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Wholesale Levy Assurance Options Paper - September 2016

Gas Industry Co has issued its Analysis of Submissions on the September 2016 Options Paper - Wholesale Levy Assurance. Seven submissions were received.

The Options Paper described issues that have been identified in respect of inaccurate payment of the wholesale levy, and sought industry views on a range of options for providing a high level of assurance that wholesale levy payers were each paying their fair share of the wholesale levy.

Gas Industry Co considered the submissions on the Options Paper and has determined a preferred option. Our intention is to further develop this option with assistance from industry participants, to ensure that the design is consistent with existing industry arrangements.

The Options Paper, the Analysis of Submissions, and the submissions received are available in Related Documents below.

BACKGROUND

Gas Industry Co is funded by wholesale and retail levies. The wholesale levy is a charge per GJ of gas purchased from a gas producer, and the retail levy is a charge per ICP (customer connection).

The data for wholesale levies is provided by the parties who purchase gas from producers, while the data for retail levies is taken from the gas registry which records the responsible retailer for each active ICP.

In general, the system for collection of the wholesale levy has worked well. Annual consultation on the work programme and the level of funding has received strong support from stakeholders, as evidenced by their submissions. However, Gas Industry Co is aware of a number of instances where industry participants have made voluntary payments following identification of errors in past returns. Although this suggests that, on the whole, industry participants’ processes were subject to a degree of rigour, Gas Industry Co considers that reliance on industry participants’ internal processes is an inadequate check on wholesale levy payments. The lack of any transparency about gas sales by producers means that it is not possible to verify the accuracy of the returns and associated wholesale levy payments.

Given that there is inadequate means for Gas Industry Co to verify that each participant has met its obligations under the Levy Regulations, the potential for undetected underpayment is unfair to other industry participants who are required to bear the cost.

Gas Industry Co has identified a series of options that could be used to mitigate the risks associated with inaccurate levy returns and payments. These options range from introducing regular audits of levy payers through to using data that is sourced independently from levy payers as the basis of the levy invoices. The latter reflects the change that was made to the method of invoicing for retail levies in FY2010 when we began using data from the gas registry to identify each retailer’s ICP market share.

 

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P 04 472 1800
A Gas Industry Co
Level 8, The Todd Building
95 Customhouse Quay
PO Box 10-646
Wellington 6143

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