Gas Industry Co has previously determined that a gas retailer becoming insolvent will only lead to a market failure in limited circumstances, as normal insolvency processes should be sufficient to produce acceptable outcomes in most cases. Accordingly, there is no need for permanent backstop regulation such as a retailer of last resort scheme.

Gas Industry Co consulted on arrangements that would see it managing a specific retailer insolvency by:

• monitoring the progress of any retailer insolvency;
• where necessary:
• tailoring pre-existing drafting instructions to the situation;
• making a recommendation for urgent regulations; and
• activating those regulations; and
• cleaning-up after the event.

Because any regulations would be made under urgency, there would also be a requirement to consult retrospectively on those regulations.

This work programme came about as a result of the Gas Governance (Insolvent Retailers) Regulations 2010, which were created by the then Ministry of Economic Development using the urgent regulation-making provisions of the Gas Act (section 43P).

Gas Industry Co consulted retrospectively on those Regulations in March-April 2011. The outcome was a recommendation by Gas Industry Co to the Minister of Energy and Resources that the Regulations be allowed to lapse and consideration be given to whether a generic regulatory solution was required to address retailer insolvency.