Gas Stakeholder meeting for the IM review and DPP reset 8 December 2015

Overview 2 Opening Introduction Engagement Approach Overview from the Industry Stakeholder views on key topics Context and assumptions for the DPP reset Next steps Summary

Attendees – Introductions 3 Commerce Commission Gas Industry Company Gas pipeline businesses and representatives Gas consumers and representatives Others

Housekeeping 4 Emergencies Phones Breaks

Introduction – why are we engaging now? 5 Two parallel consultation processes o IM review (includes IM changes for DPP reset)  Currently at the analysis stage o 2017 DPP reset  Currently in early planning stage Focus of this meeting is on IM review issues, but also on where changes are required to improve the DPP reset

Our goals for stakeholder engagement 6 Stakeholders: o are engaged in and aware of our processes o can assist us with prioritisation o can better inform our decision making

Process for this meeting 7 Aim is for informal discussion to assist us in our analysis We welcome all views Staff views are separate to Commission decisions Discussions will be recorded in note form Meeting minutes and this presentation published on our website You and other stakeholders can provide written submissions after the workshop We do not intend to discuss any commercially sensitive matters Parking lot for matters not on today’s agenda Feedback on next steps and on-going engagement

What is not included in this workshop 8 We are not setting out any Commission decisions We have limited time, so will not attempt to solve all problems in this meeting Generic, cross-sector IM review issues (WACC, cost allocation, etc.)

Overview 9 Opening Introduction Engagement Approach Overview from the Industry Stakeholder views on key topics Context and assumptions for the DPP reset Next steps Summary

Indicative timetable 10

How do we engage? 11 Pipeline of engagement? Working groups? Frequency? Representation?

Overview 12 Opening Introduction Engagement Approach Overview from the Industry Stakeholder views on key topics Context and assumptions for the DPP reset Next steps Summary

Invite to Stakeholders 13 An opportunity for industry players to set out how they see the world: o How the regulatory instruments performed in the current period o Key things they would like to see change in the next DPP period Speaking order o Powerco o MGUG o MDL

Overview 14 Opening Introduction Engagement Approach Overview from the Industry Stakeholder views on key topics Other context and assumptions from the Commission On-going engagement Summarise

Quality and security of supply 15 What, if any, changes to the gas DPP quality standards (or information disclosure requirements) could be made to provide the ‘right’ incentives in respect of the security of supply? What changes to the gas DPP quality standards could be developed to encourage the ‘right’ investments more generally? High-impact, low-probability events?

Major projects 16 What kind of scrutiny should be placed on investments key to security of gas supply under either a DPP or CPP, and what is the appropriate regulatory mechanism for dealing with projects where there is a single project makes up a very high proportion of total capex (eg, DPP re- openers for specific projects, single issue CPPs / ‘mini’ CPPs) etc? Whitecliffs investment, for both pipelines? Quality and security implications of investment decisions Consumer consultation Information requirements from the business and for the Commission decision(s) – what is practical and useful?

Form of control and risk sharing 17 What gas pipeline specific risks suggest a different treatment to other sectors. For example what are the pros and cons of setting criteria for choosing the form of control for gas transmission, and if so what gas pipeline specific criteria should be taken into consideration? Form of control currently a DPP decision for transmission IMs direct us to select revenue or price cap depending on nature of business o Decision to put Vector Transmission and MDL on revenue cap for last DPP Differences in form of control o Depends on forecast of revenue o Potential link with WACC rate

Incremental Rolling Incentive Scheme (IRIS) 18 Draft decision in July 2014 on IRIS for gas businesses, further consideration deferred to IMs review What are the pros and cons of a capex and/or opex IRIS schemes for gas distribution and transmission. In particular, the pros and cons of changing the natural incentives under a price path affecting the timing of investment decisions and the trade-offs between capex and opex?

19 Other matters raised Auction based pricing Treatment of balancing gas Recoverable and pass through costs

Overview 20 Opening Introduction Engagement Approach Overview from the Industry Stakeholder views on key topics Context and assumptions for the DPP reset Next steps Summary

Context for DPP – testing our assumptions 21 IMs review Asset transfers and mergers in the sector Fewer regulated suppliers than EDB sector, possibility for more flexibility Increasing stakeholder focus on pricing and security Decreasing demand for gas electricity generators Emerging technology has limited direct impact on GPBs Second DPP – processes and approaches from previous reset to be reused and refined Interested in your views

Overview 22 Opening Introduction Engagement Approach Overview from the Industry Stakeholder views on key topics Context and assumptions for the DPP reset Next steps Summary

Next steps 23 Workshops and submissions due, upcoming from our website: Submissions on gas pipeline issues – 29 January 2016 Feedback on how to engage further? CPP requirements: Update on the details of the planned workshopDecember 2015 Emerging technology workshop14 December 2015 Cost of capital issues: Publish any expert advice soughtFirst quarter 2016 Cost of capital issues: Submissions on cost of capital update paper due29 January 2016 CPP requirements workshopFebruary 2016

Overview 24 Opening Introduction Engagement Approach Overview from the Industry Stakeholder views on key topics Context and assumptions for the DPP reset Next steps Summary