GTAC Workshop Block 1 10 July 2018

Agenda Agenda Items Indicative Timing Workstream 1 – ICAs 1.2 Core terms of interconnection 10:30-12:30pm   Lunch 1.1 Integration of ICAs in the Code 1-2pm Workstream 2 – Linepack Management and Intraday Flexibility 2.4 Allocation methods (upstream and downstream) 2-5pm

1.2 Core Terms of Interconnection Discussion Objective GTAC Reference Identify the terms of interconnection that are common and essential and therefore should be standardised s. 7.13 FAP Findings Supporting Material D.1 The core terms of interconnection should be standard across all interconnected parties (so that coherent, non-discriminatory access is assured). Except to the extent that individually negotiated terms are appropriate. Information on current number of ICAs, termination, counterparties, confidentiality Summary of possible core terms and their treatment under MPOC, VTC and GTAC template ICAs

Framing the discussion Completeness Should any of the proposed common and essential terms be removed? Are there other common and essential terms? Scope Identification of key common and essential terms Is there any difference between receipt point and delivery point? Individual terms Are any proposed common and essential terms better treated as individual terms?

Core Common Terms – Technical Standards Item Description Applicable technical standards Applicable technical standards for gas and metering should be specified. For example, NZS 5442, NZS 5259, and the Metering Standards Document. Gas Quality The responsibility for monitoring and reporting gas quality should be set out, including any rights of inspection and audit. All IPs should have the same obligation in regard to the quality of gas they inject, including: any restrictions on the injection of non-specification gas notification of non-specification gas incidents costs of monitoring and testing the gas injected In addition, there should be no secrecy about non-specification gas incidents. All non-specification incidents should be publicly notified by First Gas. Metering The responsibility for testing and monitoring measurement equipment, and for reporting of metered quantities and correcting for errors set out, including any rights to witness tests and audit results.

Core Common Terms – Balancing and Flexibility Item Description Peaking Some minimum entitlement to peak, with specified consequences for exceeding the entitlement. Flow to nominations There should be reasonable incentives for IPs to flow to nominations. This could apply through shippers, or directly with the IP (MPOC s12.9 requires WP to use reasonable endeavours to manage ROI towards zero) Pressure Commitment for the TSP to maintain the pipeline pressure within a defined range.

Core Common Terms – Nominations and Governance Item Description TSO Instructions The TSP may rely on a Shipper to get an IP to curtail or shutdown a gas flow, or for that instruction to be given to the party in the physical supply chain: the IP. In either case, it is in the interests of the TSP, Shippers and IPs that the same arrangements apply to all. Changes Changes to the GTAC need to flow through to ICAs. Liability Terms that harmonise with the eventual GTAC framework. Liability for non- specification gas

1.2 Integration of ICAs in the Code Discussion Objective GTAC Reference Establish how ICAs should be integrated into the GTAC (e.g. via a list in the GTAC, specification of common terms in the GTAC, or some other form) s. 7.13 FAP Findings Supporting Material D.1 Terms that apply to interconnected parties through ICAs must mesh with the terms that apply to all other interconnected parties and to Shippers through TSAs. The terms and conditions of access to, and use of, the gas transmission system must be fully described for all system users and be coherent (i.e. work together). NA

Code Integration Options List of Common Terms Pros Simple to implement Flexibility for individual ICA parties Cons May not fully address FAP concerns Not sufficient for some stakeholders Specification of Common Terms in Code Appendix Clarity for shippers and ICA parties on key common and essential terms Ensures key common and essential terms align with GTAC thereby addressing FAP concerns Limits flexibility for ICA parties Separate Interconnection Code Self contained single arrangement solely related to interconnection Clarity for shippers and ICA parties Cannot integrate existing ICAs into Interconnection Code Complex and lengthy negotiation Delay GTAC programme Complex administratively Lacks flexibility for individual ICA parties Ignores the necessary link between transmission and interconnection ICA Term and Template integrated in Code Clarity for shippers and ICA on key common and essential terms Ensures key common and essential terms align with GTAC Lacks flexibility for individual ICA parties and limits ability to reflect individual differences appropriately

2.4 Allocation Methods Discussion Objective GTAC Reference Clarify allocation methodologies and how these are specified s. 6 FAP Findings Supporting Material Range of receipt point and dedicated delivery point allocation methods lack clarity/specificity (18) Shippers are not always best placed to make the choice. For RPs and DPs with a single injecting party or end-user, it is interconnected parties who have the long term interest in the allocation method, and so they should be permitted to choose it. Absence of D+1 agreement under GTAC to replace existing one under VTC NA

Downstream Reconciliation Rules D+1 Agreements The GTAC Relies on the D+1 Agreements to Function MBB D+1 Pilot Agreement D+1 Data Agreement Downstream Reconciliation Rules D+1 data used to calculate Shipper VTC balancing positions and allocate cash-out amounts and quantities. GIC produces D+1 allocations Regulations for determining Initial, Interim, Final and Special Allocations First Gas agrees to use that dataD+1 Data Agreement DRRs Interim and Final Allocations used to calculate wash-ups of balancing positions and allocated cash-out amounts and quantities. Key questions: Are the changes to the MBB D+1 Pilot Agreement, D+1 Data Agreement and Downstream Reconciliation Rules administrative? If not, why not? First Gas position: These agreements are beneficial to stakeholders The changes required to these agreements are administrative It is the role of the GIC to drive the changes to these agreement

Allocation Agreement Options under GTAC The GTAC allows parties to choose their allocation agreements at interconnected points: Operational Balancing Arrangement Interconnected Party specifies allocation methodology Interconnected Party takes risk on balancing Interconnected party drives allocation agreement Allocation Agreement Allocation agreement parties specify allocation methodology Shipper takes risk on balancing Shippers drive allocation agreement Key question: Should interconnected parties always be in control at the interconnection point? First Gas Position: Allocation agreements should be driven by those parties with the greatest interest in the allocation

Allocation Methodology Options under GTAC The GTAC allows parties to choose their allocation methods at interconnected points: Pro-rata Allocation of swing based on nominations Allocation of swing to a single party Other parties get their nomination Directional allocation of swing Allocation of swing to one party on underrun and another party on overrun Key questions: Are there any allocation methodologies (except OBA) not covered above? Do any allocation methodologies have an impact outside the interconnection point? Should First Gas specify allocation methodologies? First Gas position: Interconnected parties benefit from flexibility in allocation methodologies to allow for commercial flexibility Facilitating allocation methodologies is low cost given the GTAC software proposed