1. Gas Transmission Access Code: Final GTAC Submission to GIC
8 December 2017

2. Agenda
Purpose: summarise and discuss contents of GTAC submitted to GIC for review
Agenda:
What submitters said about the Second Revised Draft GTAC
Changes to final GTAC submitted to GIC
Proposed work plan for GTAC items to be developed in 2018
Is the GTAC materially better?
Next steps in process / GIC evaluation (see GIC presentation)

3. Documents submitted to GIC
Close out report on action items from November workshops
Final GTAC
Final GTAC (marked-up from 3 November Second Revised Draft)
Cost benefit analysis of GTAC (Sapere Research Group)
Summary of GTAC objectives
This presentation

4. What submitters said about the Second Revised Draft GTAC

5. Overview of issues raised by stakeholders
Pleasing that many issues raised correspond to November workshop action items
Several parties would like to have another opportunity to review and mark-up the GTAC, and more time to consider further drafting changes
Concerns raised about mechanical issues:
How AHPs would work
Peaking would be charged
How the rebates work
Mismatch and tolerance calculations
More substantive issues:
Terms of access and back-to-back liability for interconnected parties
Decision to rebate transmission incentive charges
Allocation agreements and back-up agreements unclear

6. Stakeholder mark-ups Code Contents Stakeholder Markup Vector Nova
Methanex
Genesis
Greymouth 1
Definitions and Construction 2
Transmission Services 3
Transmission Products and Zones 4
Nominations 5
Energy Quantity Determination 6
Energy Allocations 7
Additional Agreements 8
Balancing 9
Curtailment 10
Congestion Management 11
Fees and Charges 12
Gas Quality 13
Odorisation 14
Prudential Requirements 15
Force Majeure 16
Liabilities 17
Code Changes 18
Dispute Resolution 19
Term and Termination 20
General and Legal
Schedule One: Transmission Services Agreement
Schedule Two: Information to be Published
Schedule Three: Requirements of Gas Transfer Agreements
Markup Category
Design change
Workability improvements included in items A to E
Minor mark-ups
Flow-on changes
Timing of information
Nil

7. Principles / objectives
Code should specify some objectives for how First Gas will determine:
Tolerance for running mismatch
Specific HDQ/DDQs
The acceptability of a request for an Agreed Hourly Profile
First Gas Response: Agree – these are now provided in the GTAC
It would be good to record principles / objectives now (i.e. what success looks like), so that any future review of the GTAC can evaluate performance against those objectives
First Gas response: Agree – this is provided for through:
Gas Act / GPS objectives reference in GTAC
Specific objectives where First Gas uses discretion (e.g. areas listed above, changes to ERM fees and overrun/underruns)
Summary of GTAC objectives (information paper released alongside final GTAC)

8. Making the GTAC a living document
First Gas plans to hold an annual forum on code operations and potential changes
Scope to include the code and IT system development
Feed in information from reviews on operational issues such as pressure management and flow through of charges
Aims:
Identify issues with code operations and GTAC provisions more generally
Refine the body of operational procedures
Identify where optimisations can be made in the code/IT systems to improve stakeholder and First Gas operations
View the GTAC as something to be continuously worked to drive improvements for all stakeholders

9. Changes to final GTAC submitted to GIC (predominantly from November workshop action points)

10. Source of final changes
Changes have largely been driven by Stakeholder Feedback
Origin of change:
Items A to E from November workshop action items
Other action items from November workshops
Stakeholder mark-ups
Typos/minor corrections
First new ideas
Important to note:
Stakeholder mark-ups could be overtaken by changes made under points 1 and 2
No substantive new ideas at our initiative except to tidy up and clarify (e.g. Daily Delivery Quantity in lieu of Delivery Quantity)

11. A. Status of interconnected parties
Proposed Changes in Consultation Mark-up
Stakeholder Response
Non-discriminatory access (item 37)
First Gas will offer new interconnected parties access in the same manner as each other and in the same manner as existing ICA parties. Section 7.12 has been amended to explicitly incorporate this principle
Keeping ICAs current with GTAC (item 38)
Existing references in the GTAC to Interconnected Parties (e.g. OBA Parties) are updated with the GTAC because the terms in ICAs reference these parts of the code
Interconnected Parties can initiate Code Change Requests and are therefore able to effect changes to the GTAC they consider would improve code-based interconnection provisions (predominantly in section 7)
First Gas will ensure that new ICAs include a provision that they will change as the GTAC changes (section 7.14(a))
First Gas will maintain an interconnection policy that covers how First Gas will seek to ensure that existing ICA parties meet new GTAC provisions where they are able
Largely supportive
S. 7.13(q) amended to include the right to approved quantities

12. B. Agreed Hourly Profiles
Proposed Changes in Consultation Mark-up
Stakeholder Response
Streamlining AHP processes and implications on PRs from AHPs (items 12 and 26):
AHPs will be submitted in nominations cycles
A shipper may submit an AHP at an intraday cycle.  If approved by First Gas, the AHP will apply from the commencement of that nomination cycle
ICAs shall provide for AHPs from producers. This will allow for notification of maintenance, etc
Shippers may submit AHPs in a nomination cycle in lieu of a DNC nomination (item 12, 26)
Criteria for approving AHP (item 10):
Clarification on the criteria for accepting an AHP
Treatment of AHPs and PRs (item 46):
As DNC is equal to the sum of the AHP there is no difference in treatment between DNC and AHP in relation to PRs
Stakeholders supportive of changes
Queried implementation with ICAs and this was held to be a matter for ICAs
No comments on this section
One party queried this response, but on First Gas review there is no issue with this point

13. B. Agreed Hourly Profiles
Proposed Changes in Consultation Mark-up
Stakeholder Response
The mechanics of an AHP (items 26, 27 and 28):
If an AHP is in place then the DNC for that day is equal to the sum of the agreed hourly profile (item 28)
Once an AHP has been approved for a day, a shipper will not be able to go back to submitting DNC for the rest of the day
If a shipper submits an AHP during an intraday cycle, then the DNC for the day will be the deemed capacity calculated on the last approved NQ up to the point of the AHP becoming active plus the sum of the AHP for the remainder of the day
An AHP that is approved cannot reduce the total flow for the day below deemed capacity at that nomination cycle
The MHQ at any point during the day will be the greater of: MDQ/16, Specific HQ/DQ or the relevant HQ under the AHP. No tolerance on top of the AHP will apply (item 27)
If the AHP is not approved by First Gas, then the default will be to offer the highest DNC possible
Good feedback on clarity
Clarifications noted in some parts for the conversion of AHPs to DNC which have been address in the final version

14. C. Overrun/underrun and ERM fees
Proposed Changes in Consultation Mark-up
Stakeholder Response
ERM charges (8.14)
If there is a need to change the ERM fee from a First Gas perspective, the maximum charge shall $1/GJ. This gives Shippers and OBA Parties greater certainty in a way that is administratively simple
Changes to the fee within this limit would be in response to a failure to achieve the objective of encouraging primary balancing
Starting NERM prices are based on an average market price of $6/GJ and existing cashout premiums of 10% applied under the MPOC. First Gas considers that a plausible upper range for market prices of $10/GJ is reasonable. Based on the same cashout premium under the MPOC, this gives an equivalent maximum ERM charge of $1/GJ 
If First Gas or any shipper or interconnected party sees the need to change this upper limit it can propose a Code Change Request 
Overrun charges (11.4)
Changes to F under 5 are as per the current text with a change to the notification period to 60 Business Days. Changes within this limit respond to a failure to achieve the objective of encouraging accurate nominations
Changes to F to a value above 5 would be dealt with through a Code Change Request
Feedback on ceiling price at equivalent of $10/GJ
Positive feedback on certainty and change process
Some parties thought 60 days was too long and could be 30
Suggestion that overrun charges should only apply when a Congested Point is congested. This has been implemented

15. D. Liabilities Proposed Changes in Consultation Mark-up
Stakeholder Response
Shippers can pursue other shippers and interconnected parties to recover loss
First Gas will use reasonable endeavours to identify the party at fault and pass on information to the party suffering loss
First Gas will assist with the process, pass on information, but need not be involved in defending the claim
If a party is identified by First Gas as being at fault, First Gas will pass on information about the defending party to the shipper for them to pursue the defending party to recover loss
Concern raised over effectiveness of the subrogation mechanism
Concern that claims are only allowed when First Gas is not an RPO
Concern that claims could only be raised when First Gas suffers a loss
First Gas has reviewed these terms and is confident that they operate as intended
Request for an indemnity from First Gas for off-spec gas
First Gas has considered this and believes the subrogation clause appropriate allocates risk and control for claims

16. E. Incorporation of D+1 Allocations
Proposed Changes in Consultation Mark-up
Stakeholder Response
Reference to D+1 arrangements (item 41)
A reference to current D+1 arrangements with the GIC and successor arrangements has been inserted into section 6.11(a)
Wash-ups pursuant to current D+1 arrangements with the GIC and successor arrangements have been incorporated into the definition of Wash-ups
Fallback procedure for allocations (item 42)
In the case where the GIC no longer provides D+1 values under an industry arrangement, the fallback procedure will be to allocated based on DNC for that day (as specified in section 6.11(b))
Allocation at dedicated delivery points
New provision inserted (section 6.12) to require an Allocation Agreement at all Dedicated Delivery Points, even those used by only one Shipper. As most if not all Dedicated Delivery Points will be part of a Delivery Zone this is so First Gas will know who the Shipper is (since NQs are for the zone, not each point)
Provision of Information
It is intended that information will be provided every Day
Concern raised over longevity of D+1 mechanism
First Gas has consulted the GIC who intend to continue this mechanism and further solidify its use following the completion of the GTAC as this will allow the process to be in concord with the GTAC
Query over whether First Gas will be the Allocation Agent
First Gas will not be the default Allocation Agent except where there is only one shipper at a delivery point
Correction suggested where there is an SA for an End user at a gas gate
Amendments have been made to allow for this eventuality

17. Other key changes from November action items#
Item
Action Taken 1
Look at separating section 3.18 into two parts – with a clear PR product definition (in the code) and a clear process for establishing PR auction terms and conditions (outside the code)
Section 3.18 has been split in two and a process for determining PR Auction Terms outlined in section 3.18. 2
Consider whether governance process for finalising PR auction terms and conditions is adequate – and whether GIC approval should be required prior to adoption. Also consider how any compliance roles might be defined
The governance process for PR auction terms has been reviewed and shipper consultation and GIC approval of PR terms and conditions have been added to section
Specific compliance roles are not considered necessary for the administration of PRs. 5
Consider change to ability for parties to dispute transmission invoices (and relationship with GTPM) to retain rights afforded under existing codes
Section (removing ability to dispute transmission pricing methodology) has been deleted. Invoice disputes have been reviewed and no further changes are required. 6
Consider inserting an obligation to provide an estimate of ongoing operating and maintenance costs prior to discontinuing service to uneconomic delivery points (sections 2.10 and 2.11)
Provision of these estimates has been provided for in sections 2.9 and 2.10 (note section numbers have changed due to the deletion of section 2.1) 7
Reconsider ability to change receipt zone without consultation, given the impact on counterparties and the implications on other parts of the GTAC (section 3.2)
Receipt Zone changes in section 3.2 are now subject to Code Changes Requests. 8
Amend to “and/or” (section 3.4)
Change to section 3.4 has been made. 9
Consider how PR auction terms and conditions will deal with the question of whether to offer all available operational capacity as PRs (section 3.13)
The relevant wording has been deleted in section 3.14 (numbering changed due to deletion of clause) and wording has been included in section 3.19 to allow for this decision. 15
Consider whether actions in response to breach of line pack limits should be specified as a firm hierarchy (section 8.6). Also consider removing section 8.6(a), since line pack limits will apply across the system as a whole. Also consider consistent wording in definition of High and Low Line Pack notices
Section 8.6(a) has been removed and a priority has been introduced.
Consistency of drafting of High and Low Line Pack Notices has been reviewed.

18. Other key changes from November action items#
Item
Action Taken 15
Consider whether actions in response to breach of line pack limits should be specified as a firm hierarchy (section 8.6). Also consider removing section 8.6(a), since line pack limits will apply across the system as a whole. Also consider consistent wording in definition of High and Low Line Pack notices
Section 8.6(a) has been removed and a priority has been introduced.
Consistency of drafting of High and Low Line Pack Notices has been reviewed. 18
Consider deleting (e)(i) from the definition of emergency in section 9.1
This has been deleted in the process of redrafting the definition of Emergency. 20
Consider party best placed to receive and act on an OFO – which may be the interconnected party at a dedicated delivery point and Shippers at a network delivery point (sections 9.5 and 9.6)
Changes have been made to allow an OFO to be issued to the Interconnected Party at a Dedicated Delivery Point in section 9.7 (previously section 9.6). 22
Reconsider notification and curtailment following an OFO in light of any changes to sections 9.5 and (sections 9.7, 9.8 and 9.11)
Wording has been amended to address changes to sections 9.5 and 9.6. 24
Consider whether First Gas should be required to disclose the likely cost impacts of any proposed change to the GTAC, or exercise its veto, early in the change process (section 17.14)
This section has been changed to be subject to First Gas giving notice under section that it does not support the change. 40
Consider publishing a standard form allocation agreement or principles in section 7
A schedule four has been added to the GTAC outlining the items to be included in an Allocation Agreement. 41
Consider whether basing RM tolerances on previous day DQs is appropriate – particularly on unusual days
The definition of Running Mismatch Tolerance has changed to be allocated on previous day DNC. This is preferred to other possible allocators (such as delivery quantities and receipt quantities). 47
Consider application of extra nominations cycle (section 4.19) – whether to allow more than one in any Day. Also consider application at receipt points
Section 4.18 (previously 4.19) has been amended to allow for more than one additional nominations cycle and clarify the circumstances where an extra nominations cycle may be used. 50
Consider removing references to multiple receipt zones in section 3.2.
Reference to multiple receipt zones has been removed from section 3.2. 51
Review definition of mismatch, running mismatch and other definitions to ensure that trades are accounted for.
Definition of Mismatch has been revised to include Trade Quantities for a Shipper.
Definition of Running Mismatch has been revised to exclude Trade Quantities and only include gas bought and sold for balancing under section 8.

19. Proposed work plan for GTAC items to be developed in 2018

20. Reminder of 2018 work plan GTAC Code Process GTAC IT System
2017
2018
NOV
DEC
JAN
FEB
MAR
APR
MAY
JUN
JUL
AUG
SEP
PRELIMINARY GIC ASSESSMENT 22/12
FINAL GIC
ASSESSMENT
23/03
8/12
GTAC Code Process
08/01
GTAC IT System
Bid Evaluation
Functional Specification
FG UAT
Shipper UAT
Shipper UAT
GTAC Other Systems
Supplementary Agreements
TSA Negotiations
ICA Negotiations
Interconnection Agreements
ICA Policy
Publish 30/06
TPM
Draft TPM
Consultation
Finalise TPM
PR Auction Terms and Conditions
Shipper Consultation and GIC Approval
SOPs
Consultation and Finalisation
Internal Development
Metering Requirements
Follows from ICA Policy
First Gas / Presentation

21. Is the GTAC Materially Better?

22. Access Products MPOC/VTC
Daily capacity booking via nominations under MPOC. Annual capacity reservations (maximum daily quantity) under VTC
Scarce capacity allocated pro-rata (MPOC) and first come, first served (VTC)
Grandfathered rights to capacity exist under VTC (but not MPOC)
10x daily overrun charges assessed against annual capacity reservations (VTC), and hourly peaking limits and charges apply under MPOC
MPOC and VTC interruptible contract nominations systems use a single linked nomination for gas flow and transmission capacity
Non-standard capacity available under VTC (but not MPOC)
GTAC
Daily capacity booking via nominations
Scarce capacity allocated through interruptible load contracts and priority rights
2x incentive charges apply to daily quantities (overruns and underruns) and hourly quantities (overruns)
GTAC nominations system uses separate nominations for gas injections and transmission capacity
Non-standard capacity available, subject to specified criteria
Features of the codes
Access Products

23. Is the GTAC materially better than MPOC/VTC?
Common daily access product substantially decreases the risk of capacity sterilisation
Removal of grandfathered rights to capacity decreases barriers to entry in downstream gas markets
Greater flexibility provided for peaky loads, subject to demonstrating that peaking will not have adverse impacts on other system users
First Gas is required to identify where congestion may occur, and to offer congestion management contracts or priority rights access product to allocate scarce capacity to its highest value use
Nominations system clearly distinguishes between gas flows and transmission capacity, and provides additional flexibility to system users through an extra nominations cycle (if required)
Consistent approach to the availability of non-standard agreements (Supplementary Capacity) across the transmission system, with fair and reasonable criteria
Access Products

24. Balancing & Allocation
MPOC/VTC
Shippers have obligations to match gas injections with deliveries on a day (Primary Balancing Obligation)
Imbalances at welded points on the Maui pipeline above a 1.5TJ tolerance are automatically “cashed out” at midnight (MPOC, flowed through under VTC pools)
Cash out prices are referenced to emsTradepoint market, plus an incentive premium of up to 10%
First Gas buys and sells balancing gas as required to maintain linepack within acceptable limits
Information on initial allocation of gas quantities provided day in arrears under industry agreement (D+1), and subsequently washed up
Features of the codes
GTAC
Shippers have obligation to match gas injections with deliveries on a day (Primary Balancing Obligation)
Mismatches across the system as a whole are measured at midnight, with specified incentive fees charged on excess running mismatch
First Gas cashes out mismatch and/or buys and sells balancing gas as required to maintain linepack within acceptable limits
Information on initial allocation of gas quantities provided day in arrears under industry agreement (D+1), and subsequently washed up
Balancing & Allocation

25. Balancing & Allocation
Balancing transmission system as a whole (rather than in pools) should provide access to more linepack shared across a more diversified customer base
Additional option provided for short-term gas storage service (park and loan) priced at a lower rate than unauthorised imbalances (ERM)
Removes First Gas from the position of buyer and seller of gas of last resort, reducing secondary balancing activity and promoting greater use of the wholesale gas market
Additional “difficult day” mechanism provided for First Gas to strengthen incentives on parties the meet their primary balancing obligations, decreasing the risk of critical contingencies arising due to aggregate imbalances
Balancing credits refunded to OBA parties as well as shippers, which is fairer than current rebates to transmission charges paid by shippers only
Clarifies ability of interconnected parties to choose allocation approach for gas at dedicated delivery points, enabling gas purchases at dedicated delivery points from more than one shipper
Provision of transmission metering validation results extended to 7 days per week, with results provided as soon as possible (with improvements expected with the new IT system)
Is the GTAC materially better than MPOC/VTC?
Balancing & Allocation

26. Pricing MPOC/VTC Objectives GTAC Tariff 1 Tariff 2
CRFs (120 locations)
TPF
Recover fixed costs / revenue requirement
DNC fees (< 20 locations)
Interruptible capacity (VTC)
AQ (not used)
Signal value of scarce capacity
Congestion management charges
PRs
Peaking charges
Daily overruns (x10)
Excess Daily Imbalance
Provide incentives for accurate/efficient capacity bookings
Hourly overruns
Daily overrun/underruns (x2)
Cash outs
BPP charges
Balance the pipeline gas position
ERM charges
Balancing gas charges
Park and loan (optional)
None
Provide incentive to manage flows within design criteria
Hourly overflow charge
Features of the codes
Pricing

27. Is the GTAC materially better than MPOC/VTC?
Number of standard transmission capacity fees charged reduced from 4 to 1 (DNC), and number of separately priced locations reduced from 120 to around 20
Greater clarity provided in the link between prices and objectives
Wider set of objectives covered, including signalling the value of scarce capacity and avoiding adverse impacts from over-flowing station design capacities
More notice provided to shippers ahead of price changes
Faster, more transparent rebate of transmission incentive charges
Pricing

28. MPOC
Interconnection agreements specified in code, with ability to agree non-standard terms of interconnection
Interconnected parties must have an OBA to allocate gas quantities
Interconnection policy explains how compliance with GIC interconnection guidelines is achieved
Features of the codes
GTAC
Common and essential terms of interconnection specified in section 7
Other terms of interconnection are subject to bilateral negotiation (using ICA templates as a starting point)
Interconnected parties have standing to propose changes to the code
GTAC ICAs updated automatically to incorporate any relevant code changes
Interconnection policy will explain how compliance with GIC interconnection guidelines is achieved
Interconnection
VTC
Interconnection agreements not explicitly linked to code (VTC)
Interconnection policy explains how compliance with GIC interconnection guidelines is achieved

29. Is the GTAC materially better than MPOC/VTC?
Contractual framework allows interconnected parties to focus on elements of code that matter to them
Provides greater flexibility than existing codes in allowing parties to choose allocation approach that suits them best, and negotiate point specific elements of interconnection
Provides more commonality than interconnection arrangements under the VTC through the specification of common and essential interconnection terms in section 7 of the GTAC (with changes to section 7 automatically reflected in all GTAC ICAs when amended)
Interconnection

30. MPOC
GIC independent assessment of merits of proposed code changes
Criteria for assessment set out in MOU between First Gas and GIC
Proposed code changes consulted on with industry, then submitted to GIC
GIC consults on draft recommendation, then issues a final decision. GIC cannot suggest improvements
First Gas can veto if it would lead to breach of RPO or additional capital or operating cost
Features of the codes
GTAC
GIC independent assessment of merits of proposed code changes
Assessment performed against Gas Act and GPS objectives
Proposed code changes consulted on widely, before being submitted to GIC
GIC consults on draft recommendation, then issues a final decision. GIC can suggest any further changes or actions it considers relevant
First Gas can veto if it would lead to breach of RPO or unrecoverable capital or operating cost
Code Changes
VTC
Proposed code changes consulted on widely, before going to shipper vote
Code changes accepted unless 25% or more of shippers vote against
First Gas can veto if it would lead to breach of RPO or additional capital or operating cost

31. Is the GTAC materially better than MPOC/VTC?
Removes inconsistencies between code change processes that apply to different systems (Maui and non-Maui)
Codifies the link to the Gas Act/GPS objectives
Removes the ability for existing market participants to vote down a change that would not be in their interests
Allows GIC to make suggestions to improve proposed code changes
Restricts First Gas’ veto right to changes that would lead to costs that cannot be recovered
Code Changes

32. Balancing & Allocation Pricing
Access Products
Balancing & Allocation
Pricing
Is the GTAC materially better than MPOC/VTC?
Code Changes
Interconnection