1. GTAC Consultation Version 11 September 2018 Stakeholder Consultation workshop
16 October 2018

2. Overview Thank you to everyone for their submissions
Encouraged by productive comments in your submissions
We have built a great deal of understanding over the last few months
There are some limited areas of concern
Hope to discuss a way forward on remaining issues today
What we will go through today:
Key themes from the submissions grouped by subject
What we won’t discuss today:
Minor drafting points from submitters that are technical and do not impact others
We will discuss these individually with submitters
Where we have accepted them they are in the marked up document ‘Proposed Changes to the GTAC Consultation Version 11 September’

3. Response to Consultation Questions
Yes No
1. Do you consider that the positive features of GTAC identified in the FAP are retained in the current GTAC draft that incorporates changes made during 2018?
GGNZ
Vector
MGUG
Nova
2. Do you have any concerns about how the three key issues identified in the FAP have been addressed in the GTAC?
GGNZ (incentives, interconnections)
MGUG (peaking, liabilities)
3. Do you have concerns about how we have implemented the solutions from the workshops to address the other FAP findings?
MGUG (peaking, PRs)
GGNZ (work programme too intense)
Nova (but risk of unintended consequences)
4. Do you consider that the changes we’ve made together have the intended impact and retain the positive features of GTAC identified in the FAP?
5. Do you consider that our decision to not make certain changes to the GTAC has deteriorated access provisions in relation to the existing codes?
Core Findings:
Submissions have shown support for the process undertaken and outcomes
Some issues remain which we will discuss today

4. Agenda Peaking Nominations Peaking coverage Peaking pricing
Curtailment and Balancing
Socialisation of Curtailment
RM Tolerances
Incentive Fees
Daily underrun/overrun fees and barriers to entry
Allocation
Standardisation of rules
Wash-ups
Untested Arrangements
Governance and ICAs
Term
Meshing
Existing ICAs and SAs
Receipt Point ICA common and essential terms

5. Peaking
Peaking
Nominations
Peaking coverage
Peaking pricing

6. Nominations ISSUE RAISED FIRST GAS RESPONSE Time and Cost
Considerable increase in time and resources to manage nominations
Issue discussed in FAP
We understand that users are currently resourced to estimate their daily gas needs and nominate from producers
We do not see a materially increased burden under GTAC
FG will benefit from more accurate information from all pipeline users
Contact
Auto-nomination algorithm may not minimise costs
The quality of algorithm for auto-nominations may not minimise costs for specified shippers
The algorithm will be designed to ensure the best possible nomination based on historic data
The aim of the system is to remove the risk on overrun/underrun charges and avoid admin for small shippers
Shippers who feel they are better at estimating mass market requirements will be able to opt out
Genesis
Auto-nominations may impact line pack management
Inaccuracies in forecast and the ability to opt-in/out may impact balancing and increase the risk of curtailment
Users in allocation groups 4 and 6 account for small quantities of gas consumption (<250 GJ per annum per ICP) and are therefore unlikely to impact other users
Methanex
Key Questions:
Do stakeholders agree that GTAC nominations now strike the right balance between extra information value and extra effort?
Are there any unintended consequences from the auto-nominations regime that need to be considered?

7. Peaking coverage ISSUE RAISED FIRST GAS RESPONSE
Criteria for inclusion too broad
Criteria for ‘materially impacting’ should be narrowed to ensure that parties that do not impact the system are not captured
The criteria are designed to allow First Gas to make the assessment for inclusion on a robust, data-driven basis
While the current list is indicative, large users such as Huntly have a significant impact on the transmission system and information on their intended usage is invaluable to our team
The MPOC currently has a peaking regime at all welded points >200GJ/d
Genesis/Contact
Specific user outcomes need to be considered
FG is not required to consider specific user outcomes in selecting peaking parties to ensure that cost is not being added for no gain
FG is not incentivised to increase the number of peaking parties as the regime increases workload for no benefit
FG will take a view on the activities being undertaken at a site to understand whether a true ‘peaking’ regime is in place and the benefits of the information being provided in terms of decision making
MGUG
Clarity required on deemed flow
It is unclear if a revised AHP can increase and decrease the DNC for the day
FG agrees with this point and has amended cl 3.30
Genesis
Key Question:
Do stakeholders agree that First Gas has sufficient flexibility to consider the needs of individual users when assessing the need to apply the peaking regime to an end user?

8. Peaking pricing ISSUE RAISED FIRST GAS RESPONSE
Rolling tolerance creates issues
If M>1 shippers are incentivised to nominate for capacity they don’t use to have a buffer
Rolling average means that if a plant was only running for an hour it would have not tolerance
The 1 TJ minimum flow is designed to mitigate these issues and provide the same level of tolerance provided under the MPOC
Key for our operations team to have accurate data so underruns are important
Genesis
Costs out of line with benefits
Scale of charge does not align with the benefits
Charges are only levied for individual hours that are outside tolerance
Information on peaking loads is highly valuable and avoids socialising the costs of peaking among other users
Genesis
Incorrect basis for charging
Fee basis should be established as per ERM rather than in relation to DNC as this could incentivise parties to peak more
Charges are based on the additional cost of transmission being used and are therefore commensurate with the service being used (i.e. peaking is part of the capacity product, rather than the flow of gas)
Methanex
Key Questions:
Are stakeholders comfortable that the tolerances provided for under the peaking regime provide flexibility to manage gas flow on a day?
Do stakeholders agree that the basis for peaking charges should be the additional transmission services used in line with daily overrun/underrun charges?

9. Curtailment and Balancing
Socialisation of Curtailment
RM Tolerances

10. Socialisation of curtailment
ISSUE RAISED
FIRST GAS RESPONSE
FG Balancing obligation reduced
MPOC has greater onus on FG to undertake balancing
TTP will be less closely managed
Absence of s. 3.1 of MPOC
FG disagrees that it has a lesser obligation in relation to TTP and has maintained wording consistent with MPOC
FG understands Methanex’s concerns that FG will not buy or sell balancing gas and proposes to amend cl. 8.6 to clarify that it will exercise this discretion.
Methanex
FG more likely to curtail pro-rata
Reduced balancing obligation means that FG won’t address issues until they are too late
Greater flexibility (AHPs/park and loan) will increase curtailment
Curtailment SOP doesn’t contain provisions for buying and selling balancing gas
Greater use of pipeline flexibility will deliver benefits, but the costs and risks need to be well-managed
Currently pipeline flexibility is used without notification and there are minimal curtailments – providing notice of flexibility will reduce the potential for curtailment
The Curtailment SOP does not contain information on balancing gas as this is in the Balancing SOP
FG only curtails pro-rata if a causer cannot be found – under MPOC pro-rata curtailment is mandated irrespective of causer
Methanex
Key Questions:
Do stakeholders agree that the proposed amendments to s. 8.6 provide greater clarity on the role of FG in relation to balancing?
Do stakeholders agree that the provisions in the GTAC provide more transparency over the use of flexibility?

11. Curtailment workability
ISSUE RAISED
FIRST GAS RESPONSE
Gas trading flexibility will obscure balancing positions
OMV aggregates gas in the receipt zone to be shipped onwards
Actual position will not be apparent until trades are executed
Displaced gas nominations would provide greater transparency
GTAC tools are adequate to provide frictionless trading between OBA points and shippers
Trades can be provided at the beginning of the day to ensure all parties positions can be well known
FG is reluctant to provide functionality that duplicates existing functionality
OMV
Targeting causer unworkable
Real time estimates of RM position based on default rule will be inaccurate
Trades will not be accounted for
Default rule is adequate for estimating current and forecast end of day RM as this is an order of magnitude judgement
emsTradepoint will feed information on trades in real time if possible
Timeliness of bi-lateral trading information will depend on submission of GTA info
Greymouth
Key Questions:
Do stakeholders agree that the trading functionality in GTAC provides flexibility sufficient to manage gas a portfolio in the receipt zone?

12. RM Tolerances ISSUE RAISED FIRST GAS RESPONSE Tolerances are dynamic
GTAC tolerances change based on data
Larger shippers get more tolerance which is unfair
Washing-up tolerance is inefficient
GTAC removes current uncertainty of tolerance at TP welded points
Dynamic allocation reflects each user’s need for tolerance
MPOC allocations of tolerance over-allocated tolerance, were rigid and were not sufficiently targeted to generate strong incentives
Washing-up of tolerance ensures that users are not overcharged
Greymouth
Allocation of Tolerance to Shippers
Shippers receive tolerance of 400 TJ even if they ship only from OBA parties
Agree this should be addressed – FG will adopt the suggested amendment
OMV
Minimum Tolerance too high
End users can benefit from an aggregation of a minimum tolerance by contracting with multiple small shippers
400GJ too high if more users join the network
End users would not benefit from multiple shippers’ minimum tolerance as they would not be liable for ERM
FG will re-examine the 400 GJ minimum should more shippers join the network
Methanex
Aggregate tolerance poorly defined
Should be capped at 7.5 TJ in GTAC
The split of Aggregate tolerance is defined in the Balancing SOP
Capping at 7.5 TJ would artificially constrain users if Mokau is operating
Methanex
Key Question:
Do stakeholders feel that the level of RM Tolerance allocated in the GTAC strikes the right balance on an individual and system-wide level?

13. Incentive Fees Incentive Fees
Daily underrun/overrun fees and barriers to entry

14. Daily overrun/underruns and barriers to entry
ISSUE RAISED
FIRST GAS RESPONSE
Portfolio effects of concern
Use of delivery zones may create barriers to entry
Shippers wishing to enter a new delivery zone customers cannot offset any over/underruns against other customers
Cannot compete against incumbent shippers with a portfolio of customers in that delivery zone
Overruns and underruns of a particular user or in a portfolio cannot be known in advance
The issue raised presumes the end user knows the overrun and underrun behaviour of other users in the zone and is willing to contract based on the predictability of this behaviour and that the other users stay with their shipper
The issue also presumes pass-through in a specific manner that leverages the portfolio, which may not occur
Each shipper will take their own view on how to market gas and pass through charges
We don’t see incentives fees across a zone as a lever in competition between shippers – since there is no predictable relationship between unders/overs of any set of customers
Compared to the VTC, daily booking provides much greater flexibility for seasonal loads – removing a current barrier to entry
Greymouth
Key Question:
Do stakeholders share the view that the GTAC zonal system creates potential competition issues?

15. Allocation
Allocation
Standardisation of allocation rules
Wash-ups

16. Standardisation of allocation rules
ISSUE RAISED
FIRST GAS RESPONSE
GTA allocation rules should be standardised
Template GTA should prescribe rules for allocation of gas to ensure good industry practice is followed
FG intends to provide functionality for standard allocation methods as appropriate in TACOS
Change to Schedule 3 to clarify that these allocation methodologies will be supported
Shell
Standard allocation rules should be defined
Default allocation rules were set to be further defined in the GTAC
Criteria for accepting alternatives to standard allocation rules should be set out in the GTAC
Schedule 3 allows for the use of pre-defined rules in OATIS and these have been specified as: pro-rata, swing, directional swing and ranking
Other rules may be accepted as long as they do not affect other users or create circular references
Methanex
Key Questions:
Are there issues with the current level of standardisation of allocation rules?
Do stakeholders consider that further definition and clarification of allocation rules is required?

17. Wash-ups ISSUE RAISED FIRST GAS RESPONSE
Industry agreement and DRR wrongly referenced
Daily quantities are provided via the MBB D+1 Pilot and not the DRR
DDQ is zonal while the default rule requires a point allocation
Agree that s. 6.11(a) will need to change to be via the D+1 data agreement GTAC rather than DRR
Also allow for full implementation of the DRRs
Agree that the definition of DDQ will be changed to be either at a point or a zone level
Greymouth
Default rule has less allocative efficiency than non-business day
Shipper information for TOU sites will not be used in the default rule
TOU sites will be subject to weather impacts
The amount of corrections will increase due to the impact of mass market shippers
The default rule is a temporary instrument designed to establish values for allocation small sites on an interim basis
TOU sites will have better quality information on historic flows and therefore a better quality nomination
The risk of distortion is therefore minimised and appropriate with the intended usage of this section
Greymouth
Wash-ups may not occur
The VTC washed up special allocation to give effect to the interim/final allocation while the GTAC makes the application of wash-ups conditional on receiving an interim, special or final file
GTAC reference to DDQ makes the effect of wash-ups uncertain
s. 2.2 of Schedule 8 contemplates all the instances where FG may receive data from the allocation agent in respect of wash-ups
s refers to information coming from the Allocation Agent (DDQ) while Schedule 8 gives the mechanics of how this information is worked through into a wash-up quantity
Greymouth
Key Question:
Do stakeholders perceive any remaining workability issues with the wash-up provisions?

18. Untested Arrangements
ISSUE RAISED
FIRST GAS RESPONSE
Portfolio effects of concern
No evidence that other tried and tested arrangements (other than auto-nominations) have been considered
The risk of unintentional consequences from the operation of untested arrangements weighs negatively
Agree FG has not systematically highlighted the adoption of overseas arrangements
Overseas arrangement may be appropriate but need to assess them in context of network
Many points have been based on examples elsewhere:
Capacity charges based on daily nominations (MPOC)
ERM fees (Australia)
Separate entry/exit capacities, i.e. no daisy chaining (Europe)
PRs (COMMISSION REGULATION (EU) 2017/459 of 16 March 2017)
Greymouth

19. Governance and ICAs Governance and ICAs Term Meshing
Existing ICAs and SAs
Receipt Point ICA common and essential terms
Liability pass through

20. Term ISSUE RAISED FIRST GAS RESPONSE Asymmetry of term
ICAs have certainty on term, while GTAC is only 10 years
ICA durations appropriate for to give certainty for capex associated with IPs’ assets and allow FG cost recovery to occur – not possible with an evergreen code
Shippers do not take the risk that IPs take on infrastructure and therefore the terms should be different
GTAC extensions are for a minimum of five years
Greymouth
Uncertainty of term
Potential for use of change request creates uncertainty of terms
First Gas can veto changes if it causes chances to the IT system
Changes requests are approved by the GIC against Gas Act objectives
FG must propose a change request to extend the term
FG can only veto a change if it causes unrecoverable expenditure – IT capex is within the RAB
Greymouth
Terms after 2029
GTAC does not guarantee that the terms offered will be materially better after 2029
19.2 uses the code change process and therefore the GIC assessment will consider Gas Act objectives (or equivalent) at that time
Shell
Term too short
Term should be removed/extended to 17 years to reflect life of upstream assets
Adequate safeguards are in place to ensure that the follow-on from the GTAC will exist and continue improving
Shell/OMV
Key Question:
Do stakeholders agree that the proposed term gives security of terms while ensuring there is continuous improvement of the code?

21. Meshing
ISSUE RAISED
FIRST GAS RESPONSE
Inefficient Meshing
Manner of setting out ICA common and essential terms in two schedules is inefficient
Risk of confusion and misalignment over time
Opportunity to simplify and shorten has been missed
Better than VTC but not MPOC
Schedules group together common and essential terms compared with the MPOC where it is difficult to concisely understand the common obligations of IPs
Framework allows flexibility for non-common and essential terms while ensuring CETs will remain in place and can only be changed via the code change process
Non-CET may differ over time and this will ensure FG can meet customer needs more effectively where there is no impact on other users
Greymouth
Key Question:
Are stakeholders concerned that there will be misalignment of common and essential terms over time?

22. Associated Arrangements
ISSUE RAISED
FIRST GAS RESPONSE
Associated Arrangements are more distant
MPOC has hardwired many aspects – leading to an inflexibility that stagnated development
Balancing and pressure are operational matter that need to be defined outside the code
Under ComCom regs FG must consult on pricing methodology
FG has very limited powers to remove delivery points
Information provision requirements are inside the code while the mechanics of the IT system are not
TSA templates are in the code
ICA common and essential terms are in the code
Metering requirements are subject to consultation prescribed in the code
Inside VTC and/or MPOC
Outside GTAC
Overall tolerance allowance is expressly provided for in the MPOC as the sum of tolerances.
Overall tolerance allowance sits in Balancing SOP.
Pricing tariff principles are inside the MPOC.
Pricing principles are now deferred to the ComCom’s guidelines, which also gives FG discretion.
Welded Points are listed in the MPOC.
Delivery Points and Zones are to be set at FG discretion outside the Code.
Maximum Allowable Operating Pressure is defined in the MPOC.
This will sit outside the code.
IT requirements are specified.
Nothing.
ICA / TSA templates are part of the MPOC.
ICA / TSA templates sit outside the code.
Metering requirements sit inside the MPOC.
These now side outside the code.
Greymouth
Key Question:
Do stakeholders feel that associated arrangements create uncertainty that is not addressed by the requirement on FG to act as an RPO?

23. Existing VTC Receipt Point ICAs
ISSUE RAISED
FIRST GAS RESPONSE
Legacy ICAs have potential impacts on MPOC users
Existing VTC ICAs now also impact MPOC users
Existing VTC ICAs exclude CETs on gas quality, liability, curtailment, metering obligations and allocation arrangements
FG should commit that any ICAs in the interim comply with all GTAC provisions
Existing Receipt Point ICAs require the interconnected party to inject specification gas and/or not to knowingly inject non-specification gas.
These requirements provide the basis for First Gas to take actions (including claims) against Receipt Point interconnected parties under existing ICAs who inject non-specification gas.
Any such claim by First Gas under these ICAs against the Receipt Point interconnected party support the non-specification gas indemnity provided by First Gas under the GTAC.
The existing Receipt Point ICAs include provisions relating to force majeure/curtailments and metering/measurement (including, in most cases, reference to the VTC Metering Requirements).
FG has ensured that any new ICAs are negotiated using the latest version of the GTAC at that time and a provision to renegotiate the ICA once final GTAC terms are in place to update those ICAs
Methanex

24. Receipt Point ICA Common and Essential Terms
ISSUE RAISED
FIRST GAS RESPONSE
Outage disclosures
Should only be obliged to disclose outages that materially affect the IP’s gas injections
Agree and have implemented a change in s. 3.5
Shell/OMV
Injection of small quantities of non-spec gas may be required for start up
Current wording does not allow this
Agree and have implemented a change in s. 6.2
OMV
Immediate cessation of injection of non-spec gas
Creates a disproportionate risk for small spec excursions
Immediate cessation of gas flow is a more onerous standard than the VTC agreements
Change implemented in s. 6.4 to address issues relating to demonstrating to FG
The proposed wording from Nova is in s. 6.2 of the CET
Nova/OMV
Data required prior to inception of the agreement
First Gas is able to request data for test results prior to the inception of the code
This is correct – the data exists under the MPOC
Allows for a continuity of record that has practical benefits for the operation of the pipeline
Shell/OMV

25. Receipt Point ICA Common and Essential Terms (contd.)
ISSUE RAISED
FIRST GAS RESPONSE
Odorisation should not be a CET
Provisions are impracticable and would require investment
IPs should be consulted on decisions relating to odorisation of pipelines
FG has no incentive to odorise further pipelines
These provisions only apply to odorised pipelines and it is important that they are standard
Agree the IPs should be consulted on odorisation decisions and this has been amended in s.13.1 of the GTAC
OMV
Flowing gas at reduced rates for FG maintenance should be reimbursed
These request impact the ability of the RP to inject gas
RP should also not incur any charges
Agree and have implemented a change in s. 9.4
Shell/OMV
Key Question:
Do any of these changes detract from the CET?

26. Next Steps First Gas will review the GTAC and incorporate:
Minor technical changes not already incorporated
Outcomes of this discussion
Review technical drafting suggestions with submitters individually
Submissions to the GIC due 22 October