Gas businesses’ risk management practices reviewed

15 October

The Commerce Commission has today published two reports detailing the findings of its review of regulated gas pipeline businesses’ risk management practices.

The review was undertaken for the Commission by independent experts AECOM. The reports:
• assessed how well First Gas had specifically assessed, documented and managed geotechnical risk and geohazards affecting its gas transmission pipelines; and
• reviewed regulated gas pipeline businesses’ risk management practices more generally.

Commission Deputy Chair Sue Begg said the purpose of the review was to gain a greater understanding of the processes New Zealand’s regulated gas pipeline businesses have in place to identify and manage risks to their network. Buried gas pipelines, for example, are susceptible to natural land movements which may lead to ruptures and associated health and safety, supply, environmental and cost impacts.

“The review found that risk management practices are generally in good shape and reasonably consistent across all the gas pipeline businesses. The independent experts noted the businesses were already taking steps to address many of the concerns they identified. They also found that First Gas had a good understanding of the geohazards present in its transmission network and has appropriate processes in place to identify and mitigate the risks posed,” Ms Begg said.

Copies of the reports can be found on the Commission’s website.

Background
There is one transmission business (First Gas – Transmission) and four gas distribution businesses (First Gas– Distribution, Vector, Powerco and GasNet) that are subject to price-quality and information disclosure regulation under Part 4 of the Commerce Act 1986.

Responsibility and accountability for sound asset management practices and decisions rests with the regulated gas pipeline businesses. However, the Commission seeks to encourage improved practices, as well as a better understanding of those practices by stakeholders, because poor asset management can impose significant costs on consumers through inefficient delivery of services and poor-quality outcomes.

Under the Commission’s information disclosure requirements, gas pipeline businesses are required to publicly disclose an asset management plan (AMP) or AMP update each year. The AMP provides information on how the business intends to manage its network assets.

Under our summary and analysis powers we may monitor and review disclosed information for the purpose of promoting greater understanding of the performance of individual regulated suppliers. More generally, we also have powers to investigate how effectively and efficiently any regulated supplier is supplying regulated services, and in this instance have chosen to focus specifically on risk management practices.

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