New governance and market arrangements for the gas industry

The Government today announced a policy package designed to enhance efficiency and reliability in gas production and transportation, and improve fairness for gas customers.

"The gas sector plays a critical role in New Zealand's energy sector and the economy generally, said Energy Minister Pete Hodgson. "Gas is a premium fuel for industrial heating and processing and for electricity generation. It is also used for petrochemicals and in homes.

"The depletion of the Maui gas field over the next few years means that gas supply will come from many smaller fields. New Zealand needs improved market arrangements to manage the post-Maui supply situation."

Today’s announcements follow a comprehensive review of the gas sector, which included public consultation on a discussion document released in October 2001.

“The Government initiated the gas review because it was concerned that market processes were inadequate," Mr Hodgson said. "It is now clear that those concerns were well founded and that the industry shared them.“

“The Government’s objective is to ensure that gas is delivered to existing and new customers in an efficient, fair, reliable, and environmentally sustainable manner. As with the electricity industry, our approach is to promote industry solutions where possible and regulatory solutions where necessary. The decisions being announced today require the gas industry to take responsibility for developing the arrangements necessary for the post-Maui era."

A draft Government Policy Statement on gas sets out in detail the Government’s views on gas industry governance and it’s expectations for the industry.

The draft statement also sets out the specific outcomes the Government is seeking and the principles that should guide gas industry arrangements. It invites the gas industry to set up a governing entity that represents all stakeholders, has an independent chair, has a majority of independent members appointed after consultation with the Minister of Energy, and does not operate in the interests of individual participants.

The new governing entity will need to develop arrangements relating to production, wholesale markets, transmission and distribution networks, and retail markets. The required initiatives include: improving arrangements for the wholesale trading of gas; developing an open access regime for all transmission pipelines; developing standard terms and conditions for accessing distribution pipelines; developing model contracts for consumers; developing standardised arrangements for customer switching; and establishing an independent system for handling consumer complaints.

“This is a substantial work programme for the gas industry. Implementation will help promote efficient and secure energy markets for New Zealand” said Pete Hodgson.

“The Government expects that the industry will move quickly to implement these measures. We have set an expectation that industry arrangements will be in place by December 2004 and we will monitor them to make sure they are able to meet that deadline. The Government will introduce legislation if necessary to do this”.

To Follow: Media statement: Government pursues open access to Maui pipeline Media statement: Gas pipeline monopolies under investigation Gas Review: Summary of Government decisions Gas Review: Questions and Answers Draft Government Policy Statement: Development of New Zealand's Gas Industry

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