Application Martin No: gr9902 Jones Contents

Rebate of IT revenues to existing users and IT users

In relation to AGLES&M’s submission on this issue, the Commission notes the incentive mechanism in clause 5.3 of the access arrangement, which provides a rebate mechanism in respect of laterals and delivery points the subject of agreement between Epic and either existing users or FT users. The rebate is calculated monthly, and is deducted either from the amount invoiced to the FT user under clause 31.1 or the amount invoiced to the existing users under the relevant EHA. The Commission considers that this addresses AGLES&M’s query.

Definition of FT, IT and non-specified services

In its proposed amendment A3.1(1), the Commission required:

That the access arrangement be amended to provide for the FT, IT and non-specified services set out in Epic’s lodgement of 2 March 2000, subject to the proposed amendments in the remainder of this Draft Decision.

In response, Epic amended clause 4 of the access arrangement to comply with the amendment.

Terms and conditions of service

12. 
    Code requirements
    

Section 3.6 of the Code requires that an access arrangement include the terms and conditions on which a service provider will supply each reference service. These terms and conditions must be reasonable according to the relevant regulator’s assessment.

Epic’s proposal

Epic’s proposed access arrangement incorporates the terms and conditions of service at clauses 1142. Technical specifications and forms associated with service provision are included as schedules to the access arrangement. FT and IT service contract forms are incorporated as Schedules 6 and 7, respectively, to the access arrangement.

Clauses that were the subject of submissions by interested parties and other clauses that the Commission considers must be reviewed are outlined in Table 3.1 below. Clauses that fall within the Code policy obligations of the service provider, such as trading policy, queuing and extensions and expansions policy, are considered in detail later in this chapter.

This Final Decision assesses the latest access arrangement provided to the Commission by Epic on 29 June 2001. In assessing the latest version of the access arrangement the Commission has drawn on submissions made in relation to previous versions of the access arrangement where relevant. However, this Final Decision particularly focuses on submissions to versions 29 August 2000 and 18 May 2001 that were provided by Epic since the Commission issued its Draft Decision on 16 August 2000.

Table 3.: Clauses as proposed by Epic discussed in sections 3.2.4

Clause 9: Creditworthiness The service provider is not obliged to commence a service or to continue to provide a specified service unless the user or prospective user is able to satisfy the service provider of its ability to meet its contractual obligations. To ascertain whether this is the case, users and prospective users are obliged to provide to the service provider the information set out in Form 3 of Schedule 5. If the service provider is not satisfied that the user or prospective user can meet its contractual obligations, it can require the user or prospective user to give security for those obligations under clause 9.2.

Clause 11: Commencement, term and extension Epic proposed minimum terms of two years for service. Epic will accept reasonable requests for a shorter term of agreement for IT service. Epic is prepared to negotiate with users to extend the term beyond the terms of the agreement. However, unless a term to the contrary is in the agreement, subsequent extensions are subject to the queuing policy.

Clause 12: Principal receipt and delivery obligations of user Clause 12 sets out the user’s obligations regarding receipt and delivery of nominated quantities of gas; the temperature of gas at each receipt point; and odorisation. Users may not supply gas at the Moomba receipt point at temperatures exceeding 60C.

Clause 13: Principal receipt and delivery obligations of service provider The service provider is on a day to accept at the receipt point(s) a quantity of gas up to the final nominated delivery quantities. The service provider is to deliver to the user at the relevant delivery points final nominated delivery quantities. Gas is to be supplied at a temperature no greater than 48C and within specified pressure limits.

Clause 15: Gas quality Clause 15 establishes the specification for gas supplied to the system by users. It also describes the actions the service provider will take to deal with non-specification gas that enters the system. It includes the power to issue an operational flow order to the user to restrict or terminate supplies of non-specification gas into the system, and to vent gas.

Clause 17: Retention allowance Users are to supply system use gas to the service provider at no cost to the service provider. Retention allowance for FT service is to be calculated by multiplying the retention allowance percentage for that day by the quantity.

Clause 18: Forecasting, nominating and scheduling of service For both FT and IT service the user must give the service provider a copy of confirmation from the producers that they will supply the quantities nominated, not later than 1730 on the day. If confirmation for a receipt point is not received in time, the user will not be entitled to service the following day. Not later than 1100 on each day, an FT user must nominate the quantities of gas for the following day to be delivered by the service provider at each delivery point, the sum of which quantities must not exceed the MDQ. If the sum of the user’s nominations exceed the MDQ, the service provider will reduce those nominations on a pro rata basis so as to total the MDQ. If the user fails to make a nomination by 1100, it is not entitled to FT service on the following day. The service provider will post on the EBB by 1530 hours the amount it estimates will be available for IT service the following day. IT users must nominate the quantities of gas to be delivered by the service provider the following day by 1600 hours. If nominations for IT service exceed the capacity available at a delivery point for IT service, the service provider will allocate capacity between all IT users pro rata based on their respective nominations.

Clause 19: Imbalance and zone variation Under clause 19.3(a), if on a day an excess imbalance exists, an excess imbalance charge will be payable by the user. The excess imbalance charge will be calculated by multiplying the number of gigajoules of the excess imbalance by the excess imbalance charge rate. Under clause 19.4(a), the service provider will post a notification on the EBB as soon as the service provider becomes aware of an excess imbalance or of the likelihood of an excess imbalance. Clause 19.4 also describes the actions the service provider may take to remedy any excess imbalance.

Clause 20: Imbalance trading Imbalance trading is an alternative means of clearing an imbalance.

Clause 21: Allocation of receipt point quantities If the total quantity of gas supplied to a shared receipt point in a day is equal to the sum of confirmed quantities, each user is to be taken to have received its confirmed quantity. If the total quantity of gas supplied is greater or less than the sum of confirmed quantities, each user is to be taken to have received the proportion the user’s confirmed quantity bore to the total measured quantity.

Clause 22: Allocation of delivery point quantities This clause outlines a method for allocating delivery point quantities at unmetered and metered facilities.

Clause 23: Priority of service If on a day there is insufficient Capacity in the Pipeline System to deliver all Gas nominated by users on that day, clause 23 outlines the priorities in which gas will be allocated. The service provider may, by written notice to a user, vary the priority and sequence outlined in clause 23.1 to accommodate a non-specified service.

Clause 24: Curtailment and interruption Epic proposes rights to curtail, interrupt or discontinue services, on one hour’s notice (or more or less as stipulated by the service provider) to deal with a shortfall in system capacity in circumstances that are not within the control of the user.

Clause 25: Operational flow orders An OFO is an announcement by the service provider of operating conditions, attributable to the conduct of the user, that breach the user’s obligations under the agreement. It is conduct that adversely affects, or has the potential to adversely affect, the provision of services to other users. The OFO directs the user to take specific action to correct the conduct. Epic proposes that while an OFO is in effect the user will pay an amount equal to the default charge rate for each GJ of gas in respect of which the user is at variance. The default charge rate is set out in the Tariff Schedule.

Clause 27: Electronic bulletin board Epic proposes that all operational and other ‘day to day’ communications between the service provider and the user take place on an electronic bulletin board (EBB). This would extend to all nominations by the user, the scheduling of all quantities for a day by the service provider, and the issuing of curtailment and other notices by the service provider. The user will be solely responsible for monitoring the EBB and its facsimile machine at all times.

Clause 28: Receipt and delivery points This clause sets out the service provider’s requirements for ownership, access to, operation and use of equipment at receipt and delivery points.

Clause 29: Measurement at receipt and delivery points The quantity and quality of gas is to be measured in accordance with the terms of Schedule 9.

Clause 32: Payment If a user disputes an invoice, it would have to notify the service provider in writing by the due date for payment of the invoice, specifying the amount in dispute and the reasons for the dispute.

Clause 34: Force majeure If a party can not perform an obligation wholly or partly because of force majeure, it will be excused the corresponding amount of liability to the other party. Force majeure will not relieve either party from the obligation to pay for gas previously delivered. Force majeure will only suspend or reduce the user’s obligation to pay any money payable under the agreement where, and to the extent that, the force majeure prevents the service provider from delivering the relevant service.

Clause 35: Liability and indemnity Under clause 35.3, a user who is fraudulent or shows wilful disregard to their obligations will be liable to the other party in respect of loss or damage arising from that fraud or wilful disregard.

Clause 36: Default and termination If an event of default by the user occurs, such as if the user defaults in the performance of a material obligation, the Service Provider may terminate the agreement or suspend its obligations. If the service provider defaults in providing the specified service or in the performance of a material obligation, the user may terminate the agreement.

Clause 37: Dispute resolution and independent experts If any dispute, controversy or claim arises, the parties are to follow the procedures set out in the clause. This is a two-stage process, initially involving senior managers or executives and a mediator if the parties agree to that. Failing resolution, there is recourse to an independent financial or technical expert, depending on the nature of the dispute.

Clause 38: Assignment The service provider may, without the consent of the user, assign the whole or any part of its rights under the agreement to any transferee of an interest in the pipeline system. Such assignment will not be effective, however, until the assignee executes a Deed of Covenant in favour of the user agreeing to be bound by the agreement. An assignment by the user is to be conditional upon, and will not be binding until, the assignee has: executed a deed of covenant in favour of the service provider agreeing to be bound by the agreement; and reimbursed the service provider’s costs (clause 38.2).

Clause 39: Confidentiality The service provider is obliged to keep confidential all confidential information received from the user except with the prior written consent of the disclosing party or in the circumstances specified in the clause. Permitted disclosure is subject to the service provider obtaining a written undertaking of confidentiality from the person to whom the information is to be given, and in accordance with the user’s agreement to disclose certain matters set out in clause 39.3.

Clause 40: Access to Information The user does not have a right to be provided with any information in relation to employees of the service provider or service providers supplier, except that the service provider will provide names and contact details of relevant persons in accordance with clauses 32, 37 and 38.

Clause 41: Notices The service provider will provide most notices to users through the EBB. Notices that are required to be provided in writing will also be communicated in another written form.

Clause 43: Definitions and interpretation This clause defines terms used in the proposed access arrangement and states how its provisions are to be interpreted.

Submissions by interested parties

The Commission received a large number of submissions in respect of the terms and conditions proposed in the access arrangement. Many of these comments appear to be minor or specific in nature. For example, Epic has suggested that many of the submissions are of a ‘low level’ nature.²⁵⁴ In response, Origin stated that the draft access arrangement in its current form is unacceptable and does not meet the requirements of the Code in that it fails to take into account the interests of users, and that the proposed terms and conditions are not reasonable.²⁵⁵ Origin also submitted that the Commission must ensure that the approved access arrangement represents a balanced position between the legitimate interests of all parties.²⁵⁶

The Commission is of the view that there is some merit to Origin’s submission and has therefore undertaken an assessment of the terms and conditions in the access arrangement. This approach aims to ensure that the access arrangement as a whole is broadly consistent with the principles of the Code and to ensure that the service provider does not exercise its market power through the imposition of onerous terms and conditions.