Application Martin No: gr9902 Jones Contents

Commission’s considerations

In relation to AGLES&M’s submission that clause 18 should be removed from the access arrangement, the Commission considers that it is necessary to have a clause in the access arrangement setting out matters such as forecasting, nominations and confirmations of service.

In relation to AGLES&M‘s submission that the words ‘will nominate’ in clauses 18.1 (b) and (c) should be changed to ‘expects to nominate’, the Commission takes the view that the meaning of the phrase ‘forecast of the quantities…that the user will nominate’ is not substantially different to that of the phrase ‘forecast of the quantities…that the user expects to nominate’, and a change is unnecessary. The word ‘forecast’ qualifies the word ‘will’, and makes it clear that the quantities of gas to be supplied are estimates only. If this were changed to ‘expects to nominate’, the clause contains a double qualification, the second of which is superfluous.

In relation to Origin’s submission that FT users’ nominations should be made by 1500 hours, the Commission accepts Epic’s response that the current timings are appropriate, given the needs of all users and prospective users. The Commission does not accept Epic’s proposal that both FT and IT nominations be made simultaneously if this involved bringing the deadline for IT nominations forward to 1100 hours. The Commission considers that the current deadlines for FT and IT service are acceptable.

In relation to AGLES&M’s submission that provision should be included in clause 18.3(b) for the service provider to accept nominations well in advance, and accept changes up until the deadline, the Commission notes that clause 18.3(b) allows for nominations in advance, since it merely stipulates the latest time by which nominations may be received.

In relation to AGLES&M’s submissions concerning clause 18.3(c), the Commission considers that the wording is reasonable, as set out in the section on services policy. In relation to AGLES&M’s submission that FT users should not have priority over delivery points at which they have not reserved PCQ, the Commission considers that it is reasonable for FT users to take priority, as they are paying to obtain a higher quality service. The Commission takes the view that if IT users are unable to obtain sufficient capacity at a delivery point, they may pay for the capacity of that delivery point to be expanded. In this case, the IT user takes priority over the expanded part of the delivery point under clause 10.5 of the access arrangement.

The Commission agrees with submissions made by Origin and AGLES&M to the effect that the confirmation procedures in clause 18.4 of the access arrangement are currently burdensome and excessive to users. It is reasonable that FT users be required to provide written confirmation to the service provider.

However, the Commission considers that the consequences of failure to provide written confirmation contained in clause 18.4(e) are excessively onerous and requires the consequences to be reduced as follows. If a user fails to provide written confirmation by 1730 hours on a day, that user may still obtain capacity the following day if later confirmation is provided. In this circumstance, the FT user would no longer take priority over IT users or users of non-specified services. Additionally, capacity provided on this basis would be provided on an interruptible basis. Accordingly, the Commission requires Epic to comply with amendment FDA3.14.

Epic indicated that it would be concerned if Commission required amendment FDA3.14 because Epic would experience difficulty in recovering costs such as fuel gas.³⁵⁸ The Commission does not agree with Epic’s arguments for two reasons. First, Epic does not pay for system use gas; users do. Second, Epic is able to carry forward system use gas discrepancies. This means that if, on a day, Epic expends additional system use gas in making a late delivery, the system use gas can be recovered the following day.

Amendment FDA3.

For the access arrangement to be approved, the Commission requires Epic to amend clause 18 of the access arrangement by removing clause 18.4(e) and replacing it with a new provision detailing the procedures to be followed when written confirmation is not received. These procedures must include:

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  provision for FT Users to confirm by telephone, facsimile, e-mail or in writing at a time later than 1730 hours;
  
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  provision for Epic to accept such requests if it is reasonable and prudent to do so;
  
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  provision that FT Service for which confirmation is given after 1730 hours be given a priority below FT Service, IT Service and Non-specified Services on the day; and
  
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  provision for such Service to be provided on an interruptible basis.
  

In relation to AGLES&M’s submission that clause 18.5(f) provides users with the incentive to over nominate, the Commission considers that if the suggestion by Potential Energy were adopted, and earlier IT nominations were given priority, this might also encourage gaming. At this point in time, the Commission considers that the allocation process in clause 18.5(f) is satisfactory.

In relation to Origin’s submission that FT users should have the right to request ‘Authorised Variations’ not exceeding 20 per cent of their MDQ, the Commission considers that in its amended form, the access arrangement strikes a reasonable balance between the interests of FT users and IT users. The Commission acknowledges that FT users pay a capacity charge to reserve pipeline capacity. However, the Commission takes the view that FT users are sufficiently compensated for this in the access arrangement. For example, FT users are able under clause 18.3 to nominate in excess of their primary capacity quantities at a delivery point, and may obtain capacity up to the net available capacity of a delivery point even at delivery points where they have not reserved any PCQ. The Commission considers that to allow FT users to also request authorised variations would confer excessive benefits on FT service. For quantities exceeding their MDQ, FT users may nominate for IT service.

In relation to clause 18.7(c), the Commission considers that while this provision may give FT users some capability to engage in gaming, it is necessary that FT users have some flexibility to vary their final nominated receipt quantities.

In its letter of 29 August 2001 Epic proposed that the potential of users to engage in gaming could be addressed by deleting clause 18.7(c) and amending clause 18.7(d) as follows:

The Service Provider will not authorise a variation in the Final Nominated Receipt Quantity for a Day if, to do so, would adversely affect the quantities of gas already scheduled for receipt from and delivery to Other Users on that Day if, to do so, would adversely affect the quantities of Gas already scheduled for receipt and delivery to Other Users on that Day.

The Commission requires Epic not to make this amendment, nor to remove clause 18.7(c) from the access arrangement. The Commission considers that to remove clause 18.7(c) from the access arrangement would cause significant detriment to the conditions on which FT service was offered.

In relation to AGLES&M’s submission that 18.7(b) may encourage initial over-nomination by holders of firm capacity to the detriment of IT users, the Commission acknowledges that clause 18.7(b) does allow some scope for such behaviour. However, the Commission takes the view that the flexibility provided by clause 18.7 confers benefits on both FT and IT users.

In relation to Origin’s submission that the words ‘adversely affect’ in clause 18.7(d) are ambiguous and without practical meaning, and give Epic an absolute discretion as to whether it accepts variations, the Commission considers that it is reasonable for Epic to exercise some discretion in variations to final nominated receipt quantity. The Commission takes the view that the amendment to clause 18.7(d) suggested by Origin would be onerous to Epic, as it would require Epic to allow requests to vary service that were received by Epic at any time.

In relation to Origin’s submission that the confirmation referred to in clause 18.7(e)(ii) is unnecessary, the Commission takes the view that written confirmation of requests to vary service is reasonable, given that written confirmation is required when a user makes an initial request for service.

In relation to Origin’s submission that under clause 18.7(g), the user must pay the FT commodity charge rate and the IT commodity charge rate, the Commission considers that this provision is reasonable. Clause 18.3(f) of the access arrangement clearly states that FT users may not exceed their MDQ; accordingly, the consequences of clause 18.7(g) are appropriate.

In its Draft Decision, the Commission required Epic to amend clause 18 as foreshadowed in Epic’s revised lodgement of 2 March 2000. In its response to the Commission’s Draft Decision, Epic indicated that its access arrangement reflects the proposed amendment. Epic has subsequently made further changes to clauses 18.2(a) and 18.5(b). The effect of the former amendment is to remove the more lenient confirmation procedures that previously applied to FT service prior to 2006. The latter amendment effects the same change for IT service. The Commission takes the view that these amendments are acceptable, as it is reasonable that the same regime should apply to confirmation procedures both before and after 2006.