1. GTAC Workshop Block 1
12 July 2018

2. Agenda Agenda Items Indicative Timing
Workstream 3 – Nominations and Governance
3.1
Nominations
9-11am
3.2
PRs
11am-12pm
Lunch
3.3
Wash-up Principles and Approach
1-3pm

3. 3.1 Nominations Discussion Objective GTAC Reference FAP Findings
Ensure that nominations processes are appropriate for all customer classes to use the system and manage risk
s. 4
FAP Findings
Supporting Material
Burden largely on shared delivery points. UK system operator makes nominations on behalf of mass market load (46)
IPs approval of nominations
Nominations cycles and ability to manage exposure to overrun/underrun charges
Description of UK mass market nomination system
Suggestions for design of mass market nomination system for GTAC

4. Interconnected Party Approval of Nomination
The GTAC sets out the following for interconnected party approval of nominations:
GTAC provisions
4.1 Where an OBA (or other arrangement requiring Shipper nominations) applies at a Receipt Point:
each Shipper using that Receipt Point shall notify its NQs in accordance with sections 4.8, 4.9 and 4.10; and
the Interconnected Party will be required (under its ICA) to approve or curtail those NQs in accordance with section 4.12.
4.5 Where the Interconnected Party at an Individual Delivery Point specifies that an OBA will apply, its ICA will require that Interconnected Party to approve or curtail Shippers’ NQs in accordance with section 4.12.
4.12 Pursuant to sections 4.1(b) and 4.5 and subject to section 4.16(a), the Interconnected Party:
(a) must either approve or curtail Shippers’ NQs on OATIS not later than 30 minutes after the Provisional, Changed Provisional or Intra-Day Nominations Deadline (as the case by be); and
(b) if it fails to do so, will be deemed to have approved each applicable NQ.
For the purposes of this section 4.12, First Gas will ensure the Interconnected Party has the required access to OATIS.
Key questions:
Should nominations be required at all receipt points?
Should other interconnected parties have the ability to approve nominations?
First Gas Position:
Interconnected parties with OBAs take risk on the balancing at that point and therefore should have an ability to approve nominations

5. Nominations and ID cycles
The GTAC sets out the following for interconnected party approval of nominations:
GTAC provisions
Intra-Day Cycles provided for.
First Gas to consult on any changes giving at least 60 Business Days’ notice of changes.
4.18 Shippers/OBA parties can request an extra cycle due to:
Unplanned production outage
Unplanned issue with a user where there is a material increase in the need for gas
First Gas may initiate an extra cycle for technical reasons where operational capacity has been temporarily impacted
4.19 Party requesting an Extra ID cycle gives reasons, which are published by First Gas.
The Extra ID cycle will be notified one hour prior to the cycle.
4.20 Extra ID cycle is available to all points in the system.
4.21 The party requesting the cycle gives a report on the event within 2 business days.
First Gas Position:
Number of ID cycles is well established
Difficult to staff further ID cycles and may not be practicable for all stakeholders
Extra ID cycle provisions allow for unforeseen events to be catered for

6. Key features of UK NDM scheme
Scope
Nomination
Technical Basis
Supply points that serve NDM sites -residential, commercial or light industrial
Daily meter reading required for consumption > 210 TJ/year.
TO issues an hour prior to the nomination cut-off
No nomination is made by the shipper
Shippers cannot overwrite the nomination
Built from sophisticated modelling
Type of users served by the point, usage profiles of different types of users, normalised weather patterns, and user responsiveness to weather
Model developed by XOserve as a service to the National Grid (TO)
TO combines this with highly granular weather forecast data to create the NDM estimations
Generally accurate to within 1-2% of actual flows
Administration
Contractual Obligations
Cost allocation
TO makes the nominations on behalf of the shipper
XOserve is responsible for data analysis and technical development of the demand estimation process
Demand estimation methodology is overseen by the Demand Estimation Subcommittee of shippers convened by the Joint Office of Gas Transporters (which oversees the UNC).
Shippers with NDM nominations are not subject to scheduling charges
Still pay capacity, commodity and balancing charges.
Funded 50% by shippers and 50% by distribution companies
Cost for 2018/19 year is £1.3 million ($2.6 million NZD).

7. NZ vs UK Markets Market Structure Market Characteristics NZ UK LengthNZ UK
Length
2,505 km
7,660 km
Distribution companies 4
8 + Independents
Capacity booking model
Daily capacity booking (under GTAC)
Regular auctions of entry and exit capacity
Daily scheduling model
Combined with capacity booking
Daily nominations for delivery of gas
NZ (%)
UK (%)
Electricity generation
26.5 30
Industrial (Total)
Petrochemical feedstock
Petrochemical process
Industrial
65.8
20.5
30.5
14.8 23
Commercial
4.2 6
Residential
3.5 41

8. Scheme principles
The system would need to be cost-effective to implement
The system would need to achieve a reduction in effort and/or risk for Mass Market Shippers commensurate with the cost imposed
There would need to be equity in terms of cost with shippers making nominations (subject to cost recovery)
Shippers would have the option of overwriting the nomination.

9. Core design Key questions:
Scope
Nomination
Loads in allocation groups 5 and 6 under the downstream reconciliation rules for gas delivered to allocated gates
Separate nomination for non-mass market load that they supply in each delivery zone
Congested points would be excluded from the scheme
Made by the TSO and issued one hour prior to the ID cycle deadline to allow for review by the shipper
If there was no communication from the shipper, it would be deemed approved
Key questions:
Have we got the right allocation groups? Should there be another basis?
Should shippers be able to overwrite the nomination? What would happen if they did?
First Gas Position:
We think these are the right groups to target
We consider it is important that shippers have optionality in the scheme but need to ensure that there is enough load to fund the scheme and there is equity

10. Detailed design options
Option 1
Option 2
Technical basis for nomination
Estimate based on ICP data from that area for the load type and time of year
Average of last 10 deliveries for that point
Who calculates the nomination?
Third party contracted by industry
TSO
Industry Oversight
Oversight committee for third party contract performance/drive demand research programme
None required as simple average
Charging
Premium on DNC (likely to be around $0.05/GJ) to fund third party contract
Net overrun/underrun charge per GJ shipped under the scheme based on the average % net overrun/underrun charge per GJ shipped for all shippers on the network
Funding
GIC levy
Within existing First Gas revenue cap
Key questions:
What is the right level of sophistication of the scheme?
Are there funding risks associated with either option?

11. First Gas Assessment Option 1 Option 2 Cost effective to implement
Option 1
Option 2
Cost effective to implement
May have a significant cost impact and an impost on industry for oversight
Low cost to implement
Reduction in effort
As the nomination is generated for the shipper, the effort required by the shipper is reduced
Reduction in risk
The cost is a simple pro-rata levy so the risk of cost variability is eliminated
The cost applied would be as if the mass market shipper was an average shipper in terms of accuracy. The averaging is likely to reduce variability of costs year on year and therefore risk. However, there may be slight variations year on year
Equity with other shippers
It would be difficult to know whether there was equity with other shippers until full costs for the year were known
The amount paid would be the same as if the shipper were an average- performing shipper

12. 3.2 PRs Discussion Objective GTAC Reference FAP Findings
Identify changes required to address PR issues raised in FAP
s. 3.13, 3.25
FAP Findings
Supporting Material
FG discretion to negotiate SAs could allocate scarce capacity outside PR process (88)
Transfer between end-users if they change shippers not clear (43)
Shippers may not give best estimate of capacity and FG may not police this (43) NA

13. Transfer of PRs when end users change shippers
The GTAC sets out the following for PR transfers:
GTAC provisions
3.21 Subject to section 3.22, a Shipper may trade whole numbers only of PRs with any other Shipper at any time (with the transfer of PRs occurring during the PR Term), using the trading platform specified by First Gas for that purpose (which may be part of OATIS). In relation to any trade, the parties must enter on the trading platform:
(a) the name of the Congested Delivery Point;
(b) the identities of the buyer and seller;
(c) the number of PRs to be traded; and
(d) the Day on which the trade will become effective (which must be after the Day on which the trade is lodged).
After any trade becomes effective, First Gas will update the Shippers’ PR holdings on OATIS. No trade of PRs will affect the relevant PR Effective Date or PR Term.
3.22 Promptly following any agreement to trade PRs, the buyer must notify First Gas of the amount payable to (or by) the seller for the total PRs to be traded (the Trade Price, expressed as positive or negative $/PR). The Trade Price is separate from, and unrelated to the Priority Rights Charge, which will continue to be payable by the Shipper who holds the PRs at any time. First Gas will publish the Trade Price on OATIS. First Gas will have no responsibility for, or role in relation to the Trade Price.
Key questions:
Should PRs follow users? At what level does this become practicable?
First Gas Position:
PR allocation is on the basis of willingness to pay for the capacity at a point
PRs are paid monthly so transfer is flexible
It is not practicable to transfer PRs if over all classes or users – e.g. allocation bands 5 and 6
There would need to be a price associated with the transfer, which could be benchmarked on the last auction

14. Shippers giving the best estimate of capacity
The GTAC sets out the following for nominations at congested delivery points:
GTAC provisions
10.4 Each Shipper warrants that for any Congested Delivery Point its NQs will represent its best estimate of its End-users’ requirements and that it will not inflate those NQs with the intention of securing a greater share of the Available Operational Capacity.
First Gas Position:
All parties using the transmission system have a duty to act as a Reasonable and Prudent Operator
As the auction of PRs reflects the value each party puts on capacity at a point, it is unlikely that shippers will be incentivised overbuy PRs which limits their ability to overinflate NQs
The underrun charges also incentivise accurate nominations and therefore disincentivises overnomination
First Gas considers that part of its duties as an RPO is to enforce the GTAC
First Gas considers that the provisions of the GTAC adequately address this aspect

15. PRs and Supplementary Agreements
The GTAC sets out the following requirements for SAs in relation to PRs
GTAC provisions
7.1 Any Shipper may at any time request First Gas to enter into a Supplementary Agreement. First Gas will promptly evaluate that request against any of the following criteria:
(a) the amount of transmission capacity requested, including whether providing it would affect Available Operational Capacity to the extent of impeding or forestalling opportunities more beneficial to First Gas and other users of the Transmission System;
(b) whether the Shipper (or End-user) can demonstrate that it has a practical opportunity to bypass the Transmission System or use an alternative fuel that is cheaper than Gas;
(c) whether the Shipper (or End-user) can demonstrate that paying First Gas’ standard transmission fees would be uneconomic; and
(d) whether the Shipper (or End-user) is the sole user of the relevant Delivery Point or other transmission assets and those assets would cease to be useful were the End-user to cease using Gas.
7.4 A Supplementary Agreement may vary the terms and conditions of the Code in relation to some or all of the following (and only the following) matters:
(g) setting the priority of Supplementary Capacity in relation to DNC with Priority Rights
Key questions:
Should congestion be a consideration in First Gas’ discretion on Supplementary Agreements?
How should priority for available capacity be allocated between SAs and other contractual products? (e.g. DNC)
First Gas Position:
We feel that consideration of congestion is sufficiently covered by part of s.7.1(a)
SAs are only used to bring users on to the system who would not otherwise be using gas and therefore serve to reduce tariffs for other users
We understand the need for certainty over PRs and therefore need to clarify the relationship between PRs and supplementary capacity

16. 3.3 Wash-up Principle and Approach
Discussion Objective
GTAC Reference
Present washup principles for consultation with shippers
FAP Findings
Supporting Material
Wash-up agreement should be simple to prepare (68)
Not concerned that a wash-up agreement is still to be negotiated (126)
Washup Principles
Current arrangements
Proposed arrangements

17. Current Arrangements - overview and data
Allowance for wash-ups to apply
Wash-up data sources
Both codes allow for wash-ups to be applied to invoices based on new (more accurate) data.
No time limit on wash-ups under the MPOC. Under the VTC changes to invoicing are limited to 18 months following the month of the invoice
Under the VTC invoices may be reopened after the time limit due to wash-ups under the MPOC or Special Allocations from the Downstream Reconciliation Rules (DRRs) at the discretion of First Gas.
Under the MPOC, the data is sourced from welded parties
VTC relies on external data and allocations, and corrections are therefore reliant on the schedule for provision of that data. These include:
Gas Transfer Agreements (GTAs) for receipt quantities
MBB D+1 Pilot Agreement calculations
DRRs data
Methodologies in the VTC itself
OATIS data for metering
Maui system cashout data
Under the DRRs and the MBB D+1 Pilot Agreement, the following timing applies for provision of allocation information (and potential for wash-up adjustments):
D+1 Allocation – business day following flow
Interim Allocation – published 4 months after flow
Final Allocation – published 13 months after flow

18. Current Arrangements - calculations
Transmission Invoice
Both codes use:
Calculated amount using new data less Previously calculated amount = Wash-up amount
Balancing Invoice
MPOC has no formula prescribed for calculating these wash-ups in the MPOC and the application to operational imbalance would be discussed with the affected parties as to how they are applied.
VTC balancing is linked to the Maui system and separated into BPP Pools which are based on the TP Welded Point connections to the Maui pipeline (Frankley Road, Pirongia, Pokuru and Rotowaro).
Each BPP Pool is washed-up when Interim or Final Allocation is produced or there are any other changes to the relevant data.
No wash-ups between D+1 Allocations and the Initial Allocations.
Wash-ups are applied through an adjustment to gas quantities and charged amounts.
VTC wash-ups are aligned with the DRRs allocations:
Interim Allocation activated wash-up – Any data changes since the Initial/D+1 balancing calculation
Final Allocation activated wash-up – Any data changes since the Interim Allocation wash-up
VTC balancing quantity wash-up calculation is defined by the MBB D+1 Pilot Agreement in Schedule 3
Based on the closing position running mismatch for each day compared to the previous allocation’s closing position running mismatch for the day. Adjustments applied evenly over the next month
Cash-out cost to be adjusted is based on the volume difference and price difference for the original and revised cash-outs. This is included in the next month’s balancing invoice.

19. GTAC Arrangements
The GTAC provides for wash-up adjustments to receipt or delivery quantities due to:
Allocations by the Allocation Agent through an operational balancing arrangement (OBA), an allocation agreement (AA) or the DRRs
Corrections applied due to inaccurate metering
These wash-ups affect the following items in the GTAC:
Running Mismatch balances and Excess Running Mismatch Charges
Allocation of Balancing Gas Charges
Transmission Charges.
Applied as debits/credits with the next invoice.
Applied up to 26 months after an invoice has been issued.
Calculation method to be contained in the Wash-up Agreement to be agreed between First Gas and all system users.

20. Proposed Wash-up Agreement principles
Based on existing methodologies documented in the MBB D+1 Pilot Agreement schedule 3
Correction of gas quantity and value in each wash-up.
Any resulting changes to previously calculated charges will be applied as debits/credits with the next invoice
Transmission Invoice
Amounts will be determined for changes in quantity data that are received after the Initial Allocation during a month
Changes to Transmission Charges will be calculated as a result of the change in quantities
Balancing Invoice
Amounts will be determined for changes in quantity data that are received during a month
Excess Running Mismatch (ERM) Charges:
Changes to Running Mismatch (RM) will be calculated as a result of the change in quantities and applied as quantities
Changes to Excess ERM will be calculated
Changes to ERM Charges will be calculated based on the prevailing ERM fee on that day when ERM was incurred
Balancing Gas Costs and Credits
RM will be re-calculated as a result of the change in quantities and applied as quantities
Allocation of balancing gas will be re-calculated based on the changed RM amounts. Adjustments to RM positions in the following month will be made as a result.
Allocation of balancing gas costs will be re-calculated based on the changed RM amounts. Costs will be based on the balancing gas purchase price for the day. 

21. Opening GTAC Running Mismatch Positions Status of D+1 Allocations
Other arrangements
Other transitional arrangements that will need to be considered with wash ups:
Opening GTAC Running Mismatch Positions
Status of D+1 Allocations
MPOC - First Gas must settle ROI using the Average Market Price. Scope for wash-ups to be applied following termination.
The GTAC requires D+1 allocations and MBB Pilot Agreement (or a suitable replacement methodology) to function
Interim and Final Allocation wash-ups are made under the MBB D+1 Pilot Agreement
D+1 allocations are currently made official via Special Allocations GIC at the end of each month
VTC - First Gas must settle Running Mismatch by purchasing/selling that quantity or by making that quantity available to the Shipper. Wash-ups continue for 5 years after termination.
Agreements
D+1 Data Agreement between First Gas and the GIC can survive VTC
MBB D+1 Pilot Agreement needs to be replaced
First Gas Position:
The opening GTAC running mismatch positions are a transitional arrangement that will be treated in the September workshops
The D+1 Data Agreement can be amended to ensure the D+1 allocations continue
A replacement is needed for Schedule 3 of the MBB D+1 Pilot Agreement to form the Wash-up Agreement under the GTAC
The form and content of this Agreement should be industry driven

22. Downstream Reconciliation Rules
D+1 Agreements
The GTAC Relies on the D+1 Agreements to Function
MBB D+1 Pilot Agreement
D+1 Data Agreement
Downstream Reconciliation Rules
D+1 data used to calculate Shipper VTC balancing positions and allocate cash-out amounts and quantities.
GIC produces D+1 allocations
Regulations for determining Initial, Interim, Final and Special Allocations
First Gas agrees to use that dataD+1 Data Agreement
DRRs Interim and Final Allocations used to calculate wash-ups of balancing positions and allocated cash-out amounts and quantities.
Key questions:
Are the changes to the MBB D+1 Pilot Agreement, D+1 Data Agreement and Downstream Reconciliation Rules administrative?
If not, why not?
First Gas position:
These agreements are beneficial to stakeholders
The changes required to these agreements are administrative
It is the role of the GIC to drive the changes to these agreement