The Chairman requested the GAB to advise on the principle of the proposed changes and to assist in the development of an appropriate methodology. The chairman noted that this is approximately $2 million per year, including the operation of the Gas Bulletin Board (GBB), the operation of the Emergency Management Facility, the production of the Gas Statement of Opportunities (GSOO), the administration of the GAB and the amortization of the GSI implementation costs. The Chairman requests the PUO to propose a clear fee allocation methodology for the further consideration of the GAB.
DEVELOPMENT OF A WESTERN AUSTRALIAN GAS MARKET The Chair introduced Mr Trent Morrow of Market Reform to present a discussion of the options for developing a gas market in Western Australia (WA). The discussion returned to the impetus for discussing the development of a gas market in WA. The Chairman reiterated that the intention of the proposal is to develop a cheap, efficient and liquid gas and capacity trading mechanism.
The IMO develops a proposal and associated costs based on the SAB discussion and further discussions with gas market participants and presents it at the next SAB meeting. 37 2013 The IMO will present the process and results of the EMF test to a wider group of gas market participants in early 2014. participants, and present it at the next GAB meeting.
GAB members generally supported the continuation of the IMO's investigations into the development of a gas and capacity trading mechanism.
INTRODUCTION
SCOPE AND GUIDING PRINCIPLES
S COPE
G UIDING P RINCIPLES
Adequate governance arrangements must be in place so that there is a level playing field for market participants and confidence in market outcomes. Gas market data exchange conventions should minimize inconsistencies with existing participatory systems used for similar functions in Western Australia and elsewhere in Australia. The cost of implementing and operating the gas market should, as far as is practical, be covered by the gas market participants recognizing the uncertainty in the level and growth of transaction volumes.
The cost recovery arrangements should in themselves be relatively simple, efficient and cost effective.
INTRODUCTION TO SOME KEY TERMINOLOGY
Matching Engine: Function of a trading platform that pairs a bid and an offer in a specified product to form a transaction that includes a transaction price and quantity. Pipeline Capacity Trading: Provision of short-term pipeline1 services by facility operators and facilitation of secondary trading of pipeline services. Secondary trading: Trading in a good or service after it has been issued in the primary market.
In the case of pipeline capacity, primary distribution is between a facility operator and a shipper, while secondary trading is the sale of a service from one shipper to another. Balancing Service: The service provided by a facility operator or carrier at a facility to correct any imbalance between actual gas flows and a centrally transacted gas quantity. If there is no balancing service, then a mechanism is required to financially settle any difference between the actual amount of gas delivered and the amount of the transaction.
Operational Balancing Agreement (OBA): Agreement between plant operators to balance physical gas flows at a connection point between plants. Under the agreement, installation operators will resolve imbalances resulting from a mismatch between planned flows and the actual physical gas flow. Gas delivery process: the process of gas delivery and receipt at a hub, from nominations and planning through metering and allocations.
1 Pipeline capacity services refer to gas transportation or gas storage services offered by a pipeline or storage facility.
DISCUSSION OF DESIGN OPTIONS
- M ARKET M ODEL
- F UNDAMENTAL H UB D ESIGN D ECISIONS
- P ARTICIPATION IN THE M ARKET
- H UB L OCATIONS
- G AS B ALANCING A RRANGEMENT
- P RODUCTS
- P IPELINE C APACITY T RADING A RRANGEMENTS
- T RADING M ECHANISM
- G AS D ELIVERY
- S ETTLEMENT AND P RUDENTIAL
- M ARKET I NFORMATION
- L EGAL F RAMEWORK
- C OST R ECOVERY
These key design decisions have flow on implications for the trading, gas delivery and settlement features of the market. There will be costs and contractual changes required to implement and maintain a balancing service for the market. Avoid costs and contractual changes required to implement and operate a balancing service for the marketplace.
Transactions (or net positions) are provided directly to the relevant facility operator/s by the market operator. Trading participants then provide the actual gas delivery information to the market operator for settlement purposes. The facility operator allocates gas and provides actual delivered quantities to the market operator for settlement purposes.
With the IMO as the market operator, however, the WEM settlement and rating capacity could be used to provide services to the gas market. Trading participants should maintain and provide the market operator with a list of authorized counterparties. It is understood that some supporting legislation would be required for the IMO to act as a market operator.
Additional products for gas trading in an installation could also be developed for the market. 12 The settlement of the notional value of a transaction may be relatively easy for the market to settle. In a bilateral gas supply process, the market party has no role in the supply of gas.
The trading participants would then calculate the actual delivered volumes and forward this data to the market operator for settlement purposes. An extended model for the market is for the facility manager to act as the counterparty to the transactions. This enables the direct transmission of gas supply instructions from the market operator to the facility operator.
Confirmation of the actual quantity of gas supplied will be requested by the market operator for settlement purposes. The extended market model is a combination of gas market settlement and WEM settlement.
HIGH LEVEL DESIGN
Coordinating gas supply between the market and facility operators could increase business efficiency. Some believe that the Pilbara region hub should be proposed as a basic model for the market. Strong view that the new clearing service should not be included in the basic model for the market.
To participate in the market, trading participants must have the right to supply gas to the hub or be a shipper at the relevant facilities. Orders in designated products were matched continuously throughout market hours to form transactions. An off-market trading facility enables bilateral transactions to be recorded in the market for settlement.
The exchange operates in the mode of continuous matching of trading during the working hours of the market. The matching of orders to create transactions takes place continuously throughout the market opening. Simplifying the supply of gas between the market operator and the relevant facility operators would require amended pipeline contracts and a new system interface.
The market operator communicates net transactions or deliveries directly to the relevant facility operator(s) on behalf of market participants. Trading participants provide and confirm current gas distribution information with the market operator for settlement purposes. Recognizing the potential benefits of expanding the market design to include confirmation of gas deliveries by the facility operator.
Trading participants must provide the market operator with credit support to cover their potential settlement exposure for delivered trades, pending trades and active orders. Market enablement and the high-level market framework are defined in a rules-based framework. Market funding can also take the form of sponsorship, fixed fees for participants, or industry or government guarantees.
