There Were No Apologies Noted

MINUTES - GWCF

MEETING: Gas Wholesale Consultative Forum DATE: Tuesday, 23 October 2012 TIME: 10:00 AM – 12:20 PM LOCATION: Waratah Room, AEMO Melbourne Office MEETING #: 175 ATTENDEES: NAME COMPANY / DEPARTMENT Terry Grimwade (Chair) AEMO Roger Shaw AEMO Neale Scott (Secretary) AEMO Canh Diep AEMO Caroline Byrne AEMO Rando Yam AEMO Claire Rozyn AEMC Meredith Mayes AEMC Jeremy Llewellyn AER George Foley AGL Saul Milner AGL Libby Hawker APG Don Vigilante Energy Australia Michael Downey IPR - GDF SUEZ Branden Tan Lumo Energy Hannah Heath Origin Energy Paul Callander APA Group

1. Apologies There were no apologies noted.

2. Minutes of previous meeting The GWCF confirmed the minutes of meeting 174 held on 18 September 2012 with the following amendments:  Delete the secretariat note under item 4.3 Portfolio Rights Trading (PRT) – Proposal for Portfolio Rights Trading; following clarification at this meeting that the original contract relationship does not change.  Accept and include comments received from H. Heath (Origin Energy).

0AA08AFCFD59D46C3EEEFAACF63E0FBA.DOC 3. Action Items The action list was reviewed and the following updates provided:

Action tem # Comment

170.3 Clean Energy Act: T. Grimwade (AEMO) advised AEMO have received a draft determination. R. Shaw (AEMO) noted the draft determination states that AEMO will have operational control of the operational facility and APA will have operational control of the maintenance facility. AEMO are seeking internal legal advice to review the risks, implications, cost recovery options (during the fixed price period) and emission units thereafter. AEMO will be discussing the interpretation of the determination further with APA regarding allocation of fugitives between the two facilities. The closing date for AEMO to provide any additional information to the Clean Energy Regulator is 2 November 2012. AEMO to confirm if the draft determination has been / can be made public and circulate to the GWCF representatives if authorised. L. Hawker (APG) queried if AEMO were still on track to provide additional reporting on combustion emissions to Market Participants by March 2013. R. Shaw advised that the MIBB report would only be available in October 2013, but that AEMO will provide quarterly reports to Market Participants showing the operational gas consumption until the MIBB report is implemented. Market participants would apply their proportion of withdrawals (obtained from the linepack account MIBB report) to determine their share of gas combusted. AEMO will be monitoring the gas consumption to determine when an OTN is required. 171.4 Market Change Prioritisation: R. Shaw (AEMO) noted AEMO circulated the change request and defects list to the GWCF at the September 2012 meeting requesting feedback on the content. AEMO has received no response to date; and will therefore assume acceptance of the report as it stands. 172.1,2 and 3 AMDQ review: Pending the result of the APA access arrangement. 174.8 AMDQ Rules consultation: With the AEMC in attendance T. Grimwade (AEMO) noted that there was comment at the last Gas Wholesale Consultative Forum that three weeks for consultation for the AER proposed rule change on AMDQ is a very short timeframe for a fundamental rule change. M. Mayes (AEMC) noted that the AEMC had received a number of submissions in response to their consultation paper and that the AEMC is still on track to provide a final determination on 1 November 2012.

0AA08AFCFD59D46C3EEEFAACF63E0FBA.DOCPAGE 2 OF 13 Item Topic Action required Responsible By

175.1 Clean AEMO to confirm if the draft AEMO Nov 12 Energy Act determination has been / can be made public and circulate to the GWCF representatives if authorised.

4. Items for discussion or Noting 4.1. Force Majeure Provisions 12-005-03 Administered Price Cap Trigger Review N. Scott (AEMO) highlighted the purpose of the paper is to review the remaining triggers for invoking the administered price cap (APC) and agree whether the current provisions are sufficient or advise AEMO if more analysis should be carried out. D. Vigilante (Energy Australia) queried why it was agreed at the last meeting that a replacement trigger for force majeure was not required in the Vic market. H. Heath (Origin Energy) noted that the DWGM market has multiple schedules throughout the day to enable the market to respond to a high price event and the addition of a price threshold, in addition to the cumulative price threshold (CPT), would dampen the signal and hinder the market to respond naturally and in a timely manner. N. Scott (AEMO) presented the current triggers for invoking the administered price cap (APC) which are:  System force majeure event under rule 346: Currently planned for removal.  Market suspension under rule 347.  Retail of Last Resort (RoLR).  Inability to publish market price or pricing schedule by the required time under rule 222.  Exceeding CPT. It was noted that the DWGM is heavily reliant on the CPT trigger. The GWCF representatives discussed and agreed in principle that there should not be another quantifiable trigger, but would need to review the current CPT level to ensure it is fit for purpose. D. Vigilante (Energy Australia) noted the market risk for the DWGM is considerably higher than other markets and suggested AEMO consider this benchmark when reviewing the CPT level. The GWCF discussed whether the rule change to remove the force majeure provisions could be completed in parallel and noted AEMO would need to look at the framework for both determining and setting the CPT and APC before deciding if the rule change can be completed in parallel. Sec note: Discussion and actions arising on framework noted under 12-005-04 Removal of FM Provisions – Draft Rule and Procedure Changes. G. Foley (AGL) noted since the 22 November 2008 event, it has become apparent that the FM provision is ineffective and the market is heavily reliant on CPT as it stands. G. Foley

0AA08AFCFD59D46C3EEEFAACF63E0FBA.DOCPAGE 3 OF 13 suggested that the core issue might be that CPT is not be at an appropriate level and that the priority of progressing this may require the GWCF to reconsider the priorities of other rule changes such as portfolio rights trading (PRT). M. Downey (IPR - GDF SUEZ) noted that VoLL is a function of the CPT and should be considered when reviewing the CPT level. The GWCF agreed to:  Review the CPT level (taking into consideration CPT levels in other markets).

Item Topic Action required Responsible By

175.2 Administered Review the CPT level taking into AEMO Nov 12 Price Cap account CPT level of other Trigger markets. Review

12-005-04 Removal of FM Provisions – Draft Rule and Procedure Changes N. Scott presented the proposed draft rule change required to remove the force majeure (FM) provisions in part 19 of the NGR. N. Scott highlighted the main amendments as:  Amendment to the definition of administered price cap to: administered price cap means a price cap determined in accordance with rule 345specified in the administered pricing procedures, which will apply during an administered price period. Participant force majeure event means an event within the meaning of rule 216. system force majeure event – See rule 346.  Removal of rule 345: Administered price cap.  Removal of clauses 216 (9) and (10) as the GWCF believe the concept of non- conforming bids is not relevant in the current market. The GWCF agreed to delete clauses 216 (9) and (10). G. Foley (AGL) queried the purpose for removing rule 345; as it only puts an obligation on AEMO to have an APC procedure. H. Heath (Origin Energy) added that removing rule 345 would remove the power for AEMO to set the price cap level. R. Shaw (AEMO) noted the obligation for AEMO to have an APC procedure would fall under rule 224 which states that AEMO must have a procedure that specifies the APC as well as defines the process to reach the APC level. H. Heath (Origin Energy) suggested that given the significance of the APC and CPT as market parameters, there should be a rule that gives AEMO the discrete power to determine them. The procedures can then state the parameter levels.The GWCF discussed the framework for the APC and CPT and agreed in principle that the power to determine the APC and CPT should sit in the Rules and the setting of the level of APC and CPT should sit in the Procedures. It was agreed with this framework in place AEMO could proceed with the rule change in parallel with the review of the appropriate CPT trigger level.

175.3 CPT Redraft the proposed rule AEMO Nov 12 framework change to specify the head of power to set the APC and CPT in the rules Consider whether rule 224 already does this. Define the process for the setting of the CPT and APC in the Procedures.

G. Foley (AGL) asked why we need to retain clause 216(4) (b) and (c); as neither provides relief from market exposure and there is therefore no value in retaining these clauses. J. Llewellyn (AER) suggested it should remain in the rules to provide guidance on what is and is not in the Participant’s control. The GWCF agreed to leave clause 216 (4) (b) and (c) in the rules. D. Vigilante (Energy Australia) asked if removing 216 (4)(a) caused any concern. AEMO’s preliminary view is that all obligations are covered off in 216 (4) (b) and (c). The GWCF are to consider this point when finalising the draft rule change. 4.2. Portfolio Rights Trading 12-095-03 Portfolio Rights Trading – Cost and benefit analysis C. Diep (AEMO) presented the Portfolio Rights Trading cost and benefits analysis and highlighted that the results cover a wide range of scenarios which are heavily based on the assumptions. The GWCF discussed the assumptions: Gippsland supply outlook to DWGM To promote a more efficient usage of transportation capacity, more gas must flow from Gippsland. Based on the winter 2012 gas supply and supply outlook reported in the VGSA AEMO has noted a big increase in Longford supply injected into the DTS and therefore AEMO has assumed that mare gas can be supplied from Gippsland. How much AMDQ is available for trading AEMO looked at the Longford and Iona close proximity point (CPP); the analysis showed there is limited opportunity to trade based on 2011-12 data, due to a decrease in market participants injecting and a large proportion of Market Participants already having AMDQ credits certificate arrangements in place with APA GasNet. AMDQ surpluses and shortfalls The analysis of MPs’ AMDQ surpluses and shortfalls in winter 2011 and 2012 suggest that:  Collectively MPs have more AMDQ surpluses than shortfalls.  When there is more demand for AMDQ surpluses in winter less will become available. This applies to both Longford and Iona close proximity point (CPP).  There is less demand for AMDQ surpluses at Iona than Longford.

0AA08AFCFD59D46C3EEEFAACF63E0FBA.DOCPAGE 5 OF 13 AEMO’s assessment is that between 20 TJ and 40 TJ of Longford AMDQ could be made available for PRT. L. Hawker (APG) noted the transaction costs for AMDQ trade should also be taken into consideration and commented that PRT would be more likely to be utilised if the transaction costs were low. D. Vigilante (Energy Australia) suggested there is more availability for trading; such as property rights and contracting and suggested the range be amended to a higher level. Some GWCF members suggested the range for analysis should be amended to 40TJ – 150TJ. Liquidity of the market C. Diep asked if AMDQ surplus is held by a handful of Market Participants how willing would Participants be to trade. H.Heath (Origin Energy) noted the liquidity of the market depends on and is influenced by the process and a number of factors, such as the transaction costs, the confidence and certainty of customer transaction. The more transparent and the lower the transaction costs, the more liquid the market could be. Unit cost for AMDQ C. Diep noted the unit cost for traded AMDQ is assumed to be $15,581/TJ/yr based on the tendorof of Iona AMDQ certificates in 2011. D. Vigilante noted the unit cost is based on a short-term deal. G. Foley added the haulage component will need to be taken into consideration. P. Callander (APA) noted there will be different values when considering AMDQ and AMDQ credits. Some GWCF members suggested AEMO consider revisiting the analysis could using a unit cost for traded AMDQ at $15,581/TJ/yr and a separate range set at 50% more. AEMO implementation cost C. Diep noted AEMO’s implementation cost is $361k and an annualised cost of $72,200 assuming a lifetime of five years. C. Diep advised only the default option with no PRT capping had been analysed in the paper however for comparison a high-level estimate for PRT capping would be approximately 10% higher. Benefits of uplift hedge C.Diep suggested there would be a low likelihood of system congestion over the next five years. Based on the assumption that an AP event will occur once every three years or twice over five years each event will incur 10 TJ, 20 TJ or 30 TJ of LNG costing 10 $/GJ, 20 $/GJ or 30 $/GJ. Injection tie-breaking rights Injection tie-breaking normally affects $0 injection bids and can happen 5 to 25 times in a year. MPs without ITR can be scheduled down by 60% compared to those with ITR. The opportunity cost of ITR is estimated to be between 0.5 $/GJ and 2 $/GJ. Some GWCF members suggested the opportunity cost of ITR for the purpose of this analysis could be increased to be between 0.50 $/GJ and 4.00 $/GJ.

175.4 PRT cost Bring back costs and benefits AEMO Nov 12 and benefit analysis to GWCF based on new analysis assumptions discussed at GWCF#175.

12-095-04 Portfolio Rights Trading – Requirement checklist The detailed design for portfolio rights trading will remain on hold until further analysis of the costs and benefits has been completed. 12-095-05 Portfolio Rights Trading – MIBB report of AMDQ surpluses and shortfalls H.Heath (Origin Energy) suggested the GWCF consider the purpose and necessity of the draft MIBB report of AMDQ surpluses and shortfalls and highlighted possible concerns with preserving data confidentiality. R.Shaw (AEMO) suggested the supply hub or bulletin board could at some point in the future be used as a contract trading platform but would require both registration and prudential requirements. G. Foley (AGL) and H. Heath cautioned against proposing alternative uses for the supply hub given the Standing Committee on Energy and Resources (SCER) had not yet approved the design or its introduction in Queensland. R. Shaw confirmed AEMO will progress a proposal for aParticipant specific AMDQ summary MIBB report to provide MP’s with greater certainty of their AMDQ position to facilitate them deciding on capacity to use PRT. G. Foley noted a standard form contract to expedite the negotiation process would be of benefit and should be considered by Market Participants.

175.5 MIBB report Consult GWCF on the design of AEMO Nov 12 of AMDQ a Participant specific MIBB report surpluses to provide MP’s with greater and shortfalls certainty of their AMDQ positions.

4.3. Verbal Updates 4.3.1. PRT Rule Change R. Shaw (AEMO) noted the PRT rule change is currently on hold pending a decision on the cost and benefit analysis. 4.3.2. Cost recovery for DTS Emissions under CEA 2011 As discussed under action item 170.3. 4.3.3. AMDQ Rules R. Shaw (AEMO) noted that AEMO are awaiting final decision from the AEMC. 4.3.4. Build 31 Update

0AA08AFCFD59D46C3EEEFAACF63E0FBA.DOCPAGE 7 OF 13 N. Scott (AEMO) noted that the pre-production testing has been completed successfully and the cut-over for Vic DWGM is scheduled for Thursday 25 October 2012. A cut-over plan has been circulated to the GWCF and ITDF. N. Scott noted an industry teleconference will take place on Friday 26 October 2012 to review the cut-over and give participants the opportunity to inform AEMO of any issues that they may be experiencing. 4.3.5. Market Change Prioritisation R. Shaw (AEMO) noted AEMO will be commencing the planning phase for the September 2013 release shortly. 4.3.6. Release 32 R.Shaw (AEMO) advised AEMO will be releasing a revised change notice for release 32 as the commencement date has changed to 16 April 2013. AEMO will be removing ability to amend standing AIHN from release 32 as it requires more extensive changes than originally estimated. AEMO will be putting in place a more stringent workaround that will allow for a quick turnaround.

5. Other Business 5.1. Release 32 – MIBB reports R. Shaw (AEMO) noted a couple of MIBB reports that have been placed in release 32 for minor amendments that have not been to the GWCF for endorsement:  Prudential exposures MIBB report: Will bring the DWGM in line with other markets.  Organisation details MIBB report: Addition of the ABN and ACN. AEMO will be sending email to the GWCF representatives for endorsement of these amendments by circular resolution. 5.2. 2013 meeting schedule R. Shaw (AEMO) noted the GWCF meeting has moved to the second Tuesday of each month for 2013.

6. Next meeting The next GWCF is scheduled for Tuesday 20 November 2012. Papers are due to the GWCF secretary by 9 November 2012. The meeting closed at 12:20 PM.

0AA08AFCFD59D46C3EEEFAACF63E0FBA.DOCPAGE 8 OF 13 New action items raised at meeting 175

175.1 Clean Energy Act AEMO to confirm if the draft determination has been / can be AEMO Nov 12 made public and circulate to the GWCF representatives if authorised.

175.2 Administered Review the CPT level taking into account the CPT level of other AEMO Nov 12 Price Cap Trigger markets. Review

175.3 CPT framework Redraft the proposed rule change to specify the head of power to AEMO Nov 12 set the APC and CPT in the rules Consider whether rule 224 already does this. Define the process for the setting of the CPT and APC in the Procedures.

175.4 PRT cost and Bring back costs and benefits analysis to GWCF based on new AEMO Nov 12 benefit analysis assumptions discussed at GWCF#175.

175.5 MIBB report of Consult GWCF on the design of a Participant specific MIBB report AEMO Nov 12 AMDQ surpluses to provide MP’s with greater certainty of their AMDQ positions. and shortfalls

0AA08AFCFD59D46C3EEEFAACF63E0FBA.DOC PAGE 9 Items raised prior to Meeting 174

Item Topic Action required Currently Due date Resolution / Revised Agenda assigned to Status Date item for meeting

174.1 Force Majeure AEMO to provide a paper AEMO Oct 12 Closed Item 4.1 Drafting outlining the full drafting of replaced with 12-005-04 Instructions proposed rule changes and action 175.3 the proposed additions to the administered pricing procedures based on Market Participant feedback and progress of APC trigger. AEMO to move rule 345 (requiring AEMO to determine the APC and include in Administer pricing Procedures) to rule 224 ‘Administered Pricing’.

174.2 Force Majeure AEMO to review and AEMO Oct 12 Closed Item 4.1 Drafting consider 216 (9) and 216 (10) replaced with 12-005-04 Instructions of the FM provisions drafting action 175.3 instructions.

174.3 APC Triggers AEMO to prepare a brief AEMO Oct 12 Closed Item 4.1 document outlining the replaced with 12-005-03 remaining APC triggers for action 175.2 review by the GWCF.

0AA08AFCFD59D46C3EEEFAACF63E0FBA.DOC PAGE 10 Item Topic Action required Currently Due date Resolution / Revised Agenda assigned to Status Date item for meeting

174.4 Proposal for AEMO to prepare indicative AEMO Oct 12 Closed Item 4.2 Portfolio cost benefit analysis for each replaced with 12-095-03 Rights of the following options and action 175.4 Trading bring back to the October 2012 GWCF.  Default option with no PRT capping.  Capping AMDQ for own use. Capping AMDQ available for PRT.

174.5 Proposal for AEMO to compile a check-list AEMO Oct 12 Closed Item 4.2 Portfolio of information required for 12-095-04 Rights PRT. Trading

174.6 Proposal for AEMO to investigate options AEMO Oct 12 Closed Item 4.2 Portfolio for publication of details of replaced with 12-095-05 Rights available AMDQ for trading to action 175.5 Trading facilitate PRT amongst MPs

174.7 Market Review DWGM defects list Participants Oct 12 Closed Change and provide any comments Prioritisation on information requirements for the defects listing or specific comments on current defects to GWCF mailbox.

174.8 AMDQ Rules Highlight to AEMC that three AEMO Sep 12 Closed weeks consultation is a very short time-frame for a fundamental rule change.

172.1 AMDQ Update rules to remove ‘Use AEMO Nov 12 Pending the Review of System Agreement’ and result of the replace with “Transmission APA access Payment Deed’. arrangement.

172.2 AMDQ Rules AEMO and AER to discuss AEMO Nov 12 Pending the efficacy of AEMC rules in result of the preventing ‘double dipping’. APA access arrangement.

172.3 AMDQ Rules If new NGR provisions AEMO and Nov 12 Pending the adequately cover ‘double APA result of the dipping’ issue, AEMO and APA access APA prepare a rule package arrangement. for further discussion in GWCF. Package to include:  AMDQ CC for all expansions.  APA to auction AMDQ CC. AEMO to auction authorised MDQ.

171.4 Market AEMO to set up a process for AEMO Jul 12 Ongoing Mar 13 change prioritisation of DWGM Gas prioritisation Market Issues. AEMO to include defects in review.

170.3 Clean Energy Review determination of AEMO, APA May 12 Open Dec 12 Act operational control of the DTS.

168.3 Market MPs to provide list of MPs Mar 13 Open Mar 13 Systems issues/constraints with Review current market systems plus a wish list for any potential replacement system. Emails should be sent to gwcf_correspondence@aem o.com.au.

168.4 Market AEMO to write issues paper AEMO Apr 13 Open one month Systems using MP feedback. after 168.3 Review

163.3 Longford high AEMO to include the idea of 163.3 Longford pressure after a 2am schedule in any high pressure 10pm market review. after 10pm

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