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Development of the Benchmark Agreement

The Benchmark Agreement includes obligations on customers to comply with technical connection requirements, provide information, and pay prices calculated in accordance with the Transmission Pricing Methodology. It also includes service definitions, service levels and service measures. This section contains information about the development of the Benchmark Agreement. Work in this area between 15 September 2003 and the 31 October 2010 was the responsibility of the Electricity Commission.

Details of existing agreements - June 2009

Under rule 8.2.1 of section II of part F of the Electricity Governance Rules 2003 (rules), the Commission could request that Transpower provide a copy of any Transmission Agreement for connection to and/or use of the grid that they are party to and that was entered into before the date of the first Benchmark Agreement was incorporated into the rules.

In March 2009, the Commission wrote to Transpower and requested copies of any such agreements with appropriate certification. Transpower replied, providing copies of the certified agreements, as required by rule 8.2.2.2 of section II of Part F of the rules.

Rule 8.2.3 of section II of the rules required the Commission to publish such agreements, unless the parties involved establish good reason for not doing so. Transpower and its counterparties were contacted with no party expressing concern about the contracts being published.

Transpower's notice of grid reconfiguration

The Electricity Governance Rules 2003 (Rules) provided for Transpower to permanently reconfigure the grid, provided that the reconfiguration results in a net benefit as calculated according to the Rules.

On 20 March 2009, Transpower advised the Commission that they would change the configuration of the grid in the Auckland region by closing the 110kV 'split' between Mt Roskill and Hepburn Road substations with effect from 23 March 2009 (or thereabouts).

A copy of the letter and details of Transpower's analysis are available below:

Power factor requirements in the connection code - September 2008

In response to a number of concerns electricity industry participants expressed in relation to the power factor requirements in the Connection Code, the Commission explored what options were available to address those concerns. The Commission published a wide-ranging discussion paperon the options for the provision of efficient reactive power investment.

The Commission had no fixed view about whether change is required to the power factor requirements in the Connection Code or, if so, which of the options would be the most appropriate (or whether there is a better option). The Commission sought feedback from the interested participants so that it was better informed to form a view on its preferred option. Following consideration of submissions, the Commission intended to develop a preferred option and consult on it and the reasonably practicable alternatives.

The Commission invited submissions on the Issues Paper.

The Commission received 16 submissions from electricity industry participants.

Correspondence - Interconnection Service Measures - February 2008 to April 2008

On 14 February 2008, the Commission wrote to Transpower advising that should Transpower expect not be able to provide the HVDC link assets at the capacity required by the rules from 1 April 2008, or in the configuration specified in the rules, it should ensure that it meets one of the exceptions in rule 4.1 of section II of part F.

On 27 February 2008, Transpower wrote to the Commission advising of changes to the configuration of Pole 1 of the HVDC link, including the removal of some assets from service.

On 8 April 2008, Transpower wrote to the Commisison specifying the revised capacity service levels for the HVDC link.

Implementation date

The Board completed the final step of the Commission's process by formally deciding the date the Benchmark Agreement would take effect as a default Transmission Agreement. The decision was in accordance with rule 3.1.2.1 of section II of part F. In making this decision, the Board confirmed the original reasons for targeting the implementation date for the Benchmark Agreement of 1 April 2008, remained valid.

Briefing - November 2007

To assist greater understanding of the proposed Connection Code, Outage Protocol and Interconnection Service Measures, the Commission, in conjunction with Transpower, held a briefing for participants. The briefing session was of both a general and a technical nature, and was intended to enable submitters to ask questions of both the Commission and Transpower to assist in preparation of submissions to the Commission.

Draft Connection Code, Outage Protocol and Interconnection Service Measures published for consultation - October 2007

Before the Benchmark Agreement could take effect, the Connection Code, Outage Protocol and Interconnection Service Measures needed to be added to the Rules.

Pursuant to a request from the Commission, Transpower provided to the Commission:

  • a proposed draft Connection Code (added as Schedule 8 of the benchmark agreement); and
  • proposed draft Outage Protocol (added as a schedule to section VII of part F of the Rules).

In addition, in accordance with the Interconnection Rules, Transpower provided a proposed Interconnection Service Measures to the Commission (added as schedule F6 of section VI of part F of the Rules).

The Commission published for consultation:

Comments were sought by the Commission.

The Commission received:

Exemption for Transpower from rule 3.1.3.2(b) of section II of part F

Rule 3.1.3.2(b) of section II of part F (rule 3.1.3.2(b)) required Transpower to provide designated transmission customers with a draft Transmission Agreement with completed schedules within 20 business days of receiving information from those designated transmission customers.

Transpower was unable to comply with some of the requirements of section II of part F relating to the determination of the contents of the schedules of default Transmission Agreements.

On 27 July 2007, the Commission published a consultation paper that initiated a review of benchmark schedules. The consultation paper proposed changes to the Benchmark Agreement and associated proposed rule changes. If, following consultation, these proposed changes to the benchmark agreement and associated rule changes were agreed to by the Minister, they would allow Transpower to comply with the Rules.

However, the earliest these rule changes could be in force was 25 October 2007 and Transpower would be required to provide a draft transmission agreement with completed schedules before this date.

The Commission published a notice of its intention to grant Transpower an exemption from rule 3.1.3.2(b) on 27 July 2007 and invited interested parties to provide any views about the intended exemption by 8 August 2007. Meridian Energy and Vector responded. The Commission considered the points raised by Meridian and Vector and responded to these parties directly.

Although important, the Commission did not consider that the issues raised by Meridian and Vector necessitated any change to the intended exemption. Accordingly, the Commission granted an exemption to Transpower from rule 3.1.3.2(b) which was notified in the Gazette on 23 August 2007.

Benchmark Agreement review

Section II of part F of the Electricity Governance Rules 2003 (Rules) allowed the Commission to review the Benchmark Agreement at any time, having regard to the Commission's objectives under section 172N of the Electricity Act 1992 and the principles for Benchmark Agreements set out in rule 4.2 of section II of part F of the Rules.

On 30 May 2007, Transpower sent a letter to the Commission setting out several problems it was having when trying to implement the Benchmark Agreement.

Transpower only had the data to provide availability and reliability measures for the aggregated assets at a Point of Service, not for each individual Point of Connection. Transpower was also unable, for the first 12 months of the Benchmark Agreement's operation, to report separately on the reliability of connection and interconnection assets.

On 27 July 2007, the Commission, initiated a benchmark agreement review and some associated rule changes to deal with these issues.

Commission's request to submit proposed Outage Protocol - June 2007

On 29 June 2007, in accordance with rule 8.1 of section VII of Part F of the Electricity Governance Rules, the Commission wrote to Transpower to request that Transpower prepare a proposed Outage Protocol. In accordance with rule 8.1, the proposed Protocol was to be submitted to the Board of the Commission within three months of receipt of the request.

Commission's request to submit proposed Connection Code - June 2007

On 29 June 2007, in accordance with rule 3.3.2.1 of section II of Part F of the Electricity Governance Rules, the Commission wrote to Transpower to request that Transpower prepare a proposed Connection Code. In accordance with rule 3.3.2.1, the proposed Code was to be submitted to the Board of the Commission within 90 days of receipt of the request.

Final decision paper for the Benchmark Agreement and the Interconnection Rules - May 2007

The Commission had previously undertaken a considerable amount of analysis of its proposals against section 172F of the Electricity Act 1992 (Act). The analysis of the Commission's original proposals is contained in:

Some of the Commission's proposals were changed or clarified as a result of the consultation process, the Commission's subsequent consideration of the proposals and the feedback received.

The clarifications and changes were relatively minor in nature, and the Commission considered that the previous analysis under section 172F of the proposal still remained valid. Some changes were more significant, requiring a new or revised assessment against section 172F of the Act. Also, in some cases, even where the proposals were unchanged, it was necessary to update the Commission's initial section 172F analysis.

Accordingly, the Commission published a paper that:

  • outlined any changes to the proposals set out in the:
  • augmented, revised or replaced the analysis against section 172F of the Act presented in the above papers to reflect changes or clarifications to the proposals and the Commission's additional considerations as a result of the consultation process; and therefore
  • confirmed the final proposals that the Commission recommended to the Minister.
  • Final decision paper
    • Appendix A: Report from Ernst&Young on “Benchmark Connection Agreement Credit Support Provisions - Further Supplementary Report” (22 March 2007)
    • Appendix B: Letter from Meridian Energy Limited to the Commission on “Information Requested at the Benchmark Conference” (relating to HVDC Link contract) (16 February 2007)

The Rule change was recommended to the Minister on 21 May 2007 and subsequently gazetted on 31 May 2007.

Final draft decision paper for proposed benchmark agreement and interconnection rules

The Commission undertook extensive consultation on proposals relating to the determination of transmission contract counterparties, the structure of transmission agreements, and the preparation of the benchmark agreement itself and sought drafting comments on these proposals.

The Commission previously undertook a considerable amount of analysis of these proposals against section 172F of the Electricity Act 1992 (Act) as part of the process to recommend changes to the Electricity Governance Rules 2003. The analysis of the Commission's original proposals is contained in:

Some of the Commission's proposals were changed or clarified as a result of the consultation process, the Commission's subsequent consideration of the proposals, and the feedback received.

In many cases, the clarifications and changes were relatively minor in nature, and the Commission considered that the previous analysis under section 172F of the proposal remained valid. In other cases, the changes were more significant, requiring a new or revised assessment against section 172F of the Act. Also, in some cases, even where the proposals were unchanged, it was necessary to update the Commission's initial section 172F analysis.

Accordingly, the Commission published a paper that:

  • outlined any changes to the proposals set out in the:
    • Benchmark Agreement Consultation Paper and draft Benchmark Agreement;
    • Interconnection Rules Consultation Paper and draft Interconnection Rules; and
    • Summary of submissions and provisional response to submissions on the draft Benchmark Agreement and draft Interconnection Rules; and
  • augmented, revised or replaced the analysis against section 172F of the Act presented in the above papers to reflect changes or clarifications to the proposals and the Commission's additional considerations as a result of the consultation process.
  • Draft final decision paper - for proposed benchmark agreement and interconnection rules

Drafting comments on the benchmark agreement and interconnection rules

The Commission sought drafting comments on the final form of the recommendations to be made to the Minister of Energy. These recommendations included:

  • the draft benchmark agreement;
  • the interconnection rules (including the Outage Protocol rules);
  • proposed amendments to part F of the Rules, and
  • new definitions for part A of the Rules.

Peak demand information consultation paper

The Commission sought submissions on the proposal to add a service measure requiring Transpower to provide peak demand information by region to counterparties. This proposal originated from submissions and cross submissions on the proposed Transmission Pricing Methodology, but the Commission considered that the proposal is best included in the benchmark agreement.

This proposal was not previously be consulted on and was therefore independent of (but obviously related to) the Commission's request for drafting comments.

Benchmark Agreement conference

A public conference on the Benchmark Agreement was held in Wellington on the 13 February 2007.

Details of the conference and presentations:

Presentations

Summary of submissions and provisional response

The Commission completed its consideration of the submissions and cross-submissions on the Benchmark Agreement and interconnection rules papers. The Commission's consideration included both a summary of submitters' views and its provisional response on the proposals.

The Commission published the summary and its provisional views prior to the public conference held on 13 February 2007 to assist attendees in their preparations for the conference.

Call for cross-submissions on draft Benchmark Agreement and proposed interconnection rules

The Commission carried out an initial consideration of the submissions received on:

The Commission decided to invite cross-submissions from interested parties on the submissions received by it in response to the two consultation papers.

Transmission and distribution contracts: seminars presentation

The Commission held three seminars over 4-6 July 2006 to discuss the proposals published for consultation regarding the arrangements for transmission contracting, and their relationship to distribution and retail contracts.
The objective of the seminars was to ensure participants understand the proposals in the consultation papers and had an opportunity to ask clarifying questions about those proposals.

Benchmark Agreements

Rule 4.4 of section II of part F of the Electricity Governance Rules 2003 (Rules) required the Commission to develop Benchmark Agreements for connection to and/or use of the transmission grid.

The Benchmark Agreements were intended to provide a basis for Transpower and designated transmission customers (participants determined by the Commission pursuant to a process set out in rule 2.2 of section II of part F) to negotiate transmission agreements, and were intended to become default transmission agreements in the event parties are unable to agree contracts before a date specified by the Board (rule 3.1.2 of section II of part F).

In May 2006, the Commission published the draft Benchmark Agreement for industry consultation.

Interconnection rules

The Commission proposed in the Benchmark Agreement Consultation Paper that the Benchmark Agreement apply to connection services and interconnection information services, and that interconnection asset services be dealt with in the Rules.

In June 2006, the Commission published a paper that provided the formal consultation on the Commission's proposal for interconnection asset services. The paper also set out, in full, the Commission's proposed Rules for the preparation of an outage protocol. The proposed outage protocol Rules were briefly referred to in the Benchmark Agreement Consultation Paper.

Transmission service definitions

Rule 4.3.1.5 of section II of part F specified that the Benchmark Agreements must include service definitions, service measures, and service levels to the extent practicable.

The Commission considered that it would be helpful to both itself and to the industry if it consulted on high-level policy options and recommendations relating to transmission service definitions before developing and publishing the draft Benchmark Agreements, or the other matters provided for in section II of part F.

In April 2005, the Commission published an options paper for industry consultation.

Following its consideration of the submissions received in 2005, the Commission published the following submission summary document.

Contract structure and counterparties

Under section II of part F, the Commission was required to propose an appropriate structure for transmission agreements and appropriate categories of participants to be designed transmission customers ("counterparts") required to enter into transmission agreements with Transpower.

The Commission published a preliminary consultation paper about the Transmission Contract Structure and Counterparties in September 2004. Following its consideration of submissions, the Commission published a preliminary decision in December 2004.

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