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Request for Feedback on Amendments to Gas Act (Cap 116A)
Posted on Monday, February 13, 2006 - 08:00 PM

The Energy Market Authority (EMA) invites feedback from the public on the proposed amendments to the Gas Act to implement the Government’s policy decision to restructure the gas industry to facilitate competition in gas import and retail.

The Paper is as follows:-

INTRODUCTION

1. The Government announced in Mar 2000 its policy decisions to restructure the gas industry to facilitate competition in gas import and retail, with transportation to be undertaken by a single entity – PowerGas Ltd. The Gas Act (Cap. 116A) (the “Act”) was passed in Mar 2001 to establish the regulatory framework for this.

2. It is proposed that the Act be amended to implement the Government’s policies. This will allow new gas importers and retailers to have open competitive access to the gas pipeline infrastructure. It will also provide potential investors with greater clarity of the regulatory regime in the gas industry.

3. EMA invites feedback from the public on the proposed amendments to the Act which is currently being reviewed by the Attorney-General’s Chambers.

OPEN ACCESS POLICY

4. A key tenet that underpins Singapore’s policies in the gas industry is open access to gas pipeline infrastructure. Without open access to pipeline infrastructure, there will not be a level playing field in the gas industry. A level playing field allows for competition, and this will ultimately benefit consumers as producers and retailers will be incentivised to greater levels of efficiency and price competitiveness.

FRAMEWORK OF THE PROPOSED AMENDMENTS

5. The proposed amendments cover the following key areas:
a. Licensing Regime;
b. Measures to Ensure Open Access to Gas Network;
c. Strengthening Regulatory Powers & Safeguarding Security of Gas Transportation System in a Multiple Shipper Environment; and
d. Other General Amendments.

Licensing Regime

6. The Act currently imposes obligations on specified categories of licensees, viz. gas retailers and gas transporter. For security reasons and for the proper operation of the Gas Network Code (which is a set of terms and conditions for transportation of gas through the gas network), gas shippers and operators of the Gas Onshore Receiving Facilities (“ORF”) should be licensed as well, so that they will be required to comply with stipulated licensing conditions.

7. For ORF operators with little assets or paid-up capital in Singapore, they will be required to post a performance bond.

8. “Shipper” is currently defined in the Act as the party that arranges with the transporter to transport gas through the gas network. It is proposed that the definition of a shipper be clarified as the party that contracts with as well as pays the gas transporter for transportation of the gas through the gas pipeline or gas pipeline gas network.

Measures to Ensure Open Access to Gas Network

9. To have open access to the gas pipeline infrastructure, a Gas Network Code has to be imposed on all shippers. It is proposed to make compliance with the Gas Network Code a mandatory requirement via a licence condition. A shipper must abide by all the requirements of the Gas Network Code and will be penalized for non-compliance. It is proposed that the Act stipulates that the initial Gas Network Code must be approved by EMA, and that all code change proposals shall be considered and decided by EMA. It shall be a requirement that the Gas Network Code is updated as may be directed by EMA.

10. It is proposed to amend the Act so that any terms in existing and new transportation agreements for onshore pipelines that are inconsistent with the Gas Network Code be made illegal. Similarly, any terms in existing and new transportation agreements for offshore pipelines that prevent third party access should also be made illegal. These provisions will have retrospective application.

11. To prevent any party applying a foreign law to such transportation agreements and arguing that the Act does not apply to such agreements, it is proposed to amend the Act to render any terms that exclude the application of the Act or its regulations illegal and not enforceable. In view of the serious consequences of such illegal acts on the industry, EMA will be empowered to issue an order to such party not to flow gas under such illegal terms or, in the alternative, impose financial penalties.

12. For the offshore pipelines, it is proposed that the Act be amended to empower EMA to impose a gas allocation arrangement on users to enable third party access, if parties cannot come to an agreement of their own accord. This prevents a situation where an existing user attempt to block third party access by refusing to negotiate a gas allocation arrangement.

Strengthening Regulatory Powers & Safeguarding Security of Gas Transportation System in a Multiple Shipper Environment

13. Control of ownership of critical infrastructure: The gas grid is a critical infrastructure whose failure can have disproportionate effects on the economy. It is proposed to amend the Act to give EMA oversight and powers of approval over (i) the ownership of the gas grid, the gas transporter and any licensee engaging in the management of the transportation business; and (ii) the disposal/acquisition of the gas grid. This amendment will allow EMA, in consultation with the Ministry of Trade & Industry and any other relevant Government agencies, to reject potential ownership transfer that is assessed to be detrimental to national security. It is also proposed to amend the Act to give the Minister the power to issue a written order to reverse any ownership transfer detrimental to national security.

14. Control of key personnel appointed to operate critical infrastructure: It is proposed that EMA’s approval be required before the gas transporter and any licensee engaging in the management of the gas transportation business can appoint a person as its chief executive officer, its director or the chairman of its board of directors.

15. Power to obtain information: It is proposed to enhance EMA’s powers to obtain information and to make explicit that in carrying out its functions under the Act, EMA is empowered to obtain relevant documents and materials from any person without payment. It is also proposed to empower EMA to disclose such information to agents acting under the direction of the Minister.

16. Power to issue Codes of Practice/Standards of Performance: The current Act provisions stipulate that gas licensees are to produce and comply with relevant codes and standards subject to EMA’s approval. It is proposed that the Act be amended to empower EMA to issue codes of practice (e.g. Metering Code and Gas Supply Code) and other standards of performance.

17. Making gas consumers liable for causing risk to gas system security: Shippers have to coordinate with their gas consumers to ensure the volume of gas flowing through the network does not threaten system security. The Gas Network Code imposes charges and penalties on shippers for non-compliance. As existing gas contracts do not have provisions for such costs to be passed through to gas consumers, it is proposed that EMA be empowered to allow shippers to pass through such charges and penalties to gas consumers. This is needed to ensure that gas consumers also play their role in complying with gas system security requirements.

18. To deter non-compliance with conditions of exemption: Currently, should (i) a person or (ii) any person in a class of persons granted an exemption from holding a licence contravene any condition of the exemption, the only enforcement action EMA can take is to revoke the exemption. It is proposed to amend the Act to empower EMA to impose financial penalty on such person for contravention of exemption conditions.

Other General Amendments

19. Clarity on appeal to the Minister & Stipulating a Time Limit for Appeal to the Minister against EMA’s decision: Section 93 of the Act provides for a licensee or any other person aggrieved by EMA’s exercise of any discretion vested in it by the Act, to be able to make an appeal to the Minister, whose decision shall be final. In the interest of greater clarity, it is proposed that the Act be amended to be specific on the responsibility of the appellant to provide the grounds for the appeal, in a manner and within such period as specified by the Minister. It is proposed that any such appeal must be lodged with the Minister within 14 days after the EMA gives the relevant party notice in writing of the decision.

20. It is also proposed to amend the Act such that the Minister would have the flexibility, on the merits of each case, to refer appeals of a technical nature to an Appeal Panel (appointed by the Minister) for resolution. Where such cases are referred to an Appeal Panel, the decision of the Appeal Panel is final.

21. Compliance with decision or direction of EMA pending determination of an appeal: There is currently no requirement for compliance with the decision or direction of EMA pending the determination of an appeal by the Appeal Panel. It is proposed to amend the Act to require compliance with the decision or direction of EMA pending the determination of an appeal by the Appeal Panel.

22. Penalty to be imposed for contravening the Minister’s direction: There is currently no penalty prescribed for non-compliance with the Minister’s direction to transfer properties between gas companies substantially owned by the Government in the transitional provisions. To ensure that the transfer exercise is successfully undertaken, it is proposed to make it an offence for such companies failing to comply with the Minister’s direction.

23. Protection of underground pipelines: For public safety reasons, it is proposed to introduce additional provisions relating to precautions to be taken by any person prior to carrying out any earthworks in the vicinity of any underground gas pipeline. This is to prevent such pipelines from being damaged. Failure to take precautions to prevent damage and causing damage to such pipelines shall be an offence.

24. Licensing Town Gas Production: At present, the production of town gas is a licensable activity under the Public Utilities Act (1996 Ed.) preserved under the Public Utilities Act (Cap. 261). It is proposed to make the production of town gas a licensable gas activity under the Act and to repeal the relevant provisions in the Public Utilities Act (1996 Ed.).

MODE OF FEEDBACK

25. EMA invites comments and feedback on the proposed amendments to the Act as set out in Appendix 1. (found at www.ema.gov.sg)

26. Written comments may be sent through the following means:
Email: leow_leng_chong@ema.gov.sg and lilian_lau@ema.gov.sg
Post/Courier:
Deputy Director (Systems Development & Assessment)
Energy Market Authority
111 Somerset Road, #15-05
Singapore 238164.
Fax: (65) 68358084

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