Australian Energy Market Operator
Victorian Wholesale Gas Market
Review
Discussion with Market Participants
October 2010
Objectives of discussion
Provide an overview of:
• Approach to the market audit
• Proposed timeline
• Areas of focus
Receive feedback from you regarding:
• Communication protocols
• Areas of focus/risks
• Other suggestions
PwC
Victorian Wholesale Gas Market Review 2010
October 2010
2
Objectives of our review
PwC have been engaged to review the control procedures
maintained by the Australian Energy Market Operator
(AEMO) in relation to the Victorian Declared Wholesale Gas
Market for the year ending 30 June 2011.
Our primary responsibility is to deliver a review which fulfils
our obligations to AEMO’s Risk and Audit Committee, AEMO
Management and Market Participants.
For AEMO Risk
and
Audit committee
• Independent assurance that control procedures
• Assurance
that and
control
procedures
are designed
are designed
operating
effectively
in and
operating
effectively
in relation
to prescribed
Gas and
relation to
prescribed
Gas Market
activities
Market activities and requirements
requirements
•• Communicating
areas
of high
review
risk and
Communicating
areas
of high
review
risk and
explaining
impact
on our
review
approach
explainingthe
the
impact
on our
review
approach
• Reporting control weaknesses
•• Reporting
control weaknesses
Continually enhancing our level of service and
• Continually
level
of service and
responding toenhancing
the Risk andour
Audit
Committee’s
responding
to the
Risk and
Audit
Committee’s
evaluation
of our
services,
which
we will
seek on an
evaluation
annual
basisof our services, which we will seek
on an annual basis
For
AEMO
Management
• Ensuring comprehensive communication of
issues through:
– Timely identification and resolution
• Effective
issues
through:
– Readycommunication
access to ourofcore
team
Timely identification
and resolution
• –Holding
frequent two-way
dialogue on emerging
– Ready access to our core team
issues
• Holding frequent two-way dialogue on emerging issues
• Communicating areas of risk that are not
• Communicating areas of risk that are not sufficiently
sufficiently mitigated
mitigated
•• Providing
an independent and professional
Continually enhancing our level of service and
team
responding to management’s evaluation of our
• Continually
enhancing
our
of service
services, which
we will seek
onlevel
an annual
basis. and
responding to management’s evaluation of our
services, which we will seek on an annual
basis.
The assurance requirements for the Victorian Wholesale
Gas Market are set by the National Gas Rules, Part 19, s322
‘Market Audit’ which require we review the following:
a)
The calculations and allocations performed by the
metering and settlements system
b)
Billing and information systems
c)
The scheduling and pricing processes
d)
Processes for software management
e)
The linepack account
f)
AEMO’s compliance with Part 19 of National Gas
Rules.
For
Market
Participants
• Communicating our scope and approach
Understanding
participant
•• Providing
access
to ourrisks
review reports where
• requested
Communicating scope and approach
Providing access
to our review
where
•• Independent
assurance
thatreports
control
procedures
requested
are
designed and operating effectively in
• relation
Assurance
that
control
procedures
are
designed
to prescribed Gas Market activitiesand
and
operating effectively in relation to prescribed Gas
requirements
Market activities and requirements
PwC
Victorian Wholesale Gas Market Review 2010
October 2010
3
Proposed timeline
Fieldwork
Planning
Aug
Approved Plan
Communicated
(Vic W/S, retail
and Qld)
Market
Participant
Comms
Sep
Oct
Nov
Dec
Approved
Assurance Plan
communicated
(STTM,
NSW/ACT &SA)
Jan
Feb
Mar
Report to AEMO
Risk and Audit
Committee and
Market
Participants
Apr
May
Jun
Jul
Aug
Sep
Planning
meetings with
Market
Participants for
2011/12
Oct
Nov
Risk and Audit committee (RAC)
Victorian Wholesale Gas Market
Victorian Retail Gas Market
Queensland Retail Gas Market
Short Term Trading Markets
NSW/ACT Retail Gas Market
South Australian Retail Gas Market
Gas Safety Case
Legend
Planning
Fieldwork
Meeting with market participants
Plan presented to RAC
Interim management letter and
status update to RAC
Final report to RAC
PwC
Victorian Wholesale Gas Market Review 2010
October 2010
4
Approach
Risk Assessment
Our assurance approach is based on an assessment of key
risks impacting each respective gas market. Our risk
assessment is based upon:
• Inherent risk: the susceptibility of non-compliance with
the respective gas market Rules and Procedures,
assuming there are no related controls
• Control risk: the risk that non-compliance with the
respective gas market Rules and Procedures that could
occur will not be prevented, or detected and corrected, on
a timely basis by related internal controls.
Our risk assessment determines the nature, timing and
extent of testing we will perform on each control procedure.
Deliverables - Assurance Report
•
On completion of our second fieldwork visit for each
gas market, we will issue a limited assurance review
report to the RAC which will subsequently be available
to market participants.
•
All findings will be assigned a risk rating in accordance
with AEMO’s Risk Management Framework.
PwC
Victorian Wholesale Gas Market Review 2010
Inherent Limitations
Due to the inherent limitation of any internal control structure it is
possible that fraud, error, or non-compliance with laws or regulations
may occur and not be detected. Further, the internal control
structure, within which the control procedures that we have audited
operate, has not been audited and no conclusion is expressed as to
its effectiveness.
A review is not designed to detect all weaknesses in control
procedures as it is not performed continuously throughout the period
and the tests performed are on a sample basis. Also, a review does
not provide all the evidence that would be required in an audit, thus
the level of assurance provided is less than given in an audit. We
will not perform an audit and, accordingly, we will not express an
audit opinion.
Any projection of the evaluation of control procedures to future
periods is subject to the risk that the procedures may become
inadequate because of changes in conditions, or that the degrees of
compliance with them may deteriorate.
October 2010
5
Approach - Information Technology Systems
The following Information Technology systems are considered.
Australian Energy Regulator (AER)
Retail Market Procedures
National Gas Rules
Wholesale Settlement
Retail Market Procedures
B2B HUB
-
Wholesale Gas Systems
•
•
•
•
•
•
•
CATS
VISA
BMP
PPS
Meter Register
Demand
Prudential Monitoring
TMM
DFS
MM&S
MCE
MIBB
WebExchanger
SCADA
Data Monitoring
DM
Energy
Data
Participant
Forecast
CTM
FRC
Retail
Wholesale
AEMO Responsibility
PwC
Victorian Wholesale Gas Market Review 2010
October 2010
6
Approach - Information Technology Controls
We will review Information Technology (IT) controls for the following Declared Wholesale Gas Market systems including:
•
The Market Clearing Engine (MCE)
•
The Market Information Bulletin Board (MIBB)
•
TransEnergy Market Manager (TMM)
•
WebExchanger (WEX)
•
Demand Forecasting System (DFS)
•
Metering Management and Settlements System (MM&S)
We will review compliance with AEMO Information Technology procedures, focusing on the following IT General Computer Control domains:
•
Program development
•
Change management
•
Security
•
Computer operations including backup and Disaster Recovery Planning.
Where possible, we will leverage common controls that operate across multiple gas markets.
PwC
Victorian Wholesale Gas Market Review 2010
October 2010
7
Areas of focus
Discussion with AEMO management and market participants to date has identified the following areas of focus :
•
Prudentials
•
Settlement accuracy
•
Registration processes – registration process has moved departments within AEMO
•
Security - Confidentiality of market participant information
Further areas of focus or comments?
•
Provide comment now
•
Email to: gas.market.auditor@au.pwc.com
PwC
Victorian Wholesale Gas Market Review 2010
October 2010
8
Next steps
We will :
•
Consider feedback from Market Participants
•
Present draft assurance approach to AEMO Risk and Audit Committee
•
Communicate assurance approach to Market Participants
PwC
Victorian Wholesale Gas Market Review 2010
October 2010
9
Key PwC contacts
Mike Bridge
Lead Engagement Partner
03 8603 3652 / mike.bridge@au.pwc.com
Matthew Hunt
Engagement Partner
03 8603 2399 / matthew.hunt@au.pwc.com
Nicola Moran
Senior Manager
03 8603 2330 / nicola.moran@au.pwc.com
e-mail: gas.market.auditor@au.pwc.com
PwC
Victorian Wholesale Gas Market Review 2010
October 2010
10