Most GSA contain a make-up provision. This allows a buyer’s ToP obligation to be averaged out over the life of the contract. Once a buyer has made a ToP payment, and if he has not taken all the sales gas, then these volumes will go into a make-up bank. If at some point, the buyer has taken the ToP amount for that year before the year end, he can start taking gas free of charge from the make-up bank up to the make-up outstanding. Thus the buyer will be entitled to exercise the right to have delivered at the delivery point a quantity of sales gas equivalent to the quantity of Sales Gas for which a Take or Pay Payment has been paid (but the gas not taken) without the buyer having an obligation to make a payment in respect thereof (“Make-up Right”). The Make-up Right can either cease to be available on termination of the agreement, or could continue only to the extent that there is Sales Gas to satisfy it or could outlive the GSA agreement by a couple of years. Buyers will certainly want to negotiate a period as long as possible and certainly longer than two years, the more so the higher the ToP figure is as there is more chance of incurring ToP and less chance of using any make up. Often Make Up Gas will be the Buyers sole remedy in respect of Sales Gas paid for but not taken. Usually make up rights cannot be exercised in respect of Excess Gas
05.07.2009

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