Challenging natural monopolies: Assessing market power of gas transmission system operators for cross-border capacity

Jann T. Keller, Gerard Kuper and Machiel Mulder

Energy Policy, 2022, vol. 170, issue C

Abstract: It is expected that several national gas markets in Europe will be merged in the near future. Such mergers provide network users transport alternatives, which may imply competition amongst transmission system operators (TSOs). TSOs are, however, regulated by default, as they are viewed to operate natural monopolies facing no effective competition. Using daily data for the German gas market over 2014–2018, this paper assesses market power for cross-border transport capacity based on the Residual Supply Index to analyse the need for regulation. To contribute to the debate on the future regulatory framework within the EU, we assess TSOs’ market power for cross-border capacity in a single merged German gas market. We find 15 German TSOs operating in seven relevant markets. In 85% of the cases, we do not find any significant market power for TSOs. In 20% of these cases, the absence of significant market power was related to the utilisation of excess storage capacity. Hence, we conclude that current regulatory constraints imposed on gas TSOs, such as tariff regulation, may be relaxed for cross-border capacity, when market mergers lead to effective inter-TSO competition.

Keywords: Gas market; Market merger; Market power; Regulation; Infrastructure competition (search for similar items in EconPapers)
JEL-codes: K23 L51 L95 L98 Q48 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:enepol:v:170:y:2022:i:c:s0301421522004475

DOI: 10.1016/j.enpol.2022.113228

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