Regulatory Reform of the Gas Market – The Case of the Storage Auction

David Hawdon and Nicola Stevens
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Nicola Stevens: Surrey Energy Economics Centre (SEEC), Department of Economics, University of Surrey

No 98, Surrey Energy Economics Centre (SEEC), School of Economics Discussion Papers (SEEDS) from Surrey Energy Economics Centre (SEEC), School of Economics, University of Surrey

Abstract: The UK gas industry has undergone major changes since it was privatised in 1986 as a fully integrated monopoly. The most significant of these have occurred not as an outworking of the privatisation legislation but by the intervention of the ordinary competition authorities in support of an active industry regulator. While price capping continues to be used as the primary instrument for welfare protection against the still substantial monopolistic powers of the incumbent, new competition which has been positively encouraged, has had the greater impact on prices and choice. Recently, however, the regulator has encouraged the use of auctions for the sale of storage capacity. This paper considers the merits of auctions and makes a tentative evaluation of their effectiveness. Further use of auctions is recommended but reserve prices are considered inappropriate where monopoly power still remains.

Keywords: Gas Act; Ofgas; DGGS; Regulation; Auctions; Storage. (search for similar items in EconPapers)
JEL-codes: L51 L95 L97 (search for similar items in EconPapers)
Pages: 32 pages
Date: 1999-08
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Citations: View citations in EconPapers (1)

Published in Fiscal Studies, 22(2), pp. 217-232 (Revised Version).

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