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Competition in the British domestic gas market: efficiency and equity

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  • Ruth Hancock
  • Catherine Waddams Price

Abstract

The British domestic gas market is to be opened to competition from April 1996; within 24 hours of enabling legislation being confirmed (Queen’s Speech, 1994),British Gas (BG) announced the first significant change in gas tariff structure since it had been privatised nine years earlier. The changes introduced cheaper tariffs for some of those who paid promptly and so were cheaper for BG to supply. These are likely to be the first of many such changes, as the threat of competition leads BG to abandon its previous policy of charging similar tariffs to a wide range of consumers even when they incur different costs of supply. It is clear that competition will have a much more dramatic effect on domestic tariffs than did the flotation of the industry. While it retained its monopoly in the domestic market, even the privatised BG continued its policy of crosssubsidisation between consumers, using a single charging structure despite cost differences. (One reason for this may have been to avoid signalling cost

Suggested Citation

  • Ruth Hancock & Catherine Waddams Price, 1995. "Competition in the British domestic gas market: efficiency and equity," Fiscal Studies, Institute for Fiscal Studies, vol. 16(3), pages 81-105, August.
    • Handle: RePEc:ifs:fistud:v:16:y:1995:i:3:p:81-105
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    File URL: http://www.ifs.org.uk/fs/articles/fshancock.pdf
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    References listed on IDEAS

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    1. Sherman,Roger, 1989. "The Regulation of Monopoly," Cambridge Books, Cambridge University Press, number 9780521368629, Enero-Abr.
    2. J. Gregory Sidak & William Baumol, 1994. "Toward Competition in Local Telephony," Books, American Enterprise Institute, number 52984, September.
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    Cited by:

    1. Ariel Casarin, 2014. "Regulated price reforms and unregulated substitutes: the case of residential piped gas in Argentina," Journal of Regulatory Economics, Springer, vol. 45(1), pages 34-56, February.
    2. Catherine Waddams Price & Alison Young, 2001. "UK Utility Reforms: Distributional Implications and Government Response," WIDER Working Paper Series DP2001-10, World Institute for Development Economic Research (UNU-WIDER).
    3. Catherine Waddams & Ruth Hancock, 1998. "Distributional effects of liberalising UK residential utility markets," Fiscal Studies, Institute for Fiscal Studies, vol. 19(3), pages 295-319, August.
    4. Andres Gomez-Lobo, 1996. "The welfare consequences of tariff rebalancing in the domestic gas market," Fiscal Studies, Institute for Fiscal Studies, vol. 17(4), pages 49-65, November.
    5. David Parker, 2004. "Editorial: Lessons From Privatisation," Economic Affairs, Wiley Blackwell, vol. 24(3), pages 2-8, September.
    6. Severin Borenstein, 2012. "The Redistributional Impact of Nonlinear Electricity Pricing," American Economic Journal: Economic Policy, American Economic Association, vol. 4(3), pages 56-90, August.

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