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Auctions to gas transmission access: The British experience

Author

Listed:
  • Tanga McDaniel

    (Department of Applied Economics, University of Cambridge)

  • Karsten Neuhoff

    (Department of Applied Economics, University of Cambridge)

Abstract

When access to monopoly owned networks is constrained auctioning access rights can increase the efficiency of allocations relative to negotiation and grandfathering when there is sufficient competition among network users. Historically, access rights to entry capacity on the British gas network were granted by the monopoly network owner via negotiation; rights were later based on regulated tariffs with an increasing reliance on market based constraint resolution by the system operator. In 1999 an auction mechanism for allocating rights was introduced. Comparing the different allocation methods we conclude that where there is competition at entry terminals auctions have been successful with respect to anticipating spot prices, capturing producer rents and reducing the costs of alleviating network constraints. Moreover, auctions are more transparent and better facilitate entry.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Tanga McDaniel & Karsten Neuhoff, 2002. "Auctions to gas transmission access: The British experience," Working Papers EP06, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    • Handle: RePEc:enp:wpaper:ep06
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    Citations

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    Cited by:

    1. Isa Hafalir & Hadi Yektaş, 2011. "Selling goods of unknown quality: forward versus spot auctions," Review of Economic Design, Springer;Society for Economic Design, vol. 15(3), pages 245-256, September.
    2. Fontini, Fulvio & Paloscia, Lorenzo, 2007. "The impact of the new investments in combined cycle gas turbine power plants on the Italian electricity price," Energy Policy, Elsevier, vol. 35(9), pages 4671-4676, September.
    3. Gert Brunekreeft & David Newbery, 2006. "Should merchant transmission investment be subject to a must-offer provision?," Journal of Regulatory Economics, Springer, vol. 30(3), pages 233-260, November.
    4. Tanga McDaniel & Andreas Nicklisch, 2004. "Prices as Indicators of Scarcity: An Experimental Study of a Multistage Auction," Working Papers 04-18, Department of Economics, Appalachian State University.
    5. Machiel Mulder & Gijsbert Zwart, 2006. "Market failures and government policies in gas markets," CPB Memorandum 143, CPB Netherlands Bureau for Economic Policy Analysis.
    6. Silva, Lucas Santos e & Bugarin, Mauricio Soares, 2025. "Auctioning electricity transmission margins for competitive access to Brazil's National Interconnected System," Utilities Policy, Elsevier, vol. 95(C).
    7. Sergio Ascari, 2011. "An American Model for the EU Gas Market?," RSCAS Working Papers 2011/39, European University Institute.
    8. David Newbery & Tanga McDaniel, 2002. "Auctions and trading in energy markets - an economic analysis," Working Papers EP15, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    9. Tanga McDaniel & Karsten Neuhoff, 2002. "Use of long-term auctions for network investment," Working Papers EP04, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    10. McDaniel, T., 2003. "Auctioning access to networks: evidence and expectations," Utilities Policy, Elsevier, vol. 11(1), pages 33-38, March.
    11. Nicolas Boccard & Xavier Wauthy, 2006. "Quality Choice, Sales Restriction And The Mode Of Competition," Manchester School, University of Manchester, vol. 74(1), pages 64-84, January.

    More about this item

    Keywords

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    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D45 - Microeconomics - - Market Structure, Pricing, and Design - - - Rationing; Licensing
    • L5 - Industrial Organization - - Regulation and Industrial Policy
    • L95 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Gas Utilities; Pipelines; Water Utilities

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