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

Author

Listed:
  • David Hawdon

    () (Surrey Energy Economics Centre (SEEC), University of Surrey)

  • Nicola Stevens

    (Surrey Energy Economics Centre (SEEC), Department 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.

Suggested Citation

  • David Hawdon & Nicola Stevens, 1999. "Regulatory Reform of the Gas Market – The Case of the Storage Auction," Surrey Energy Economics Centre (SEEC), School of Economics Discussion Papers (SEEDS) 98, Surrey Energy Economics Centre (SEEC), School of Economics, University of Surrey.
  • Handle: RePEc:sur:seedps:98
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    File URL: http://www.seec.surrey.ac.uk/Research/SEEDS/SEEDS98.pdf
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    More about this item

    Keywords

    Gas Act; Ofgas; DGGS; Regulation; Auctions; Storage.;

    JEL classification:

    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L95 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Gas Utilities; Pipelines; Water Utilities
    • L97 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Utilities: General

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