The Regulation of Access to Gas Storage
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The Regulation of Access to Gas Storage Alberto Cavaliere
4.1 Introduction Due to the implementation of directives 98/30/EC and 2003/55/EC, during the last decade natural gas markets have been liberalised in the European Union. National regulatory reforms have been carried out in order to implement unbundling and non discriminatory third party access to essential facilities. At present each member Country is expected to implement legal unbundling of transmission and distribution networks from potentially competitive activities, though the European Commission is now fostering the introduction a third “liberalisation package” in order to strengthen unbundling requirements. In order to let new entrants compete with former integrated utilities on a level playing field, regulated third party access to transmission and distribution networks has also been imposed by the last EC directive. A particular feature that differentiates natural gas from electricity is the possibility of storage. Gas consumption is affected by seasonal, weekly and daily fluctuations, both predictable and unpredictable. Utilities need to constantly balance demand and supply (which might be flat). Access to storage gives suppliers the flexibility needed to cope with demand uncertainty. Therefore directive 2003/55/EC also requires unbundling of gas storage and non discriminatory third party access to storage facilities. However, member Countries are just required to implement accountancy unbundling of storage assets and can opt between negotiated and regulated third party access, according to the features of national storage markets. Though storage costs are affected by scale economies, storage is not a natural monopoly. Any storage plant can supply storage services in competition with other existing plants as minimum efficient scale is generally far from the amount of total storage demand from gas suppliers. However the liberalisation directives did
A. Cavaliere Universit`a degli Studi di Pavia, Facolt`a di Economia, Via San Felice, 5 27100, Pavia, Italy e-mail: [email protected] A. Cret`ı (ed.), The Economics of Natural Gas Storage: A European Perspective, DOI: 10.1007/978-3-540-79407-3 4, c 2009 Springer-Verlag Berlin Heidelberg
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not require divestiture of existing storage assets owned by former integrated utilities, in order to introduce storage to storage competition. At present a competitive market for storage is effective only in the UK, where ownership unbundling has already been implemented and multiple storage companies operate their business independently from gas supply, under the supervision of antitrust authorities. Most continental Countries are characterized either by de facto monopolies or by market power in the storage sector. Moreover, access to storage facilities is still granted by branches of the former integrated gas utilities,1 now operating as dominant gas suppliers in the downstream market. However storage services are not the unique flexibility source for gas suppliers. Flexible productio
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