The liberalization of natural gas markets : regulatory reform and competition failures in Italy

Working paper

In the last decade, the EU has started to liberalize national gas markets and regulatory reform has followed in member countries. We analyse the basic issues concerning network and storage regulation and the implementation of regulatory reforms in Italy. We then try to explain why, in gas importing countries, such reforms are not sufficient to foster competition. Even regulation ex-post by the Competition Commission has proved to be a formidable task, to the extent that entry barriers in the market for imports depend on congestion of transit pipelines still controlled by the incumbent. Moreover, when gas supply is characterized by long-term importing contracts with take-or-pay clauses, liberalization policies lead to entry and market segmentation without benefits for consumers. In order to foster gas-to-gas competition, the development of wholesale exchanges at market hubs is then necessary. However, new investments in essential facilities are required to reach this aim. At present, new investments are both subsidized and exempted from third party access regulation for financial reasons, but we claim that the incentive to invest is negatively affected by a lack of ownership unbundling.

Authors: Cavaliere, A

• Publication status: Published
• Peer review status: Reviewed (other)
• Publisher: Oxford Institute for Energy Studies
• Series: OIES paper
• Publication date: 2007-01-01
• Edition: Publisher's version
• Paper number: NG20
• ISBN: 1901795624
• Language: English
• Keywords: competition; take-or-pay obligations; storage; transmissions; third party access; distribution; gas market reform; tariffs; hubs; Italy; unbundling; OIES; liberalisation