Network access regulation and competition policy : the UK contract gas market

Increasingly policy-makers and regulatory theorists have focused on network access regulation. This thesis examines the role of network access regulation as part of a regulator's overall competition policy or strategy to introduce competition into privatised industries. It examines in detail recent theoretical models of network access regulation.;The analysis is undertaken in the context of the UK contract gas market. British Gas (BG) was privatised in 1986, and the gas industry structure remained vertically integrated. The incumbent, or in the present case, BG, retains control of the gas network transmission while competing in the final goods, or retail, market. The present research provides a theoretical framework examining the impact of regulatory and competition policies with respect to both the final goods market and network access, on the competitive process in the contract gas market. This is done using a unique dataset on the UK contract gas market made available by a leading gas analyst and broker; John Hall Associates. The theoretical analysis distinguishes between the potential strategic advantage of both BG and the main competing shippers. BG, as the incumbent in the vertically integrated industry, has pre-entry advantages, while the main competing shippers who are wholly or partially owned by North Sea gas producers and operate as downstream firms in the retail market potentially have post-entry advantage.;The entrants pricing behaviour followed a distinct and separate path to that of BG's. An empirical analysis of the entrants' pricing behaviour is conducted. This is done within the context of supergames or repeated games explanation of dynamic oligopoly behaviour. The relationship between access charges and market structure, or the level of market concentration is also empirically established, which shows the impact of access charges on the competitive process, market structure and final goods prices. The estimates are used to give an empirical application of the "Direct-plus-Opportunity Cost Regime" (DORC) model of access pricing. Consequently, the various policy options and choices open to a policy-maker are considered.