Liberalization and Access to Essential Facilities: Regulation and Competition in Gas Storage

Due to the liberalisation of the natural gas market in Europe, access to storage facilities should be granted to any firm operating in the wholesale market for gas. However single Countries are left with the option between negotiated access and regulated access. We investigate the issue of optimal regulation of gas storage on the basis of the essential facility doctrine. A typical test is applied to storage plants in order to ascertain if they should be treated as essential facilities, then the same test is considered in the case of Italy. We establish that regulated access is necessary in the first liberalisation stages. However in order to achieve efficiency concerning the allocation of scarce storage resources, the price of storage should correspond to its value for each firm. Therefore auctions can perform better with respect to cost reflective tariffs, as a regulatory instrument. Such a conclusion concerns also Italy where storage still represents an essential facility and capacity is rationed due both to strategic storage requirements imposed by security of supply concerns and to inefficient allocation procedures.