Implications of liberalisation for methods of setting retail gas prices in Belgium

The liberalisation of the gas and electricity markets entailed the establishment of new pricing mechanisms, including those concerning consumers in the residential sector. The purpose of the article is to analyse how Belgian gas suppliers have adopted those mechanisms. After a brief description of the wholesale and retail gas markets in Belgium, the second section focuses on examining retail prices for residential consumers. The analysis is based on the tariff data of the five main suppliers active in that segment. It shows that the method of setting the retail gas prices used in variable price contracts is based on very similar principles, using specific indexation formulas freely determined by each operator. The formulas generate selling price indexation based on parameters which pass on changes in purchase costs to the final consumer according to a price risk transfer principle. That indexation is convenient for all operators and does not entail any additional consumer information costs. The disclosure of the automatic indexation mechanisms has the advantage of being relatively simple and transparent in regard to fundamental movements in parameters and their influence on prices. However, for the average consumer, the calculation of indexed prices appears complex and the information supplied seems incomplete. Discretionary adjustments to the said indexations are not very clear even though they are reflected in an increase in the portion of the price which is not linked to changes in the energy parameters. The situation of gas suppliers active on the retail market in Belgium is then assessed in comparison with that in neighbouring European countries, which apply officially regulated prices, price approval procedures, price caps and prices free of any regulation. However, those prices are still at least subject to “close” supervision owing to the authorities’ concern that the retail prices charged should reflect the true cost of a product which is subject to a public service obligation, which is an item of essential household expenditure, and for which the price must be determined by the market. Since consumer prices of gas are more volatile in Belgium than in other countries, with the ensuing second-round effects on inflation, measures capable of reducing that volatility could be attractive. However, the effects of any such measures require careful appraisal. Two measures might be envisaged, in line with developments seen in other countries : the introduction of “supervised” freedom to set tariffs, with effective checks on the justification for tariff adjustments, and information on tariff formulas which is easier for consumers to understand.consumer price index, Belgium, gas price, retail gas market

The gas chain: influence of its specificities on the liberalisation process. NBB Working Papers. No. 122, 16 November 2007

Like other network industries, the European gas supply industry has been liberalised, along the lines of what has been done in the United Kingdom and the United States, by opening up to competition the upstream and downstream segments of essential transmission infrastructure. The aim of this first working paper is to draw attention to some of the stakes in the liberalisation of the gas market whose functioning cannot disregard the network infrastructure required to bring this fuel to the consumer, a feature it shares with the electricity market. However, gas also has the specific feature of being a primary energy source that must be transported from its point of extraction. Consequently, opening the upstream supply segment of the market to competition is not so obvious in the European context, because, contrary to the examples of the North American and British gas markets, these supply channels are largely in the hands of external suppliers and thus fall outside the scope of EU legislation on the liberalisation and organisation of the internal market in gas. Competition on the downstream gas supply segment must also adapt to the constraints imposed by access to the grid infrastructure, which, in the case of gas in Europe, goes hand in hand with the constraint of dependence on external suppliers. Hence the opening to competition of upstream and downstream markets is not "synchronous", a discrepancy which can weaken the impact of liberalisation. Moreover, the separation of activities necessary for ensuring free competition in some segments of the market is coupled with major changes in the way the gas chain operates, with the appearance of new markets, new price mechanisms and new intermediaries. Starting out from a situation where gas supply was in the hands of vertically-integrated operators, the new regulatory framework that has been set up must, on the one hand, ensure that competitive forces can be given free rein, and, on the other hand, that free and fair competition helps the gas chain to operate coherently, at lower cost and in the interests of consumers, for whom the stakes are high as natural gas is an important input for many industrial manufacturing processes, even a "commodity" almost of basic necessity

The gas chain : influence of its specificities on the liberalisation process

Like other network industries, the European gas supply industry has been liberalised, along the lines of what has been done in the United Kingdom and the United States, by opening up to competition the upstream and downstream segments of essential transmission infrastructure. The aim of this first working paper is to draw attention to some of the stakes in the liberalisation of the gas market whose functioning cannot disregard the network infrastructure required to bring this fuel to the consumer, a feature it shares with the electricity market. However, gas also has the specific feature of being a primary energy source that must be transported from its point of extraction. Consequently, opening the upstream supply segment of the market to competition is not so obvious in the European context, because, contrary to the examples of the North American and British gas markets, these supply channels are largely in the hands of external suppliers and thus fall outside the scope of EU legislation on the liberalisation and organisation of the internal market in gas. Competition on the downstream gas supply segment must also adapt to the constraints imposed by access to the grid infrastructure, which, in the case of gas in Europe, goes hand in hand with the constraint of dependence on external suppliers. Hence the opening to competition of upstream and downstream markets is not "synchronous", a discrepancy which can weaken the impact of liberalisation. Moreover, the separation of activities necessary for ensuring free competition in some segments of the market is coupled with major changes in the way the gas chain operates, with the appearance of new markets, new price mechanisms and new intermediaries. Starting out from a situation where gas supply was in the hands of vertically-integrated operators, the new regulatory framework that has been set up must, on the one hand, ensure that competitive forces can be given free rein, and, on the other hand, that free and fair competition helps the gas chain to operate coherently, at lower cost and in the interests of consumers, for whom the stakes are high as natural gas is an important input for many industrial manufacturing processes, even a "commodity" almost of basic necessity.network industries, gas industry, gas utility, liberalisation, regulation, deregulation, market structure, European gas supply, oligopoly, OPEG

La politique pétrolière Russe: Entre le G8 et L'arabie Saoudite

As this article pertains to many macroeconomic and microeconomic subjects as well as to political issues, we would like to advise the interested reader to refer directly to the titles of the sections announcing the subject dealt with. In this respect we may for instance point out Russia's future oil might, the importance of the price of oil for the Russian economy, the effects a price war between oil producers might have on Russia and the Russian oil policy vis-a-vis the G8, OPEC and Saudi Arabia.SCOPUS: ar.jinfo:eu-repo/semantics/publishe

L'offre et la demande de pétrole au XXIesiècle: Le nécessaire relais par le gaz naturel les contraintes de délai et de financement

SCOPUS: ar.jinfo:eu-repo/semantics/publishe

Le défi pétrolier : questions actuelles du pétrole et du gaz

Analyse des grands enjeux pétroliers et gaziers internationaux : les prix, les marchés à terme, les principaux acteurs

Le défi pétrolier : questions actuelles du pétrole et du gaz

Analyse des grands enjeux pétroliers et gaziers internationaux : les prix, les marchés à terme, les principaux acteurs

The Gas Chain: Influence of Its Specificities on the Liberalisation Process

Like other network industries, the European gas supply industry has been liberalised, along the lines of what has been done in the United Kingdom and the United States, by opening up to competition the upstream and downstream segments of essential transmission infrastructure. The aim of this first working paper is to draw attention to some of the stakes in the liberalisation of the gas market whose functioning cannot disregard the network infrastructure required to bring this fuel to the consumer, a feature it shares with the electricity market. However, gas also has the specific feature of being a primary energy source that must be transported from its point of extraction. Consequently, opening the upstream supply segment of the market to competition is not so obvious in the European context, because, contrary to the examples of the North American and British gas markets, these supply channels are largely in the hands of external suppliers and thus fall outside the scope of EU legislation on the liberalisation and organisation of the internal market in gas. Competition on the downstream gas supply segment must also adapt to the constraints imposed by access to the grid infrastructure, which, in the case of gas in Europe, goes hand in hand with the constraint of dependence on external suppliers. Hence the opening to competition of upstream and downstream markets is not "synchronous", a discrepancy which can weaken the impact of liberalisation. Moreover, the separation of activities necessary for ensuring free competition in some segments of the market is coupled with major changes in the way the gas chain operates, with the appearance of new markets, new price mechanisms and new intermediaries. Starting out from a situation where gas supply was in the hands of vertically-integrated operators, the new regulatory framework that has been set up must, on the one hand, ensure that competitive forces can be given free rein, and, on the other hand, that free and fair competition helps the gas chain to operate coherently, at lower cost and in the interests of consumers, for whom the stakes are high as natural gas is an important input for many industrial manufacturing processes, even a "commodity" almost of basic necessity