Liberalisation and the security of gas supply in the UK

This paper contests the view held by the current UK government and its industry regulator, OFGEM, that liberalisation is good for security of supply. Focusing on the downstream aspects of the security of UK gas supply, on system security, it considers the impact of the different aspects of liberalisation: of legal governance, supply competition, de-integration, market simulation, regulation and the interaction of liberalised gas and electricity markets. Categorising these impacts in terms of security threats and threats to security response, it finds that individually and as a complex collectivity they have increased the risks of supply failure, either potential or already realised, in a variety of ways: from creating increased uncertainty and failing to signal adequate or appropriate investment, to legal ambiguity which divorces responsibility from liability and renders legal liability indeterminate ex ante. Moreover, one of the UK government's responses to these increased dangers, which it does appear to perceive, is revealed as itself paralysed by the liberalisation paradigm: the government can only intervene pre-emptively with information in attempt to persuade the market to behave as it thinks it should. Meanwhile, however, the government has also had to recognise its default responsibility for security of supply and make preparations to intervene in an emergency situation: liberalisation can only be challenged when it is already too late. (c) 2004 Elsevier Ltd All rights reserved.