I blogged earlier about the draft decision of the CER on the pricing rules for the gas interconnectors.
The decision is now final. I find the document hard to read, because it assumes that you are familiar with the draft decision, and it rambles between the actual decision, decisions that might have been, justification of the decision, and responses to comments to the draft decision. This is what I think was decided:
- The interconnector will be moved, legally, from offshore to onshore.
- Interconnector capacity will be auctioned.
- There is a reserve price for the auction.
- The reserve price is the long-run marginal cost.
- If the auction does not cover the costs of the pipe-formerly-known-as-the-interconnector, the difference will be split over ALL gas suppliers.
I am not sure whether there will really be an auction, or whether the reserve price will always hold.
The contentious point, however, is the long-run marginal cost. This implies that Bord Gais will have a guaranteed income on its assets.
Instead of forcing BGE to take a hit on what might turn out to be a bad investment in interconnection, the CER forces gas consumers to make up the difference.
This is wrong in principle. It is a transfer from gas users to the owners of BGE. And it distorts competition.