Strategic responses to regulatory policies: What lessons can be learned from the UK contract gas market?

The gas industry was first privatised in 1986, and the regulator, Ofgas, identified the contract gas market as a possibility for introducing initial competition into the industry. Nevertheless, competing shippers were slow in entering the market. Subsequently, Ofgas introduced a series of procompetitive policies. It, however, invoked a series of strategic behaviour by the incumbent shipper, British Gas. The effectiveness of these measures are analysed here with respect to the evolving competitive process. The issues it raised, especially when formulating future regulatory policies and theories, are also considered.