The CMA has provisionally decided that undertakings relating to the Rough gas storage facility should be varied.
Rough is a gas field in the North Sea used to store gas in the summer and deliver it in winter when the gas is needed to help meet high demand. It is an important part of the UK’s gas storage infrastructure and capacity.
In October 2015, the Competition and Markets Authority (CMA) decided to review the undertakings in response to a request made by Centrica Storage Ltd (CSL) and Centrica plc (Centrica).
The undertakings include a requirement to keep CSL, the operator of Rough, legally, financially and physically separate from its parent company Centrica, and to prevent CSL from discriminating in favour of Centrica or other users of Rough. The undertakings also include an obligation for CSL to offer for sale a specific amount of capacity before the start of each storage year and limit the amount which can be supplied to Centrica.
CSL and Centrica had submitted that, as an ageing asset, Rough’s performance is more likely to vary in the future, increasing the chance that it may not meet its capacity obligations.
In a provisional decision published today the group of independent CMA panel members carrying out the review (supported by CMA staff) have found that that as Rough ages its performance may become increasingly unpredictable, so that CSL cannot meet its capacity obligations. More immediately, the need to reduce gas pressure whilst CSL carries out tests on the facility also means it is unlikely to meet the same obligations for the 2016/2017 Storage Year.
The group has provisionally decided to vary the undertakings to introduce an adjustment mechanism which would allow Ofgem, as energy regulator, to vary the capacity obligations - if CSL is able to demonstrate that there is an issue which will have a substantial impact on Rough’s capacity.
Martin Cave, who chairs the Rough undertakings review group, said:
Rough’s performance may become increasingly unpredictable and it seems appropriate to allow Ofgem to decide whether the capacity obligations on CSL in the undertakings should be changed. This would be limited to circumstances where CSL can demonstrate that Rough’s capabilities are reduced significantly for prolonged periods so that it cannot meet its capacity obligations under the undertakings.
Further details, including the CMA’s provisional decision, can be found on the case page.
Anyone wishing to respond to the provisional decision should do so in writing, by 5pm on 22 March 2016. Please email email@example.com or write to:
Rough Undertakings Review
Competition and Markets Authority
London WC1B 4AD
Notes for editors
- The CMA is the UK’s primary competition and consumer authority. It is an independent non-ministerial government department with responsibility for carrying out investigations into mergers, markets and the regulated industries and enforcing competition and consumer law.
- The Rough undertakings were first given by Centrica Storage Ltd and Centrica plc following Centrica plc’s acquisition in 2002 of the Rough gas storage facility and have been subsequently amended following Competition Commission reviews in 2006 and 2011.
- The Rough undertakings were accepted by the Secretary of State under section 88 of the Fair Trading Act 1973. By virtue of paragraph 16 of Schedule 24 to the Enterprise Act 2002, and The Enterprise Act 2002 (Enforcement Undertakings and Orders) Order 2004 (SI 2004/2181), the CMA has the ability to supersede, vary or release certain undertakings accepted under the Fair Trading Act 1973; this includes the Rough undertakings. This power is exercisable in the same circumstances, and on the same terms and conditions as applied to the Secretary of State under the Fair Trading Act 1973; namely that by reason of any change of circumstances the undertakings are no longer appropriate and need to be varied, superseded or released.
- The group of CMA panel members acting as decision-makers in the review are Martin Cave (Chair), Marisa Cassoni, Roger Finbow and Jon Stern.
- Enquiries should be directed to Rory Taylor (firstname.lastname@example.org, 020 3738 6798).
- For information on the CMA see our homepage, or follow us on Twitter @CMAgovuk, Flickr and LinkedIn.
Published: 4 March 2016