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CMA to review Rough gas storage undertakings

The CMA is to review the undertakings relating to the operation of the Rough gas storage facility.

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.

The review follows a consultation which the Competition and Markets Authority (CMA) started last month in response to a request made by Centrica plc (Centrica) and Centrica Storage Ltd (CSL).

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 has 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 under the undertakings. CSL has asked the CMA to vary the undertakings to allow for Rough’s changing physical capabilities.

The panel of CMA panel members who will act as decision-makers in the review are: Martin Cave, Roger Finbow and Marisa Cassoni. The CMA anticipates that the review will be completed in the first half of 2016.

Further details, including the CMA’s decision statement can be found on the case page. An administrative timetable will be published shortly.

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namely that by reason of any change of circumstances the undertakings are no longer appropriate and need to be varied, superseded or released.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 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.