Gas release as an incentive for competition in the European gas industry.

Summary The characteristics of gas supply in Europe and the specificities of the gas market have led regulators to adopt asymmetrical regulations in the form of gas release and market share loss targets. Empirical experience shows, in line with economic theory, that these measures make competitors active on the market and do not discourage investment. In terms of competition, the effects are more mixed. Some positive effects are certainly due to the growth of consumption, which is sometimes exponential, or to the development of import and transport infrastructures. However, these measures can encourage collusive behavior, skimming or reverse cherry-picking strategies, as well as inefficient entry, made possible because the competitor is protected for a given period of time. A gas release creates a commercial relationship between the incumbent and its competitor, as well as a system of constraints on the capacities of each. The price or quantity strategies are then modified. Equilibrium prices are more volatile and can deviate significantly from the << mark-u p >> of competition. Similarly, the strategies of a COURNOT model become more complex. The incumbent operator, if the on-lending quantities are high and its supplies low, may voluntarily let its costs increase to increase its profits. This strategy of increasing rivals' costs is all the more possible if the retrocession price is close to its supply costs. It does not deteriorate consumer surplus but it does reduce welfare. The regulator can restore the incentive to efficiency by setting a proportion of retrocession according to the observed level of supply. This proportion should not be too low to allow the market to benefit from the incumbent's efficiency incentive and the higher sales of the two operators. At the same time, a proportion that is too high accentuates the potential for increased costs for rivals or collusion.