Ownership unbundling of natural gas transmission networks: empirical evidence

The European Commission has intensively examined the mandatory separation of natural gas transmission from production and services. However, economic theory is ambiguous on the price effects of vertical separation. In this paper, we empirically analyze the effect of ownership unbundling of gas transmission networks, considered to be the strongest form of vertical separation, on the level of end-user prices. Therefore, we apply different dynamic estimators such as system GMM and the bias-corrected least-squares dummy variable estimator to an unbalanced panel consisting of 18 EU countries over 19 years, allowing us to avoid the endogeneity problem and to estimate the long-run effects of regulation. We introduce a set of regulatory indicators as market entry regulation, ownership structure, vertical separation and market structure, as well as account for structural and economic country specifics. Among the different estimators, we consistently find that ownership unbundling has no impact on natural gas end-user prices, while the more modest legal unbundling reduces them significantly. Furthermore, third-party access, market structure and privatization show significant influence, with the latter leading to higher prices. Copyright Springer Science+Business Media New York 2014