Gas monopolist unbundling needed to stimulate competition on Poland’s retail market - report
September 11, 2012
Division between wholesale and retail operations within Poland’s gas giant PGNiG and gas supply diversification are listed amongst steps necessary to free gas prices in a report by the Office of Consumer and Competition Protection (UOKiK) published on Monday.
The report points to a lack of competition on Poland’s gas market due to unsuccessful efforts to break the monopoly of the state-controlled PGNiG.
"The foundation for securing effective functioning of a gas market is to prevent firms from the PGNiG group shifting their market power from primary gas supply to further levels of trade," the authors say in a summary to their report.
They also say that separating retail from wholesale would secure a step towards major changes in the sector.
"A financial and accounting unbundling of PGNiG" is called "a first step" towards the goal. The unbundling would separate wholesale from retail parts in organization and accounting terms. The move "could avoid" situations in which PGNiG uses margin squeeze to protect the retail market, a press statement announcing the report shows.
The antitrust office criticizes the idea to conduct a "shock therapy", i.e. abolishing tariffs for individuals and industrial recipients at the same time and suggests that industrial recipients should be the first to see the tariff abolished.
Eventual price liberalization must be "evolutionary" with a portion of the market - likely the largest recipients accounting for 20% of the market - facing freed prices in the first stage as much as two years before a broader price liberalization for industrial users. Two years later, other institutions join the fund and two years later, retail clients, the report reads.
The antitrust office also advocates, among other things, setting a system of maximum prices until effects of competitiveness on the market appear.
Supply diversification is listed amongst longer-term goals required for the gas market, with the contractual ties between PGNiG and its Russian gas supplier Gazprom blamed for much of the market's iniquities.