In a recent column for the October issue of the Wiley journal, Natural Gas and Electricity, NERA Senior Vice President Dr. Jeff D. Makholm compares how pipeline systems serve gas markets in Alberta, Canada and the United Kingdom. In both places, the gas market and physical pipeline systems are unconnected, and gas trades “notionally” without regard to particular locations or pipelines. Both systems contrast sharply with the way the rest of North America (except for the Alberta “island”) closely links the gas market to the locations and operational capacities of the physical pipeline systems in order to facilitate competition in both gas supply and its interstate/interprovincial transport.

How these two notional pricing expediencies arose, in both locales, illustrates important differences between how pipelines serve the very different North American and European gas markets—and how regulators have treated them. In Canada, federal regulators, with a focus on competition, have prevented the spread of Alberta’s “island” regime to other provinces. But in Europe, where the focus seems to be less on preserving competitive price signals (as in North America) than on preventing competitive entry for member state gas industries, the notional pricing system invented in the United Kingdom has been embraced by the European Union. 

Makholm, Jeff D. (2015, October). "Entry/exit" pipeline pricing in gas "islands" enables EU to resist competition. Natural Gas & Electricity 32/3, ©2015 Wiley Periodicals, Inc., a Wiley company.