EU referendum: UK leading energy liberalisation

The UK leads EU energy liberalisation. While EU requirements have driven amendments to our domestic energy laws, the basic structure that is in place now is a home-grown affair that has provided the template for, rather than being led by, the process of EU liberalisation.

As such, the effect of a Brexit on the regulatory regime governing the UK energy sector would likely be relatively minimal, at least in the short term.

Of course, when our regulatory regime was first developed, Great Britain was much more of an energy island than it is now. Not only are we physically interconnected to mainland Europe, there are also well-established trading operations across the continent involving physical and virtual products.

As with any other commodity, the sale or trade of gas and electricity into Europe must be carried out under EU rules.

If the energy industry wished to carry on as it is now after a Brexit, it is difficult to see how EU rules could be avoided.

We do not yet know what the UK’s relationship with Europe would look like were the Leave vote to prevail.

However, no matter how absolute the separation, the idea that we would be completely free to do as we please in areas such as state aid if this were to happen is at best an oversimplification.

When it comes to exports and imports, and certainly for piped gas and power, there is no immediately obvious alternative market to the EU that we could trade with. Even if we were to abandon all compliance with EU rules (and thereby any trade with the EU), the UK is a signatory to the World Trade Organisation (WTO) which has its own prohibitions on government subsidies that adversely affect the trading interests of the other 160- odd WTO members.

Investors will still want to be sure that the WTO rules are not being breached, particularly because, at least according to some commentators, they are less lenient than those of the EU.