I’m talking to Larry Ruff, another giant of energy market reform. Larry worked with Bill Hogan, whom many of you enjoyed listening to on the podcast last year, on the design of the UK and New Zealand electricity markets in the 1990s but he’s probably best known as the brain behind Victoria’s gas market. He’s been watching the NZ regime with interest and recently put in an independent submission to the NZ Gas Industry Company’s Review of Transmission Access and Capacity Pricing about which he agreed to come and talk to us.

Last week, Larry debunked the received truth that because you can control physical gas flows (which you can’t with electricity), it makes sense to allocate gas transmission capacity as contractual “paths”. This week he explains the problems that beset capacity-only markets for gas transmission. They don’t work as contract paths (or “straws” as we seem to be calling them) and the European solution to this problem - defining capacity in terms of entry and exit - is even worse, no matter how liquid it makes the market.