Regulation and competition: an analysis of natural gas policy reforms

Thesis/Dissertation · Wed Jan 01 04:00:00 EST 1986

OSTI ID:5365659

Correll, M R

In 1985 the federal Energy Regulatory Commission (FERC) issued Order 436, a set of reforms intended to extend competition by opening transportation to all shippers and allowing market entry by competing pipelines. This thesis assesses the reforms' efficiency and equity. Efficient pricing and investment rules are derived and applied to the new policy. The reforms are probably an improvement, but the attempt to ensure parity with traditional sales service may hamstring potential gains, and rate design to stimulate competition may forgo benefits of multi-part tariffs and discourage efficient risk-sharing and investment. The analysis also addresses problems of competition in a regulated utility's traditional market. Even if wellhead markets are competitive, it may prove difficult to separate the commodity from pipeline market power. An industry simulation model is constructed from estimates of demand and supply, representing thirteen major interstate pipelines. The simulation is over 1985-90 for nine combinations of trading arrangements, regulation of commodity prices, and distortions from rigid purchase contracts. Deregulation policies risk large efficiency losses if contractual constraints distort prices. However, if new gas prices are flexible, rigidity in high-cost contracts and partial deregulation of old gas yield little efficiency loss relative to fully-flexible scenarios.

• Research Organization: Wisconsin Univ., Madison (USA)
• OSTI ID: 5365659
• Country of Publication: United States
• Language: English

Related Subjects

03 NATURAL GAS
031000* -- Natural Gas-- Legislation & Regulations
29 ENERGY PLANNING, POLICY, AND ECONOMY
293000 -- Energy Planning & Policy-- Policy
Legislation
& Regulation
294003 -- Energy Planning & Policy-- Natural Gas
COMPETITION
DEREGULATION
EFFICIENCY
INDUSTRY
MARKETING
NATURAL GAS INDUSTRY
PIPELINES
PRICES
REGULATIONS