Cost allocation in interstate natural-gas-pipeline ratemaking: analysis and simulation

Thesis/Dissertation · Sat Jan 01 04:00:00 EST 1983

OSTI ID:5585418

Eisinger, D W

Two specific policy issues in natural-gas-pipeline ratemaking are analyzed, so that a clearer understanding of their economic implications is gained, and to see under what circumstances these two policies best achieve their objectives. The first issue concerns the allocation of fixed costs. Since only part of an interstate gas pipeline's business is federally regulated, the allocation of fixed costs between the regulated and unregulated segments can have important implications for the regulated price. A comparative statics analysis of the regulatory constraint specifying the fixed-cost allocation method is performed to illustrate the operation of the constraint. Next, a model of a profit-maximizing pipeline subject to the regulatory constraint is developed and analyzed to illustrate resource allocation within the firm caused by the regulatory constraint. The second issue addressed is the effectiveness of the incremental pricing provisions of the Natural Gas Policy Act of 1978. These provisions are designed to shield residential consumers from the higher natural gas prices legislated in the NGPA by allocating a portion of the higher gas costs to certain industrial users. The incremental pricing provisions are simulated to see under what conditions the shielding function is best performed.

• OSTI ID: 5585418
• Country of Publication: United States
• Language: English

Related Subjects

03 NATURAL GAS
030600* -- Natural Gas-- Economic
Industrial
& Business Aspects
29 ENERGY PLANNING, POLICY, AND ECONOMY
290200 -- Energy Planning & Policy-- Economics & Sociology
294003 -- Energy Planning & Policy-- Natural Gas
ALLOCATIONS
COST
INDUSTRY
LAWS
NATIONAL ENERGY ACT
NATURAL GAS INDUSTRY
NATURAL GAS POLICY ACT
PIPELINES
PRICES
RATE STRUCTURE