Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

A Member of the Law Professor Blogs Network

Monday, January 17, 2011

Gas Release and Transport Capacity Investment as Instruments to Foster Competition in Gas Markets

Posted by D. Daniel Sokol

Corinne Chaton (Laboratoire de Finance des Marchés d'Energies), Farid Gasmi (Toulouse School of Economics (ARQADE & IDEI)), Marie-Laure Guillerminet (Hamburg University (FNU)), and Juan Daniel Oviedo (Universidad del Rosario) advocate Gas Release and Transport Capacity Investment as Instruments to Foster Competition in Gas Markets.

ABSTRACT: Motivated by recent policy events experienced by the European natural gas industry, this paper develops a simple model for analyzing the interaction between gas release and capacity investment programs as tools to improve the performance of imperfectly competitive markets. We consider a regional market in which a measure that has an incumbent release part of its gas to a marketer complements a program of investment in transport capacity dedicated to imports by the marketer, at a regulated transport charge, of competitively-priced gas. First, we examine the case where transport capacity is regulated while gas release is not, i.e., the volume of gas released is determined by the incumbent. We then analyze the effect of the "artifcial" duopoly created by the regulator when the latter regulates both gas release and transport capacity. Finally, using information on the French industry, we calibrate the basic demand and cost e! lements of the model and perform some simulations of these two scenarios. Besides allowing us to analyze the economic properties of these scenarios, a policy implication that comes out of the empirical analysis is that, when combined with network expansion investments, gas-release measures applied under regulatory control are indeed effective short-term policies for promoting gas-to-gas competition.

http://lawprofessors.typepad.com/antitrustprof_blog/2011/01/gas-release-and-transport-capacity-investment-as-instruments-to-foster-competition-in-gas-markets.html

| Permalink

TrackBack URL for this entry:

http://www.typepad.com/services/trackback/6a00d8341bfae553ef0147e0dd0c8e970b

Listed below are links to weblogs that reference Gas Release and Transport Capacity Investment as Instruments to Foster Competition in Gas Markets:

Comments

Post a comment