Research on Pricing in a Gas Transportation Network

Abstract

This report is focused upon regulatory institutions that organize prices within a network of commodity flows. The network has economic properties of the natural gas pipeline industry and the regulatory institutions have properties similar to those that arc being considered as alternatives for the current rate hearing process. The questions posed at this stage of research are somewhat basic about the technical details of the institutions and how markets perfonn when they are in place. In order to isolate the independent effects of the institutions and separate them from many complicating economic activities that can occur in networks, it is best to begin with a study of relatively simple systems. It is also necessary to abstract from many important issues. For example, the legal details of the regulatory institutions are not addressed. Various uncertainties and complications resulting from uncertainty about commodity demand are not addressed directly. Such issues can be addressed by application of the same methodology, but at this stage of the investigation, they are not. The research strategy and overview of the study is contained in the first section.

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