Evaluating and Enhancing Competition in the Interstate Natural Gas Transportation Industry

Posted: 19 Nov 2008

See all articles by Michael J. Doane

Michael J. Doane

Competition Economics LLC

R. Preston McAfee

Yahoo! - Yahoo! Research Labs

Michael A. Williams

Competition Economics LLC

Date Written: 2004

Abstract

On both sides of the Atlantic, the regulation of gas transmission networks has undergone major changes since the early 1990s. Whereas in the US, the long-standing regime of cost-plus regulation was complemented by increasing pipe-to-pipe competition, most European countries moved towards incentive regulation complemented by market integration. We study the productivity development of a panel of US interstate companies using data envelopment analysis and Malmquist productivity indices. Results are presented for changes in productivity, as well as for several convergence tests. The results indicate that taking productivity and convergence as performance indicators, regulation has been rather successful, in particular during a period where overall demand was flat. However, we argue that a benchmarking-based regulation might have brought about stronger convergence. Lessons for European regulators are twofold. First, the US analysis shows that benchmarking of European transmission operators would be possible if data were available. Second, our results suggest that, in the long-run, market integration and competition are alternatives to the current European model.

Suggested Citation

Doane, Michael J. and McAfee, Randolph Preston and Williams, Michael A., Evaluating and Enhancing Competition in the Interstate Natural Gas Transportation Industry (2004). Natural Resources Journal, Vol. 4, No. 3, 2004, Available at SSRN: https://ssrn.com/abstract=1303629

Michael J. Doane (Contact Author)

Competition Economics LLC ( email )

2000 Powell Street
Suite 510
Emeryville, CA 94608
United States
510-655-7503 (Phone)

Randolph Preston McAfee

Yahoo! - Yahoo! Research Labs ( email )

Sunnyvale, CA 94089
United States

Michael A. Williams

Competition Economics LLC ( email )

2000 Powell Street
Suite 510
Emeryville, CA 94608
United States

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