regulationoftariffsforgastransportation.doc

regulation of tariffs for gas transportation in a case of ‘competing’ pipelines: Evaluation of five scenarios A Report for the ACCC Prepared by NERA October 2000 Sydney Project Team: Greg Houston Michael Quinn Ann Whitfield National Economic Research AssociatesEconomic Consultants60 Margaret StreetSydney NSW 2000 Australia Tel: (+61) 2 9375 0588Fax: (+61) 2 9375 0585 Web: An MMC Company n/e/r/a Table of Contents Executive Summary i 1. Introduction 1 2. Alternative Scenarios and Criteria For Assessment 2 2.1. Alternative Scenarios 2 2.2. Criteria for Assessing Alternatives 2 2.3. Gas Code Objectives in Relation to Tariffs 7 3. No Regulation of Tariffs 9 4. Forecast volumes 13 5. Deemed volumes 16 6. Backloaded Depreciation 18 7. Defined capacity 20 8. Conclusions 24 8.1. Implications of the Gas Code 25 8.2. Transitional considerations 25 Appendix A. Relevant US Experience 28 A.1. Approval of New Pipelines and the Expansion of Capacity 29 Ref: Ann Whitfield/9/11-10-00/C:\ACCC\ACCCFIND.DOC Executive Summary The Australian Competition and Consumer Commission (the Commission) regulates the tariffs for the transportation of gas through transmission pipelines covered under the National Third Party Access Code for Natural Gas Pipeline Systems (the Gas Code). The Commission has asked NERA to consider the implications of five potential scenarios for the regulation of the tariffs charged by an incumbent gas pipeline following the entry of a new, potentially competing pipeline: no regulation of the tariffs charged by the incumbent pipeline. tariffs for the incumbent pipeline are based on the volumes which are forecast to be transported by the incumbent pipeline; tariffs for the incumbent pipeline are based on an assumed level of volumes transported by the incumbent pipeline (ie, deemed volumes); tariffs for the incumbent pipeline are based on forecast volumes and the adoption of a backloaded depreciation schedule for the incumbent pipeline; or tariffs for the in