I wrote an interesting article entitled "On the Road to Market-Based Rates." In it, he refers to "one economist" who recently testified on this issue in a pipeline rate case. Further, he considers how this economist would argue on more general market-based pipeline ratemaking issues.
While Grenier has shown professionalism and restraint in not naming names, this economist has decided to "come out of the closet" and reply. I am the economist to whom Grenier refers.
The current fight over pipeline rates, including the fight characterized by Grenier, is over whether there is an avenue for legitimate competition in the provision of gas shipping services. He says no, while chronicling the potential harm to industrial gas users and claiming that the debate seems academic and complicated by much economic theory. I disagree.
Competition Needed in Gas "Shipping Services"
Viewed from outer space, the nation's natural gas transmission network looks as if a careless waiter dropped an order of overcooked spaghetti on a map of the country. Other than major globs that appear in the Gulf Coast area, Kansas, and Appalachia, and a few bundled strands that stretch from somewhere near Texas toward the Midwest and Northeast, there are strands of "spaghetti" that reach virtually every major population center.
The reason to pursue competition in the provision of interstate gas transportation is to prevent the squandering of the value of this resource. This could happen in two ways:
- The existing resources are not used by those who value them most. 2. The system is e3cpandedwastefully, without regard to whether the expansions are worth the cost.