Moselle, Boaz; Black, David; White, Martin --- "Regulation of the Natural Gas Industry" [2012] ELECD 441; in Van den Bergh, J. Roger; Pacces, M. Alessio (eds), "Regulation and Economics" (Edward Elgar Publishing, 2012)

Book Title: Regulation and Economics

Editor(s): Van den Bergh, J. Roger; Pacces, M. Alessio

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781847203434

Section: Chapter 9

Section Title: Regulation of the Natural Gas Industry

Author(s): Moselle, Boaz; Black, David; White, Martin

Number of pages: 41

Extract:

9 Regulation of the natural gas industry
Boaz Moselle, David Black, Martin White and
Henri Piffaut



1. INTRODUCTION

There is a large literature on natural resource economics, and another large
literature on utility regulation. Here we focus on issues and literature specific
to natural gas regulation.1 Like other utilities, notably telecoms and electric
power, the natural gas industry has seen an evolution from a `traditional'
approach based on a regulated, vertically integrated monopoly towards a liber-
alized model with regulation applied only to those parts of the supply chain
deemed to be natural monopoly elements (so-called `essential facilities'). As
with telecoms, there have also been experiments with infrastructure-based
competition in areas that are often considered as natural monopolies, in partic-
ular long-distance transportation.
In this chapter we therefore describe a range of approaches: `traditional'
regulation of vertically integrated monopoly natural gas suppliers; a liberal-
ized model, based on requiring the owners of transmission, distribution and
potentially other essential facilities to provide services to competing suppliers
on a non-discriminatory basis (`third party access'); and a model that fosters
infrastructure-based competition, i.e. competition between pipelines (so-called
`pipe-to-pipe competition'). We draw out some important features that are
specific to the natural gas industry, focusing on:

1. Some implications of the fact that the industry is based on extraction of a
natural resource. While this has important policy implications, for exam-
ple in relation to security of supply and even macroeconomics, our focus


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