By F Gasmi Published: 29/12/2007

Investment in Transport Infratructure, Regulation and Gas to Gas Competition

This paper develops a simple model in which a regulated (upstream) trans-
porter provides capacity to a marketer competing in output with an incumbent in the (downstream) gas commodity market. The equilibrium outcome of the firms' interaction in the downstream market is explicitly taken into account by the regulator when setting the transport charge. We consider various forms of competition in this market and derive the corresponding optimal transport charge policies.

We then run simulations that allow us to perform a comparative welfare analysis of these transport infrastructure investment policies based on different assumptions about the degree of competitiveness that prevails in the gas commodity market.

Key words: Transport capacity investment, Regulation, Natural gas, Imper-
fect competition.