The Alexandria Pipeline Application for Authorization to Charge Market-Based Rates
15 Pages Posted: 21 Nov 2019
Date Written: November 7, 2019
A short fictional story to illustrate for non-economists the economic forces at play when the Federal Energy Regulatory Commission (FERC) reviews oil pipeline applications to be authorized to charge market-based rates. Economic theory made as digestible as possible by avoiding formulas, using lots of pictures and letting the involved parties tell their story. The take-away messages: relying on concentration indexes (HHIs) and easy-to-implement algorithms determining who competes with whom may (netback analysis) is consistent with FERC precedent, but it may not produce answers FERC can safely rely on.
Keywords: Market-Based Rates, Netback Analysis, FERC, Product Differentiation
JEL Classification: L13, L51, L95, L98
Suggested Citation: Suggested Citation