The Alexandria Pipeline Application for Authorization to Charge Market-Based Rates

15 Pages Posted: 21 Nov 2019

Date Written: November 7, 2019

Abstract

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

Mini, Federico, The Alexandria Pipeline Application for Authorization to Charge Market-Based Rates (November 7, 2019). Available at SSRN: https://ssrn.com/abstract=3483253 or http://dx.doi.org/10.2139/ssrn.3483253

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