Top officials at several U.S. retail gas companies reveal how they are rethinking their business models and developing new approaches to serve customers in the face of supply concerns and price...
Pipelines: Are Regulators in for the Long Haul?
An economic perspective on long-term contracting for gas pipeline service.
rationally and efficiently in adapting to the more open and competitive environment. We should expect to see more interest in long-term contracting in the future if and when the price for short-term transactions starts to rise because of scarcity in regional pipeline capacity. But other than this development, the lower preference for long-term contracting by shippers is compatible with their self-interest. More important, shorter-term transactions have fostered a more efficient and socially desirable natural-gas industry.
Advocates of long-term contracting have not made a case for their position, which comes across more as self-serving than anything else.
1. As defined here, although other market observers may disagree, long-term contracts have time durations of 5 years or more.
2. EIA’s Annual Energy Outlook 2005 .