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Competition in Natural Gas Pipeline Wellhead Supply Purchases

Throughout most of the last three decades, interstate natural gas pipeline companies-operating mainly as private carriers, buying gas supplies in the field and reselling them downstream'-have competed primarily on the basis of nonprice terms. Under the regime of wellhead regulation stemming from Phillips,' in upstream (field) markets binding price ceilings meant thatinterpipeline competition in gas purchases was governed principally by the attractiveness of take-or-pay provisions pipelines offer in their contracts with gas producers.' In downstream (city-gate) markets the chronic excess demand induced by wellhead regulation meant that pipelines competed for gas sales to local distribution companies and direct wholesale consumers (large industrial end-users and electric utilities) largely on the basis of the maximumquantity of gas that could be delivered.

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Energy Specializations: Natural Gas – Pipelines

JEL Codes:
N5 -

Keywords: Natural gas pipelines, wellhead supply purchases, regulation, Completition

DOI: 10.5547/ISSN0195-6574-EJ-Vol8-No3-6

Published in Volume 8, Number 3 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.