“Wholesale competition in the gas industry has spurred
gas production, encouraged pipeline construction,
driven down commodity prices for the past decade and
lowered retail prices accordingly. In the electric sector,
wholesale competition, although in its infancy, has
enabled the construction of thousands of megawatts of
new power plant capacity across the country, resulting
in lower commodity and retail electric prices in most
regions, and in a cleaner generation fleet.”
Chairman Pat Wood, FERC, Congressional Testimony, 2002
Regulation of electric power, natural gas, and petroleum has been radically transformed during the past 30 years. Cost-based rate regulation, price controls, quotas, and entry barriers have been removed or modified to enable competition to allocate resources efficiently. At the same time, energy industries have been undergoing fundamental structural changes, and new types of markets and companies have emerged.
Energy companies are learning how to operate successfully in competitive markets. Lawmakers and regulators have become increasingly active in analyzing how structural and regulatory changes in energy industries affect prices ultimately paid by consumers. EI economists are increasingly being called upon to analyze how proposed market changes will affect energy supplies, energy prices, financial and business risks, and competitive strategies.
Increasing competition in the supply of wholesale electric power and the prospect of retail customer choice has raised new issues for businesses and policy-makers. Due to concerns over transmission access, deregulation of generation and wholesale power sales has been accompanied by increased regulation of transmission and discussions of divestiture. The disputes associated with California’s attempt at deregulation has led some to question the feasibility and efficacy of competition in the electric power industry. Government agencies, electric utilities, and independent power producers have sought the advice of EI economists to analyze market competition. EI economists have also provided consulting services to assist electric power companies in adapting to the new competitive environment.
Work by EI economists on the electric power industry includes:
Testimony before the Federal Energy Regulatory Commission and state commissions on the competitive effects of major electric utility mergers
Analyses and presentations to the Department of Justice and the Federal Trade Commission on the competitive effects of electric utility mergers
Presentations to the Federal Energy Regulatory Commission, Federal Trade Commission, and Department of Justice on methods of evaluating competition in the electric power industry
Reports and testimony in state restructuring proceedings
Testimony on cost-savings from electric utility mergers
Analyses and testimony concerning utility applications for authority to sell electric power at market-based rates
Reviews of the effects on competition of different forms of regional transmission organizations
Advice to clients on strategic implications of different acquisition targets
Testimony on antitrust issues and revenue requirements in electric rate cases
Natural Gas and Petroleum
The increase in competition resulting from changes in natural gas regulation has led to substantial industry restructuring. EI economists have analyzed the competitive effects of many of the major natural gas pipeline mergers in the past twenty years. In addition, EI economists have had substantial involvement in developing and commenting on new natural gas regulations that broaden the role of competition and improve efficiency. EI economists have worked on competitive issues at all levels of the natural gas industry, including production, processing, fractionation, NGL transportation, gas transportation, and LNG transportation and storage.
Although the petroleum industry historically has seen greater competition than other energy industries, it also continues to face complicated issues involving competition and regulation. EI economists have experience in analyzing competitive issues at all levels of the industry, including mergers between oil field service companies, pricing crude oil at the wellhead, regulation of oil pipelines, acquisition of refineries, and mergers among retail gasoline stations.
In addition to work in the United States, EI economists have also consulted on energy matters in Argentina, Canada, Chile, Estonia, Latvia, Lithuania, Mexico, and Saudi Arabia.
Previous work by EI economists includes:
Analysis and testimony on the competitive effects of mergers and acquisitions in the natural gas and petroleum industries, including mergers between companies owning oil pipelines, oil refineries, fractionators, processing plants, gasoline stations, storage facilities, product pipelines, natural gas pipelines, and natural gas gathering facilities
Testimony on the reasons for high natural gas prices in the western United States in the years 2000 and 2001
Studying crude oil transactions in response to alleged evasion of price controls
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