VERTICAL CONTRACTS - A NATURAL EXPERIMENT IN GAS-PIPELINE REGULATION

Authors
DECANIO SJ FRECH HE
Citation
Sj. Decanio et He. Frech, VERTICAL CONTRACTS - A NATURAL EXPERIMENT IN GAS-PIPELINE REGULATION, JITE. Journal of institutional and theoretical economics, 149(2), 1993, pp. 370-392
Citations number
38
Categorie Soggetti
Economics
Journal title
JITE. Journal of institutional and theoretical economics → ACNP
ISSN journal
09324569
Volume
149
Issue
2
Year of publication
1993
Pages
370 - 392
Database
ISI
SICI code
0932-4569(1993)149:2<370:VC-ANE>2.0.ZU;2-3
Abstract
In 1987, the Federal Energy Regulatory Commission (FERC) issued Order 500, which severed vertical contracts between natural gas pipelines an d natural gas producers. In so doing, the FERC intended to reduce pric es. In fact, the opposite occurred and prices rose substantially. We r eview the theories explaining the contracts, particularly the efficien cy-enhancing theories. Statistical analysis of spot and average natura l gas prices supports the efficiency rationales for vertical contracts in this industry. (JEL: L22, D23, K23)