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A Marginal-Cost Pricing Model for Gas Distribution Utilities

Author

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  • Jean-Michel Guldmann

    (Ohio State University, Columbus, Ohio)

Abstract

We develop a natural gas distribution utility pricing model that includes optimization of supply mix and capacity expansion, financial analysis of revenue requirements, and design of either average-cost- or marginal-cost-based rates, and apply it using data from the East Ohio Gas Company. The results clearly point to the superiority of marginal-cost over average-cost pricing policies in terms of lesser capital requirements, better capacity utilization and higher end-use economic efficiency.

Suggested Citation

  • Jean-Michel Guldmann, 1986. "A Marginal-Cost Pricing Model for Gas Distribution Utilities," Operations Research, INFORMS, vol. 34(6), pages 851-863, December.
    • Handle: RePEc:inm:oropre:v:34:y:1986:i:6:p:851-863
    DOI: 10.1287/opre.34.6.851
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    Citations

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    Cited by:

    1. Psarras, John, 2016. "Multicriteria decision support to evaluate potential long-term natural gas supply alternatives: The case of GreeceAuthor-Name: Androulaki, Stella," European Journal of Operational Research, Elsevier, vol. 253(3), pages 791-810.
    2. Aouam, Tarik & Rardin, Ronald & Abrache, Jawad, 2010. "Robust strategies for natural gas procurement," European Journal of Operational Research, Elsevier, vol. 205(1), pages 151-158, August.
    3. Gabriel, Steven A. & Zhuang, Jifang & Kiet, Supat, 2005. "A large-scale linear complementarity model of the North American natural gas market," Energy Economics, Elsevier, vol. 27(4), pages 639-665, July.
    4. Steven A. Gabriel & Supat Kiet & Jifang Zhuang, 2005. "A Mixed Complementarity-Based Equilibrium Model of Natural Gas Markets," Operations Research, INFORMS, vol. 53(5), pages 799-818, October.
    5. Guldmann, Jean-Michel & Wang, Fahui, 1999. "Optimizing the natural gas supply mix of local distribution utilities," European Journal of Operational Research, Elsevier, vol. 112(3), pages 598-612, February.

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