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FERC Staff Releases ABCs of Auctions

October 12, 1998
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FERC Staff Releases ABCs of Auctions

In preparation for a major workshop on capacity auctions, FERC on Friday issued a staff paper that provides an overview of the subject - the benefits of auctions, factors to be considered when designing auctions, the different types of auctions, the use of auctions in the pipeline industry today and a glossary of auction terms.

The 35-page paper, titled "Auctions and Their Use in Natural Gas Markets," provides mostly "background information" on the auction process, and is intended to "stimulate comment and criticism" from those planning to attend FERC's workshop on Oct. 20th. The Commission also has indicated that it may hold a follow-up workshop to address the issue.

The paper, which was prepared by FERC's Office of Economic Policy, noted that gas transportation capacity was uniquely suited for the auction process because of the fluctuating nature of its supply, demand and price. In addition, it would give shippers an "equal opportunity" at bidding, limit price discrimination and promote efficiency, it said.

In designing an auction, a number of factors would have to be considered and could affect the final design: limiting market power, costs to run the auction, transaction costs, risks and the speed at which the auction would occur, the paper noted. "The auction designer may need to choose among, or to make compromises between, some of the goals."

The staff paper can be downloaded from www.ferc.fed.us. on the Commission's website. Click on CIPS. The docket number is RM98-10; where it asks for 'date range' choose 'past month.'

Susan Parker

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