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
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.'
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