In preparation for a major workshop on capacity auctions, FERCon Friday issued a staff paper that provides an overview of thesubject – the benefits of auctions, factors to be considered whendesigning auctions, the different types of auctions, the use ofauctions in the pipeline industry today and a glossary of auctionterms.

The 35-page paper, titled “Auctions and Their Use in Natural GasMarkets,” provides mostly “background information” on the auctionprocess, and is intended to “stimulate comment and criticism” fromthose planning to attend FERC’s workshop on Oct. 20th. TheCommission also has indicated that it may hold a follow-up workshopto address the issue.

The paper, which was prepared by FERC’s Office of EconomicPolicy, noted that gas transportation capacity was uniquely suitedfor the auction process because of the fluctuating nature of itssupply, demand and price. In addition, it would give shippers an”equal opportunity” at bidding, limit price discrimination andpromote efficiency, it said.

In designing an auction, a number of factors would have to beconsidered and could affect the final design: limiting marketpower, costs to run the auction, transaction costs, risks and thespeed at which the auction would occur, the paper noted. “Theauction designer may need to choose among, or to make compromisesbetween, some of the goals.”

The staff paper can be downloaded from www.ferc.fed.us. on theCommission’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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