Designing natural gas network charges: a proposed methodology and critical review of the Spanish case

Abstract

One of the key objectives of regulated charges is to provide efficient price signals to elicit an efficient response by users and maximize social welfare. Nevertheless, current approaches in Europe and elsewhere mainly pursue cost recovery with less attention to economic efficiency. This paper addresses the development of sound and suitable natural gas network charges which should fulfil these and other regulatory principles that have economic and social implications.

Considering the main principles as guiding criteria, we analyse Spain as an illustrative case. Current challenges in the design of natural gas charges are examined, and a novel methodology is proposed.

One of the key objectives of regulated charges is to provide efficient price signals to elicit an efficient response by users and maximize social welfare. Nevertheless, current approaches in Europe and elsewhere mainly pursue cost recovery with less attention to economic efficiency. This paper addresses the development of sound and suitable natural gas network charges which should fulfil these and other regulatory principles that have economic and social implications.

Considering the main principles as guiding criteria, we analyse Spain as an illustrative case. Current challenges in the design of natural gas charges are examined, and a novel methodology is proposed.