A Marginal-Cost Pricing Model for Gas Distribution Utilities

Jean-Michel Guldmann
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Jean-Michel Guldmann: Ohio State University, Columbus, Ohio

Operations Research, 1986, vol. 34, issue 6, 851-863

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.

Keywords: 303 natural gas distribution; 356 marginal-cost pricing; 473 natural gas as an energy source (search for similar items in EconPapers)
Date: 1986
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Persistent link: https://EconPapers.repec.org/RePEc:inm:oropre:v:34:y:1986:i:6:p:851-863

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