Impact of Regional Market Power on Natural Gas Transport Network Size

This paper focuses on the size of natural gas transport capacity as a means to fight regional market power. Starting from a model in which the network operator has three instruments to control a local monopoly, namely, transfers between consumers and the firm, price/output, and capacity, we compare the policy prescriptions of this control scheme and two others in which the set of control instruments is restrained (without transfers and without price con-trol). The analysis allows us to identify conditions under which the objective of mitigating regional market power results in either over- or down-sizing of the transport network