Productivity and efficiency of US gas transmission companies: A European regulatory perspective. Energy Policy

Abstract

Abstract On both sides of the Atlantic the regulation of gas transmission networks has undergone major changes since the early 1990's. Whereas in the US the longstanding regime of cost-plus regulation was complemented by increasing pipeto-pipe competition, most European countries moved towards incentive regulation complemented by market integration. We study the productivity development of a panel of US interstate companies using Data Envelopment Analysis and Malmquist productivity indices. Results are presented for changes in productivity, as well as for several convergence tests. The results indicate that taking productivity and convergence as performance indicators, regulation has been rather successful, in particular during a period where overall demand was flat. However, we argue that a benchmarking-based regulation might have brought about stronger convergence. Lessons for European regulators are twofold. First, the US analysis shows that benchmarking of European transmission operators would be possible if data were available. Second, our results suggest that, in the long-run, market integration and competition are alternatives to the current European model