The Equity And Efficiency Of Two-Part Tariffs In U.S. Natural Gas Markets

Residential natural gas customers in the United States face volumetric charges for natural gas that average about 30% more than marginal cost. The large markup on natural gas - which is used to cover the fixed infrastructure and operating costs of the local distribution companies - is widely recognized to be inefficient. Nonetheless, attempts to reduce volumetric charges, and cover the revenue shortfall through increased fixed monthly fees, have faced opposition based on the belief that current rate schedules have desirable distributional consequences.

Provided by: National Bureau of Economic Research Topic: CXO Date Added: Dec 2010 Format: PDF

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