Some Benefits, Drawbacks and Perils of Negotiated Settlement as a Price Regulatory Method of Pipeline Services

Jimenez-Montiel, Guillermo

Some Benefits, Drawbacks and Perils of Negotiated Settlement as a Price Regulatory Method of Pipeline Services

dc.contributor.advisor	Stewart, Fenner Leland
dc.contributor.author	Jimenez-Montiel, Guillermo
dc.contributor.committeemember	Wright, David Vincent
dc.contributor.committeemember	Ingelson, Allan Edward
dc.date	2022-11
dc.date.accessioned	2022-09-29T20:50:07Z
dc.date.available	2022-09-29T20:50:07Z
dc.date.issued	2022-09
dc.description.abstract	Carriers and shippers have long preferred negotiation over litigation to solve issues of prices for natural gas pipeline services. However, parties frequently end up in litigation. This paper explains why this problem happens under Canadian law. When parties negotiate, they create benefits by solving short-term issues of financial viability of pipeline systems. Parties sometimes unanimously agree upon their own rules and incentives on price and conditions of service under minimal regulatory intervention. In addition, parties find a balance of interests and certainty by agreeing on the carrier’s total revenue requirement and the method to set the prices shippers will pay. Moreover, parties prevent abuse of monopoly and market power which used to be the main reasons for regulatory intervention based on adjudication. Parties have achieved these benefits without discussions based on regulatory principles. However, parties’ negotiation has some drawbacks and perils even in the presence of pipeline competition. Sometimes parties alone have not prevented cross-subsidization which can affect rivalry between shippers and rivalry between carriers. Even more, the growing degree of pipeline competition and other business risks can leave some transmission assets stranded. Therefore, shareholders cannot recover the profits permitted and the capital invested, and the long-term viability of a pipeline system is threatened. Here the drawback is that shippers alone cannot prevent a carrier from attempting to transfer that long-term risk to shippers. Finally, a carrier can take actions contrary to a settlement after the Regulator approves it, leading parties to new conflicts. The Regulator has adapted the regulatory processes to manage the drawbacks and perils by adjudicating on the issues posed by parties who dissent from the settlement agreed or when negotiation do not work. Despite parties’ preference for negotiation, the Regulator needs to adjudicate based on cost of service and the regulatory principles. Thus, adjudication remains the default process as the Regulator has solved the disputes based on the carrier’s burden of proof to minimize the asymmetry of information between the carrier and shippers and between the carrier and the Regulator regarding the allocation of costs and business risks. That asymmetry explains the drawbacks and perils.	en_US
dc.identifier.citation	Jimenez-Montiel, G. (2022). Some benefits, drawbacks and perils of negotiated settlement as a price regulatory method of pipeline services (Master's thesis, University of Calgary, Calgary, Canada). Retrieved from https://prism.ucalgary.ca.	en_US
dc.identifier.uri	http://hdl.handle.net/1880/115325
dc.identifier.uri	https://dx.doi.org/10.11575/PRISM/40331
dc.language.iso	eng	en_US
dc.publisher.faculty	Law	en_US
dc.publisher.institution	University of Calgary	en
dc.rights	University of Calgary graduate students retain copyright ownership and moral rights for their thesis. You may use this material in any way that is permitted by the Copyright Act or through licensing that has been assigned to the document. For uses that are not allowable under copyright legislation or licensing, you are required to seek permission.	en_US
dc.subject	Negotiated settlement	en_US
dc.subject	Market failure	en_US
dc.subject	Cross-subsidization	en_US
dc.subject	Stranded assets	en_US
dc.subject	Market power	en_US
dc.subject	Pipelines	en_US
dc.subject.classification	Law	en_US
dc.title	Some Benefits, Drawbacks and Perils of Negotiated Settlement as a Price Regulatory Method of Pipeline Services	en_US
dc.type	master thesis	en_US
thesis.degree.discipline	Law	en_US
thesis.degree.grantor	University of Calgary	en_US
thesis.degree.name	Master of Laws (LLM)	en_US
ucalgary.item.requestcopy	true	en_US