Incentivizing Criteria for Steering the Implementation of Gas Distribution Investment Projects

Abstract

Natural gas distribution involves delivering gas to end customers via local low-pressure pipelines and is a public service. As part of the procedure for awarding the gas distribution service, contracting authorities define the scope of programmatic guidelines whereas firms participating in the open bidding process propose development plans through which they propose investment projects typically classified into extensions, upgrades, and maintenance development plans. According to the scale and scope of development plans, such investment projects must undergo, or are exempt from, a cost-benefit analysis. The criteria for classifying investment projects are called development conditions. This paper focuses on such criteria, proposing a new methodology aimed at incentivizing investment projects and simplifying the evaluation process. Results confirm that an improvement can be made in making development conditions more adequate to the needs of different territories. Policymakers can benefit from this paper, as investors and contracting authorities require a common methodology at the heart of the analysis of gas distribution network extension.