Attacking the Productivity Commission's draft report on gas, Terry Dwyer and Bob Lim ("Gas access report a load of hot air", June 23) argue that a government right of way for a gas pipeline confers a monopoly to a pipeline business.
They oppose deregulation of pipeline charges and argue that pipelines with a regulatory "holiday" period (say, 15 to 25 years) should revert to government ownership and be free to users thereafter.
There are several problems with their analysis.
First, the key ingredient to monopoly power is a lack of competition and once more than one pipeline serves a market that monopoly is eroded.
Second, the government retains ownership of rights of way and a pipeline business cannot stop a rival from duplicating its facility along the same route.
Third, if pipeline usage were to become free after a period, how would the rival uses for it be determined?
Government price regulations mean lobbying costs that feed consultants but are a deadweight loss to the economy.
They should be reserved for genuine monopolies, not extended to cover industries, such as most of gas transmission, where competition holds prices in check.
And if governments were to specify that all new pipelines must be handed over to the state after a period, the corollary is a reduced incentive to build such facilities.
Governments would also have to manage the pipeline it thereby nationalised (heaven forbid!) or resell them.
The value of the resale might compensate for the lost incentive to build such facilities but this is doubtful.
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