Message-ID: <14077751.1075856950294.JavaMail.evans@thyme> Date: Wed, 22 Dec 1999 08:34:00 -0800 (PST) From: vince.kaminski@enron.com To: vkaminski@aol.com Subject: Re: working gas price model Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit X-From: Vince J Kaminski X-To: vkaminski@aol.com X-cc: X-bcc: X-Folder: \Vincent_Kaminski_Jun2001_8\Notes Folders\Sent X-Origin: Kaminski-V X-FileName: vkamins.nsf ---------------------- Forwarded by Vince J Kaminski/HOU/ECT on 12/22/99 04:34 PM --------------------------- Clayton Vernon@ENRON 12/22/99 10:40 AM To: Vince J Kaminski/HOU/ECT@ECT cc: Vasant Shanbhogue/HOU/ECT@ECT Subject: Re: working gas price model Vince- I have a simplified version of Brad's model in mind. The "no arbitrage" condition equates trading margins across the country. Costs of transmission rise with congestion on the network. Wellhead supply is almost completely price- elastic, while burner-tip demand is almost completely price inelastic. Storage is rationalized as a perpetual call option. The least time-variant parameters are the costs of injecting and withdrawing gas from storage to the pipeline, followed by the costs of delivering gas from the wellhead to the pipeline. The intermediate-variant parameters are the capacity-dependent costs paid to the pipeline (above shrinkage) for transmission. The most time-variant parameters are the trading margins and the valuations of the storage option. There are 8 parameters to be estimated at each major node of the betwork. They are identifiable in either of two straightforward ways: using a short time series of the last 3 days prices based on the assumed variability mentioned above, or point-estimates ("calibrations") using only today's data based on a node-based model of competition between pipelines where pipes with the same region of origination, albeit markedly different terminus, price versus capacity similarly, "competing" for outflows. I will write this up for you in Scientific Word and present it to you at your earliest convenience. Clayton