A technique for calculation of nodal gas prices and analysis of their components

Consideration is given to the technique for calculation of nodal gas price and all its components on the basis of a two-stage approach, i.e. calculation of the optimal gas distribution in gas supply system (a direct solution of the linear programming problem), marginal prices (a dual solution) and their decomposition into components by the graph-based cost allocation method. It is shown that the price components are determined by the gas production and transportation costs as well as by the marginal markups for reaching the limit values in gas production and transportation. Simultaneously, the similar price components related to gas losses are found. The technique of the nodal price calculation is illustrated by the example of the Unified gas supply system in Russia. The nodal gas price components were studied on the basis of the retrospective information on gas production and consumption in the constituent entities of the Russian Federation (RF) in 2005. The paper shows the relationship among different components of the nodal price.