This paper surveys the existing theoretical and empirical research on long term contracts inspired by the American experience. We analyze the role of take-or-pay clauses and price indexation rules, questioning whether regulation distorts optimal contract duration. The models we summarize allows us to discuss the economic fundamentals of the ED provisions on long-term contracts in the natural gas industry, pointing out that the ED position on long-term contracting seems to mix up contract duration and flexibility.
Creti, Anna and Villeneuve, Bertrand
"Longterm Contracts and Take-or-Pay Clauses in Natural Gas Markets,"
Energy Studies Review:
1, Article 1.
Available at: http://digitalcommons.mcmaster.ca/esr/vol13/iss1/1