ABSTRACT
Marginal cost in the supply of gas to consumers is not a simple concept and requires a fairly lengthy explanation. An increment or decrement in the supply of gas should be represented by the change in the consumption of an existing consumer, or by the total consumption of a single new consumer. The direct supply will come mostly from the North Sea, though it may be cheaper to provide some peak requirements by importing methane or by manufacturing SNG. The distribution costs of connecting each new consumer are estimated by the engineering department at the time when the proposal to connect him is appraised. System costs, including the beach-head cost of natural gas, obviously depend upon the level and nature of the demand for gas, which it is planned to meet. The incremental delivery capacity cost of direct supply from the North Sea would be higher than that of any alternative if it caused the specified maxima to be exceeded.
