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Natural gas was regulated in the US to protect customers from high prices. Deregulation began in 1935, giving consumers more choice and lower prices. The Natural Gas Policy Act of 1978 promoted deregulation to address supply shortages. Deregulation in the 1990s gave consumers more supplier options and kept prices low. Other countries, including Canada, Norway, Venezuela, Chile, and Britain, have also deregulated natural gas.
Natural gas regulation had been put in place, ostensibly to protect customers from high energy prices, during the early years of that energy supply industry. The industry was mostly a monopoly at the time, so it had the power to charge consumers for anything it wanted, including higher prices. The move to deregulate natural gas in the United States began to take shape in 1935, as the Federal Trade Commission (FTC) became concerned with the industry’s regulated monopolistic practices and its near-total control over energy prices for customers. Deregulation of natural gas has given American consumers greater choice of suppliers and, as a result, lower prices for natural gas by some companies.
With the passage of the Natural Gas Act of 1938, the US government was able to regulate rates for the delivery of natural gas interstate. This was another way the government tried to limit the market power of natural gas monopolies. In other words, it was an attempt to keep costs competitive for consumers.
In the 1960s, the Federal Power Commission (FPC) regulated the cost of natural gas intended for interstate, but not intrastate, delivery. Suppliers found they could sell their natural gas for their immediate region at much higher rates. As a result, a shortage of natural gas has been created in regions outside consumers because most of the supply has gone into the intrastate delivery system. Thus, the federal government’s regulation of the natural gas industry in the late 1970s ended up hurting consumers.
To promote the deregulation of natural gas so that interstate supply shortages could be addressed, the Natural Gas Policy Act (NGPA), as part of the National Energy Act (NEA), was enacted in November 1978. Deregulation and subsequent price hikes of natural gas lead to excess supply due to decreased demand. Natural gas buyers were forced to purchase an aggregate plan, which consisted of supply and delivery. With the FERC order n. 436, issued in 1985, interstate pipelines had the option of acting solely as carriers of natural gas supplies rather than also being sellers of natural gas.
During the 1990s, natural gas deregulation made many more supplier options available to residential and corporate customers. Natural gas services continued to be provided, uninterrupted, through the original supplier, but with some savings for customers once they had chosen a new supplier. This has given consumers a role in making the best decision for them regarding the supply of natural gas. With the deregulation of natural gas, competition between the new supply companies tended to keep prices for the consumer low and also under control.
Beginning in 2000, several other countries besides the United States entered into natural gas deregulation proposals with the World Trade Organization (WTO). Canada, Norway, and the South American countries of Venezuela and Chile have all taken steps in that direction. Britain now has one of the most liberalized natural gas supply industries in the world. As far as the European Union is concerned, by 2008 approximately 33% of total gas consumption came from liberalized supplies.
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