Natural gas regulation was in place to protect customers from high energy prices, but deregulation began in 1935 to limit the market power of monopolies. Deregulation gave consumers more supplier options and lower prices, but oversupply and bundled plans caused issues until the 1990s. Many countries have since initiated natural gas deregulation.
Natural gas regulation was in place, ostensibly to protect customers from high energy prices, during the early years of this energy supply industry. The industry was basically a monopoly at the time, so it had the power to charge consumers whatever it wanted, including higher prices. The shift to natural gas deregulation in the United States began to take shape in 1935, when the Federal Trade Commission (FTC) became concerned about the industry’s regulated monopolistic practices and its near-total control over energy prices for customers. Natural gas deregulation has offered American consumers more choice in suppliers and, as a result, lower prices for natural gas from some companies.
With the passage of the Natural Gas Act of 1938, the US government was able to regulate rates for delivering natural gas over interstate pipelines. This was another way in which the government sought to limit the market power of the 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 interstate delivery. Suppliers found that they could sell their natural gas to their immediate region at much higher rates. As a result, a natural gas shortage was created in external consumption regions, because most of the supply ended up in the intrastate delivery system. Therefore, regulation of the natural gas sector by the federal government ended up harming consumers until the late 1970s.
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 implemented in November 1978. Deregulation and rises resulting changes in natural gas prices lead to an oversupply due to diminished demand. Natural gas buyers were forced to purchase a bundled plan consisting of supply and delivery. With Order No. 436 of FERC, issued in 1985, interstate pipelines had the option of acting only as natural gas supply carriers, instead of also being natural gas sellers.
During the 1990s, natural gas deregulation made many more supplier options available to residential and business customers. Natural gas services continued to be provided uninterruptedly through the original supplier, but with some savings for customers once they chose a new supplier. This gave consumers the role of making the decision best suited to them regarding the supply of natural gas. With the deregulation of natural gas, competition between new supplier companies tended to keep consumer prices lower and also under control.
Beginning in the year 2000, many countries other than the United States initiated proposals for natural gas deregulation with the World Trade Organization (WTO). Canada, Norway and the South American countries of Venezuela and Chile have taken steps in this direction. Britain now has one of the most liberalized natural gas supply industries in the world. As far as the European Union is concerned, in 2008, around 33% of total gas consumption came from unregulated supplies.
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