The New Golden Rules: How Deregulation Changed the National Gas Industry

Vista AdminBlog

There is no other industry in the United States that has been as heavily regulated as the natural gas industry. Dating all the way back to 1930s, the regulation of public utilities can be credited for the immense natural gas infrastructure we have today. Over the last 8 to 9 decades, a number of regulations have been imposed on this industry such as the Public Utilities Regulatory Policy Act of 1978. These regulations were important to structure the relationship between the utilities and the customers. The rules have changed a lot over the years, but a few things remain the same. The Federal Regulation of Interstate Commerce is performed by the Federal Regulatory Commission FERC and the regulation of intrastate affairs is carried out by the respective state Public Utilities Commission. Otherwise, deregulation has been the name of the game since the 90s.

The Conventional Supply, Transmission and Distribution Network

To understand the basics of deregulation, you need to first have a basic idea of how the natural gas industry works in the United States. So let’s break it down into three major components: the commodity supply portion, the long distance transmission of natural gas, and the local distribution of the commodity among homes and businesses. For years, the local utility was responsible for handling the day-to-day business of the supply, the transmission and the distribution network.

As the industry evolved, construction and the addition of market participants made it necessary for the industry to embrace competition and allow the private sector to play an important role in the distribution of natural gas. How do you encourage competition? Enter deregulation. Deregulating the cumbersome industry allowed the three phases of utility operations to be fully separated, re-structured and in many cases sold off to third party vendors or regional organizations.

The Impact of Deregulation on the Natural Gas Industry

The deregulation of the natural gas market was quite similar to that of the airline, trucking and telephone industries. During periods of expansion and contraction, these deregulated industries underwent drastic changes. You may not have noticed this, but airfare and phone rates today (when adjusted for inflation) are actually a lot less expensive than they used to be back in the 80s. In addition to that, you get to enjoy a wide range of products and services that were not available for your parents’ generation.

The best thing about deregulation, and perhaps its greatest impact on the industry, is that it has allowed customers to choose their natural gas supplier. Customers who were served by investor-owned utilities can now select independent suppliers. In other words, you no longer have to settle for the default option. You can do your own research at home and figure out which option is going to work best for your home or your business.

Deregulation And Its Effect On Your Energy Bill

As a quick recap, deregulation naturally increases competition, and competition naturally decreases prices as companies try to get a competitive edge on one another. So deregulation, in effect, can decrease your electricity or gas bill. Did you know that the number one factor that hurts the finances of people and small businesses is the cost of energy? Thanks to the energy deregulation laws that have been implemented in more than a dozen states, consumers of electricity and natural gas can save anywhere from 5 to 20 percent on their energy bill by subscribing to the services of a third party energy supplier.

It’s Not All Privatized

Just because deregulation has been implemented in the industry does not mean that the entire natural gas supply, transmission and distribution network has been privatized. The state utility will continue to deliver the natural gas or electricity regardless of which organization you have chosen as your supplier. It is the utility’s job to maintain the distribution system, respond to emergencies and read meters. It’s the supplier’s job to ensure you always receive a steady flow of gas to your home or business, and it’s your job to choose which supplier works best for you. Happy hunting.