We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.
Finance

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

What is Natural Gas Deregulation?

By Barbara R. Cochran
Updated: May 17, 2024
Views: 10,214
Share

Natural gas regulation had been in place, ostensibly to protect customers from high energy prices, during the initial years of that energy supply industry. The industry was primarily a monopoly at that time, so it had the power to charge consumers anything it wanted, including higher prices. The move towards natural gas deregulation in the United States started to take form in 1935 when the Federal Trade Commission (FTC) became concerned about the industry’s regulated monopolistic practices and its almost total control over energy prices to customers. Natural gas deregulation has offered American consumers more supplier choices, and as a result, lower natural gas prices from some companies.

With the passage of the Natural Gas Act of 1938, the US government was able to regulate the rates for interstate pipeline delivery of natural gas. This was another way the government sought to limit the natural gas monopolies’ market power. In other words, it was an attempt to keep costs competitive for consumers.

By the 1960s, the Federal Power Commission (FPC) regulated the cost of natural gas that was destined for interstate, but not intrastate delivery. Suppliers found that they could sell their natural gas for their immediate region at much higher rates. As a result, a natural gas shortage was created in outside consumer regions because the majority of the supply ended up in the intrastate delivery system. Therefore, regulation of the natural gas industry by the federal government actually ended up hurting consumers by the end of the 1970s.

To promote natural gas deregulation so that the shortage of interstate supplies could be counteracted, the Natural Gas Policy Act (NGPA), as part of the National Energy Act (NEA), was put into place in November of 1978. Deregulation and the resulting hikes in natural gas prices lead to an oversupply because of decreased demand. Purchasers of natural gas were forced to buy a bundled plan, which consisted of supply and delivery. With FERC Order No. 436, which was issued in 1985, interstate pipelines had the option to act solely as the transporters of natural gas supplies instead of also being the sellers of the same.

During the 1990s, natural gas deregulation made many more supplier options available for residential and business customers. Natural gas services continued to be furnished, uninterrupted, through the original supplier, but at some savings to customers, once they had chosen a new supplier. This gave consumers a role in making the decision that was best for them, regarding their natural gas supply. With natural gas deregulation, competition between new supplier companies tended to keep prices to the consumer lower, and also in check.

As of the year 2000, many other countries besides the United States initiated natural gas deregulation proposals with the World trade Organization (WTO). Canada, Norway, and the South American countries of Venezuela and Chile all took 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, about 33% of total gas consumption was from deregulated supplies.

Share
WiseGeek is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.

Editors' Picks

Discussion Comments
Share
https://www.wisegeek.net/what-is-natural-gas-deregulation.htm
Copy this link
WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.

WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.