Deregulation of the Natural Gas Market

Deregulation 101

The Federal government restructured its regulation of the interstate natural gas transmission pipeline industry during the 1980’s and early 1990’s. Customers of interstate pipelines stopped purchasing gas supplies directly from the pipelines and made supply arrangements directly with gas producers or third party gas marketers. In the early 1990’s, many interstate pipelines became “open access”. Large interstate pipeline customers (large industrials, electric and gas utilities) began purchasing gas from third parties and contracting with the interstate pipelines solely for the transportation of their gas on the interstate pipeline system.

Savvy Customers Save Big

During the early 1990’s many gas distribution utilities also began “unbundling” their retail gas sales service tariffs. With an unbundled tariff, the gas commodity costs are separated, or unbundled, from the utility’s local gas delivery costs. Most gas utilities initially offered large volume industrial customers the opportunity to purchase gas from third party marketers and make their own arrangements for the delivery of the gas on the interstate pipeline system to the utility. Following the model established by the interstate pipelines, the local utilities transported the customer-owned gas over the utility’s local distribution system to the customer’s facility.

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