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Natural Gas Deregulation

USA Natural Gas Deregulation

It was sometime during the 1970s when natural gas regulation became a serious problem. The nation was dealing with constant shortages because of the imposed regulations that were in place. This meant retail was getting promoted in gas-producing states, while the customers didn't get anything. This is why it was important to restructure how the natural gas market was setup. Congress quickly moved to pass the Natural Gas Policy Act during the late-70s. With this Act, the idea was to make sure there was a singular gas market across the nation with fair pricing. This made it easier for producers to focus on exploring more and finding additional natural gas resources without getting bogged down by regulations. It also ensured there was a central body in place to overlook the market in the form of FERC (Federal Energy Regulatory Commission).

When this commission was set up, it became easier for the prices to rise. Customers were willing to spend more on natural gas and this also meant more suppliers entered the market too. Everyone wanted natural gas production to be separated from the transportation services listed under the interstate pipelines.

For the natural gas markets to become deregulated, there were specific requirements in place for consumers. The first hurdle that was noted included the presence of natural gas pipelines that had to be split. This was done with the help of the FERC Order 436, which ensured pipelines had to offer competitive rates when it came to transportation-based services. As a result, the pipeline owners were unable to restrict who was using the pipelines and it often came down to first-come, first-serve basis for all relevant customers.

It is important to note that pipeline owners weren't an active part of Order 436, but the pipelines had to move towards a transportation-based service setup. By 1992, it was deemed mandatory for the pipelines to become a part of the process that included following guidelines listed in the FERC Order 436. This is why natural gas deregulation has become a reality in this day and age. Everyone is on equal footing when it comes to use of the pipelines.

Since the pipelines are open, it has made it a lot easier to move forward with natural gas deregulation. In general, independent suppliers didn't have to struggle and had the opportunity to fight for their ability to use the pipelines against the utility companies. The last hurdle was found during 1989 when the Natural Gas Wellhead Decontrol Act was launched. This meant that the federal price regulations weren't in place any longer and natural gas could be sold for distribution purposes. This also meant the market competition would ensure everyone was offering fair pricing.