Natural gas costs likely to decline under new rules

April 09, 1992|By Thomas C. Hayes | Thomas C. Hayes,New York Times News Service

DALLAS -- Federal regulators approved a sweeping set of new rules yesterday that will further deregulate the natural gas industry and are likely to lead to lower prices for consumers.

The new rules will allow local utilities and other buyers to bargain directly with producers, ending pipelines' regulated monopoly on such sales.

The monopoly had been eroding since the mid-1980s amid government deregulation efforts.

Analysts and utility executives said the changes, along with many others in the complicated rule revisions, would restrict pipelines mainly to being transporters of gas and should lead to lower prices for consumers, or at least reduce the rate of %J increases when gas prices rise.

"This takes away the pipelines' monopoly to merchandise gas to the pipeline customers," said Edward J. Sondey, senior vice president for gas supplies at Brooklyn Union Gas Co., one of the nation's largest utilities.

"The result will be more buyers, more sellers and a reduction of end-user prices. And it should have a positive impact on the demand for gas."

Utilities in most regions have purchased gas from pipeline companies that gathered big volumes of gas from dozens of gas drillers. The pipelines typically charged the local utilities one fee, adding the shipping and storage costs to the cost of the natural gas itself.

The new rules, detailed yesterday in a long-awaited document by the six-member Federal Energy Regulatory Commission, would require pipelines to separate those costs and enable utilities to bargain directly with producers and other marketers for the natural gas and separately with the pipelines for their transportation or storage services.

Nicholas Bush, president of the Natural Gas Supply Association, which represents major producers, called the regulatory action "a historic occasion." He said the new rules would create a more competitive environment that would bring "positive changes" to the industry.

Some industry executives and consultants said the changes could moderate the seasonal pricing patterns for gas -- lower prices in winter and higher prices in the summer -- thereby bringing more stability to the industry.

Mr. Sondey said large utilities such as Brooklyn Union would acquire larger volumes of gas during the summer, when gas is cheaper, and hold it in storage for use during peak use periods in the winter, when gas demand is typically as much as six times greater than in the summer.

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