Elements of Market Power in the Natural Gas Pipeline Industry

Abstract

As a result of the distortions that have beset natural gas markets in the wake of partial wellhead deregulation under the Natural Gas Policy Act of 1978 (NGPA)-the most visible problem being the existence of increased prices amid a glut of deliverable supplies-concern has mounted about whether the natural gas pipeline industry will perform in a socially efficient manner in the long run when field prices are completely decontrolled. In addition to transporting natural gas from the field to the city-gate, interstate natural gas pipeline companies have traditionally performed two functions. Granted private carrier status by the Natural Gas Act of 1938 (NGA), they both purchase gas shipments in upstream markets and resell them in downstream markets as well as match up gas producers who have available supply with distribution companies and wholesale end-users (direct industrial consumers and electric utilities) who have unfilled demand. In other words, as private carriers gas pipelines not only provide a gas transmission service but also assume the twin roles of gas merchandiser and broker.