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1.2.1.2 Regulation

Every state and the District of Columbia regulates gas utilities—both LDCs and intrastate pipelines—to some degree.24 The Federal Energy Regulatory Commission (FERC) regulates wholesale transactions, that is, transactions between pipeline and producer as well as between pipeline and local distribution company.25

Although there are individual differences, state public utility commissions (PUCs) generally regulate rates of the regulated portion of a customer’s bill, customer service and termination policies and practices, issue certificates of public convenience and necessity for entities that wish to construct facilities and commence service within their respective geographic areas of jurisdiction, and grant permission to intrastate pipelines and local distribution companies to abandon service. Unlike other utility services, there are close substitutes for natural gas (for example, oil and propane for heating, electricity for cooking) so utilities are not required to serve parts of their service territory if they find it uneconomical to do so.26 To enforce the common law public utility duty to charge “just and reasonable” prices, most state commissions also have the authority to set rates, to require prior notice of any proposed rate changes, to suspend proposed rates, and to launch inquiries into unreasonable proposed rate hikes. As part of their mandate to ensure just and reasonable rates, PUCs will also require the pipelines and LDCs within their reach to provide service in a non-discriminatory manner. Thus, arbitrary classifications among customer groups are subject to challenge.

Footnotes

  • 24 {24} Nat’l Ass’n of Regulatory Util. Comm’rs, Profiles of Regulatory Agencies of the United States and Canada, Yearbook, 1994–1995 (1995).

    Texas was the last to do so. Gas Util. Regulatory Act, Tex. Util. § 102.001 (2003).

  • 25 {25} Natural Gas Act, 15 U.S.C. §§ 717–717z.

  • 26 {26} Many LDCs, however, have tariff provisions or written “line extension policies” that describe at which locations or in which areas the company will provide service to new customers at no installation charge. These tariff provisions or policies may also specify, in more or less detail, the costs of bringing gas service to areas near, but not yet connected to, the company’s existing service mains.