Emergency Natural Gas Purchases:

Actions Needed to Correct Program Abuses and Consumer Inequities

EMD-78-10: Published: Jan 6, 1978. Publicly Released: Jan 6, 1978.

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Under the Natural Gas Act of 1938, as amended, the Federal Power Commission (FPC) is responsible for regulating the interstate commerce of natural gas, including the price producers receive for natural gas and the price that pipeline companies can charge for transporting it. FPC issued regulations for emergency natural gas purchases to help alleviate temporary shortages in the interstate market, and Congress provided the President with special powers to ensure adequate supplies for high-priority uses during the adverse 1976 through 1977 winter season.

The manner in which FPC regulated emergency purchase provisions resulted in intrastate pipeline companies avoiding regulations while dealing in the interstate market. Consequently, many interstate pipeline companies were allowed to use emergency purchases for sales to low-priority customers that had alternate fuel capabilities. This was contrary to national policy of attempting to shift high-volume industrial and utility gas users to coal and other energy sources. These actions were also inequitable because high-priority customers not affected by curtailment were forced to bear part of the higher cost of emergency purchases, thereby subsidizing low-priority users. Problems encountered emphasize the need for taking strong measures to curb low-priority uses of emergency natural gas and improving the administration of emergency natural gas purchase programs.

Matter for Congressional Consideration

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Matter: The Federal Energy Regulatory Commission (FERC) should amend regulations for emergency purchases of natural gas to: (1) define an emergency as a situation in which a gas company's supply for high-priority use is endangered; (2) establish the policy that emergency purchases are only for high-priority uses with limited exceptions; (3) prohibit emergency purchases which require payment for gas not taken even though service is resumed to low-priority users; and (4) prohibit emergency purchases for low-priority users that have facilities for alternate fuel use. The Secretary of Energy should: (1) review purchases made under the Emergency Natural Gas Act which did not require prior authorization to determine ineligibility of purchasers and appropriate penalties; and (2) consider exercising his authority to intervene with state public utility commissions to promote policies. Congress should amend the Natural Gas Act to give the President permanent authority to declare a natural gas emergency and to grant the FERC authority to regulate the end price and use of gas obtained under emergency regulations.

 

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