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Congressmen Want To Know Why Gas Prices Aren’t Falling Faster

May 28, 1987

WASHINGTON (AP) _ Impatient House subcommittee chairmen asked federal regulators Thursday why residential natural gas prices weren’t falling faster and were told it’s just taking longer to open up the market than anyone expected.

″If we’re serious about getting into competition, we’ve got to be serious about shaking up the system,″ Rep. Phil Sharp, D-Ind., told the five members of the Federal Energy Regulatory Commission at a hearing he chaired of the Energy and Commerce Committee’s energy and power subcommittee.

Sharp said the average price paid by homeowners had risen from $4.29 per thousand cubic feet in 1981 to $5.82 in 1986 while the average wellhead price had fallen from $1.98 to $1.87.

Sharp was joined by Rep. John D. Dingell, D-Mich., chairman of the full committee and the oversight subcommittee, in sharp questioning of the commissioners. He said industrial gas prices had fallen 46 cents per thousand cubic feet since 1981.

″When you have an industry that came to the commission and the commission told it what to have for lunch, there’s a reluctance to change,″ said Martha Hesse, chairman of the commission, in trying to explain why homeowners haven’t seen lower rates from the large surpluses of gas in recent years.

For one thing, commission members noted, the commission does not regulate local distribution companies, or LDCs, at the end of the interstate pipelines that do come under its jurisdiction. The distribution companies serve the homeowner, and they are regulated by the states.

Commissioner Michael Naeve said, ″LDCs have been slow″ to seek out low- cost gas on their own and buy it directly from producers, but there are signs that they have become ″more aggressive in recent months.″

Responding to court rulings that price-cutting for individual fuel- switchable customers to keep their business was discriminatory against the homeowner, the commission in October 1985 offered interstate pipelines the option of becoming ″open access″ lines, no longer buying and selling gas but simply transporting it for a fee for other buyers and sellers.

Pipelines that did not chose the option were not supposed to carry cut- price gas for others, but that provision has not been enforced yet.

Most major pipelines have accepted the option but at least 11 have asked the commission to reconsider their cases, and very little gas is moving under full ″open access″ provisions - only 200 million cubic feet of gas per day.

Sharp noted that 32 billion cubic feet a day is being carried by pipelines for others under temporary arrangements that were supposed to expire last year, but which the commission has extended several times.

″I think it’s imperative that we move forward in getting all pipelines to play this game,″ Sharp said.

Recent prices, Dingell said, show ″a pattern of discrimination against captive customers (such as homeowners and stores) and producers at the same time bestowing significant benefits on fuel-switchable customers″ such as factories that can burn oil.

Commissioner Charles Trabandt replied that ″all the initiatives of the commission ... are intended to get competitive prices at the city gate,″ and those prices are lower than they have been for many years.

″I think we’re all confident (our) policy direction will get that price benefit to the consumer,″ Trabandt said.

The Energy Department is forecasting a 5 percent decline in residential gas prices this year. Its figures show that the average residential price fell 4.9 percent from 1985 to 1986, from $6.12 to $5.82; the average commercial price fell 7.3 percent, from $5.50 to $5.10; the average industrial price fell 19.5 percent, from $3.95 to $3.18; and the average price received by producers fell 14.1 percent, from $3.75 to $3.22.

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