AGA: Nonutility natural gas supply rising rapidly

The American Gas Association reports that more than 30% of U.S. households with natural gas service have, or will soon have, the opportunity to purchase their natural gas from a supplier other than their local natural gas utility, much as they can now select a long-distance telephone company.

May 18, 1998

2 min read

David Parker, AGA president and CEO, said, "The trend toward competition in the gas industry has already helped reduce gas bills for all classes of customers by 14%, on average, since 1987. These are significant savings for manufacturing plants, electric power plants, hospitals, homeowners, and others who rely on natural gas.

"Now, gas utilities in 21 states and the District of Columbia hope to further increase competition and give residential customers broader choices by enabling them to purchase their natural gas independently."

Traditionally, natural gas utilities have purchased natural gas for residential customers and passed along the cost of the gas commodity to customers through their monthly bills. The cost of the gas generally makes up about a third of a household's monthly bill for gas service; the rest is attributable to delivery costs.

If a customer purchases gas from a nonutility supplier, the local gas company continues to transport it to the customer's home and maintain the safety of the gas delivery system.

Parker said, "While it is too early to tell how much money customers can save, we know historically from the restructuring of other industries that customers like the option of choice and have benefited from an increased array of products and services.

"It is worth noting that it is sometimes difficult for marketers to offer customers a better price than a utility."

About 90% of large-volume natural gas customers, such as manufacturers and electric power plants, can choose a gas supplier. Almost 40% of commercial customers, such as hospitals and food service operations, have or will soon have that choice.

Overall, about 70% of the gas consumed in the U.S. could be purchased from nonutility suppliers under programs that are proposed or under way.