The Effect of Decontrol on the Price of Natural Gas

Abstract

Under the NGPA, the wellhead prices of certain categories of interstate natural gas are partially decontrolled on January 1, 1985. It is generally acknowledged that unless producer/pipeline contracts are renegotiated, the average price of interstate natural gas may increase upon decontrol. The determination of the average price increase in 1985 depends on the mix of contracts and their provisions, as well as on the mix of gas as categorized by the NGPA. This paper summarizes the analysis of a survey of interstate natural gas pipelines to estimate the 1985 average price increase, focusing on the variations within the pipeline industry.