Position of the Natural Gas Supply Association
on
Restructuring the U.S. Electricity Marketplace
Submitted to the U.S. Senate Committee on Energy and Natural Resources
in conjunction with the testimony of
Donald Niemiec, Union Pacific Resources
May 8, 1997
Relationship Between Natural Gas and Electricity
Natural gas competes in two ways in the electricity market:
- As an electric generation fuel.
- As an end-use fuel for residential, commercial, and industrial equipment and appliances.
About 4.5 trillion cubic feet of natural gas--23 percent of total gas demand--is used to generate
electricity. At current wellhead prices of approximately $2/thousand cubic feet (mcf), this
demand represents approximately $9 billion in producer revenue.
Additionally, electric power generation has been seen by many energy analysts as the best
opportunity for significant future natural gas consumption.
NGSA Positions on Proposals to Increase Competition in the U.S. Electricity Industry
NGSA members support comprehensive, balanced initiatives to restructuring the U.S. electricity
sector. Such actions have the potential to:
- Make the electric industry more competitive and efficient, thereby reducing consumer
electricity prices and stimulating economic growth.
- Save U.S. natural gas and oil companies up to $200 million annually by the year 2015,
according to a recent study by the American Petroleum Institute (API).
- Create opportunities for new cost-competitive power generation.
However, restructuring may have a negative effect on natural gas demand.
- Restructuring is likely to encourage better use of today's excess electricity generating capacity,
reducing the near term need for new capacity that many have predicted would be gas-fired.
- The anticipated drop in electricity prices would increase the competitiveness of electricity in
the energy marketplace and thus could erode future gas use in the residential, commercial, and
industrial sectors.
It is the responsibility of natural gas industry participants to respond positively to such new
marketplace conditions by making those changes required to keep gas fully competitive. NGSA
members are confident that the gas industry will aggressively respond to this competitive
challenge.
To ensure that electricity restructuring initiatives support the development of such a market,
NGSA supports comprehensive federal legislation that leads to a competitive and integrated
electricity marketplace by guaranteeing:
- Access to all consumers by all electricity suppliers. As part of this, NGSA supports a uniform,
federally-imposed "date certain" by which this access must be in place. NGSA opposes
allowing states to limit competition or to phase it in under unnecessarily prolonged schedules
- Open access to the transmission and distribution grids. To that end, Congress should monitor
the development of independent systems operators (ISOs), power pools, and other state and
regional implementation initiatives as well as the potential concentration of market power in
the electricity sector.
- Protection for contracts now in place while also repealing, prospectively, 1) Section 210 of
the Public Utilities Regulatory Policies Act (PURPA), and 2) the Public Utilities Holding
Companies Act (PUHCA).
NGSA opposes legislation that:
- Includes environmental provisions that fail to achieve fuel-neutral standards for all electric
generating facilities. NGSA opposes reopening the Clean Air Act to achieve electricity-related
environmental objectives and is confident that appropriate goals can be achieved through other
means.
- Mandates use of specific fuels, such as renewables, to generate electricity.
The Natural Gas Supply Association represents producers and marketers of domestic natural gas.
This page was placed May 11, 1997; last updated August 31, 1997.
