System Gas in a Regulated Market

This paper examines the role, structure, requirements and implications of system gas in a regulated natural gas market. It concludes that system gas—natural gas sold by regulated distribution utilities—has an important role to play in the efficient, reliable and safe functioning of the natural gas industry. This discussion paper is part of a five-part series.

Document Highlights

Energy industries are calling for improved regulatory streamlining. The Ontario Energy Board and the National Energy Board are conducting public hearings on natural gas regulation this autumn. The Conference Board of Canada, in conjunction with the Canadian Gas Association, is contributing five discussion papers to the debate on natural gas regulation.

System Gas in a Regulated Market examines the role, structure, requirements and implications of system gas—natural gas that regulated gas utilities sell to end-users. The paper reviews jurisdictions in Canada and the United States and concludes that system gas has an important role to play—both in the efficient, reliable and safe functioning of the natural gas industry as a whole and of the regulated natural gas distribution system in particular. Small-volume customers (for example, residential users) value the option of system gas, most often choosing it even where complete choice is available in the retail market. In addition, utilities retain the incentive to contract for supply, to support infrastructure investments to their market area, and to ensure capital renewal and growth within their franchise. Concerns regarding the possible exercise of market power have been and continue to be addressed in the regulatory arena.