The new secretary of Energy said yesterday that he hopes to come up with a way to deregulate natural gas shortly after the first of the year and that mounting pressures in Congress for a quick, dramatic fix may help develop industry consensus in support of an administration deregulation bill.
"I think that the present situation may be intolerable and, if uncorrected, might produce worse results than what we're talking about," Secretary Donald P. Hodel said.
Hodel said that his initial estimates, which he described as slightly more sophisticated than "back of the envelope" calculations, indicated pending proposals to freeze natural gas prices at August or October levels would produce little relief.
"If we went with a price freeze, it would save perhaps 2 percent on natural gas prices," he said. Proposals aimed at "take-or-pay" gas contract provisions, which locked gas companies into higher cost purchases, might reduce prices another 1 or 2 percent, he said.
"I think people who find themselves unable to pay their bills and are looking for relief would be terribly disappointed," he said.
Members of the Senate Energy and Natural Resource committee, holding hearings on natural gas pricing problems yesterday morning, indicated that the lame-duck session of Congress will produce no legislative price relief.
Natural gas prices are expected to jump 20 to 25 percent during this heating season, an increase that has produced political hue-and-cry and approximately 40 bills introduced in the past few weeks aimed at holding down natural gas prices.
Hodel said that any approach to modifying the Natural Gas Policy Act, which regulates the prices of natural gas, would have to address the "take or pay" problem in some fashion. Those provisions, negotiated in the past by gas pipeline companies anxious to guarantee supply in an era of shortage, obligate companies to pay for a portion of high priced gas whether they use it or not. As a result, companies are buying high-priced gas and spurning lower priced supplies. "That's just not going to be acceptable to the American people," he said.
Hodel also said that some low cost gas that comes up with oil may be being flared (burnt) rather than sold and that such actions also raise pressure to do something about natural gas pricing.
Hodel said that his preference is for energy to be priced competitively, rather than through regulation, and for those who cannot afford the price to receive some type low-income energy assistance. "The NGPA isn't working like the sponsors thought it was going to work, and the impulse is to go back to more regulation," he said. Prices set too low might bring back natural gas shortages that in the past prompted higher prices to stimulate production.
"It's a tangled web," Hodel said.
On another subject, Hodel said he believes oil prices may continue to come down.