How ironic it is that at the very moment the Reagan administration applauds the potential beneficial economic impact of cheaper oil prices, it has set in motion a deregulation plan that will mean higher, not lower, natural gas prices.
The usual rationale for deregulation is that it will at once stimulate new production. Then, as the new supplies become available, market forces will act to reduce prices.
It's a neat theory, but it doesn't always work. In the case of natural gas, there already exists a glut, and despite the oversupply of gas, natural gas prices have soared and stayed high under the "phased" deregulation that has been in effect since 1977 when the Natural Gas Policy Act was passed.
President Reagan's proposal would totally decontrol so-called "old gas" on Jan. 1, 1985--although there is no logic, no economic benefit, no potential increase in production--just a profit bonanza to producers.
Competitive market forces don't work for natural gas: a homeowner with a gas furnace who doesn't like the prices he's being charged by a utility company can't go down the block and find a competing utility company. He's stuck--in his local area, the utility company has a monopoly.
Similarly, the utilities, for the most part, have little power over the price of natural gas set by the producers and the pipelines, which have been sitting on a huge supply of "old gas," the price of which is still controlled and forcing the utilities to take gas for which there is no price ceiling.
Administration officials claim that producers and pipelines will renegotiate such contracts that keep prices high, even with lower-priced gas available. But there would be nothing mandatory about such negotiations, and, if past history is any guide, the producing industry will take care of itself, not its utility customers or the ultimate individual consuming businesses or individuals.
Producers and the pipelines would still manage the market, and the only option available to natural gas consumers is the expensive--and often impossible--process of trying to convert to another fuel.
The cost of natural gas already has soared beyond all reasonable levels. Supporters of the existing "phased" deregulation bill confess they thought that there would be a chronic shortage of natural gas. But there is the worst of all worlds under present law: a glut and rising prices.
This has created untold burdens for poor people, small businesses, hospitals, farmers and local communities. The Citizen/Labor Energy Coalition estimates that under present law, gas prices will rise by 70 percent between 1982 and 1986, at a cost to users of $135 billion.
Today, it is not at all unusual for a family with a moderate income to find that its monthly gas bill exceeds its mortgage payment--even in an era of double-digit mortgage rates. According to the coalition, more than 300,000 gas-heating households will be disconnected this winter because they can't afford to pay their gas bills.
If Congress goes ahead and accelerates decontrol, as Reagan asks, prices overall will go up 94 percent, adding another $50 billion to natural gas costs. Robert Brandon, director of the consumer lobby, scoffs at administration promises of consumer protection through the Federal Energy Regulatory Commission. "Under Reagan, FERC has completely failed to protect consumers or police producer-pipeline behavior," Brandon says.
"Last year, FERC was prepared to circumvent Congress and push through regulatory proposals that would have effectively decontrolled old gas prices. Mike Butler, the FERC chairman, is a former oil company lawyer, and an outspoken advocate of full decontrol. Like other Reagan bureaucrats, he was brought on to frustrate rather than enforce the law," according to Brandon.
It's not too late for consumers to have a voice in this issue. They can urge their congressmen and senators to join with numerous labor, farmer and citizens groups in support of the Natural Gas Consumers Relief Act, which would roll back prices to the Jan. 1, 1982 levels, and strip the FERC of its discretionary powers--which it has been using to raise natural gas costs to consumers.
Natural gas can never be a truly "free market," because of the need to pipe it directly into the home or business. But the Consumers Relief Act would introduce some semblance of consumer pressure to make suppliers sensitive to demand, instead of enhancing their monopoly as Reagan proposes to do.