The Reagan administration has decided to ask Congress to accelerate deregulation of the price of natural gas, but no new timetable has yet been picked, administration officials said yesterday.
Complete deregualtion this year, which is favored by some Reagan officials, could increase users' bills by up to $60 billion if natural gas prices rose to their oil equivalent.
David Stockman, director of the Office of Management and Budget, in an interview with the Los Angeles Times, said the administration will launch a two-pronged effort to accelerate decontrol of gas prices. The Federal Energy Regulatory Commission can deregulate prices of certain types of gas, but congressional action would be required to change the deregulation schedule set in the Natural Gas Policy Act which was passed in 1978.
Edwin Dale, OMB spokesman, said there was no intention to send a proposal to Capitol Hill soon since "this budget business is overloading the [congressional] system already."
Stockman's statement appeared to conflict with one made last week by Energy Secretary James B. Edwards, who said no decision on deregulation would be made until a through study of its likely economic impact is completed. wOMB officials said the study would not be finished for at least two months.
The Natural Gas Policy Act calls for most gas prices to be deregulated in 1985 with steady increases between now and then. Originally the price schedule was supposed to allow gas prices to rise to their oil equivalent in 1985, but the doubling of oil prices in 1979 and 1980 threw that schedule awry. Now a significant gap would remain if the present schedule were followed.
But even if the administration decided just to close that gap during the next four years -- and some officials would prefer immediate deregulation -- it would mean sharply higher costs for gas users. Fifty-five percent of America's homes are heated by gas.
The price of gas is only part of the monthly bill of a homeowner who uses it for heat; much of the bill is to transport the gas from the producing states. Even so, heating bills in the Washington area, for instance, would rise 50 percent to 100 percent under immediate deregulation, Washington Gas Light Co. officials have estimated. The issue the administration is now deciding is how quickly gas users will have to bear the added cost, not whether they will.
The outcome of congressional action on any deregulation proposal, however, is unclear. Gas producers strongly favor deregulation, of course, since it could raise the average price of natural gas at the well from its current $1.65 per thousand cubic feet to perhaps several times that amount. Interstate gas pipelines and retail gas distribution companies generally are opposed to faster deregulation because it likely would mean transporting and selling less gas to their customers.
Economists are unable to predict with much certainty just how much gas prices at the well would go up in a free market situation. But most of them caution that the price would not rise to the equivalent price of oil when both fuels are measured on the basis of their heat content. On that basis, natural gas would currently sell for about $6.50 to $7 per thousand cubic feet. n
But transportation charges are high for moving gas to markets such as Washington or New York that are far from the gas fields, and economists caution that customers will base the choice between oil and gas on what it costs delivered at the burner tip, not at the well. In addition, the alternative fuel for many industrial gas users is not home heating oil but cheaper residual fuel oil. With residual fuel oil currently selling for about $36 a barrel in New York, the nautral gas equivalent would be about $4.75 a thousand cubic feet.
However, increases in gas prices probably would cause some users to conserve, cutting gas consumption. If that happened, the free market price might well be lower, at least for some period after deregulation.
More immediately, the pending decision on deregualtion could affect construction of the Alaskan natural gas pipeline system. In the absence of lower-priced gas with which the cost of the very expensive Alaskan gas could be averaged, the pipeline may not be economically viable. Canandian officials, concerned on this point, will be seeking reassurances from President Reagan when he visits Ottawa next week that the United States will intends to build the systems.