Business: What Price Gas?

Should the price of natural gas in the field be regulated by the Federal Government? Federal Power Commission Chairman Jerome Kuykendall and gas producers say no. They favor a bill by Arkansas’ Democratic Representative Oren Harris that would free natural gas from regulation at the wellhead, thus overturn a U.S. Supreme Court decision of last June (TIME, June 14). Last week, at a House Interstate and Foreign Commerce Committee hearing on the bill, the representatives of more than a dozen utility companies called for federal regulation; they argued that the continuing increase in the cost of natural gas may price it out of the market. First witness was Randall LeBoeuf Jr., counsel for Consolidated Edison Co. of N.Y. and spokesman for 15 other utilities serving 17,195,000 consumers from New England to Virginia. He said that producers are overcharging for gas, pointed out that they had raised prices as much as 20% since 1950. Distributors, said he, cannot predict the cost of natural gas even a year ahead, because they all sign escalator clauses permitting a producer to raise prices to match any increase by another producer in the same field. Utility companies, said LeBoeuf, are caught in the squeeze between rising wholesale prices from the pipeliners (who gear their prices to producers’ prices) and a ceiling on retail prices set by various state utility commissions. Said he: “Unless this trend of disorderly and unpredictable rate increases is halted, there is a serious danger that natural gas may be priced out of the market in the northeastern United States … It is our considered judgment that if the Harris bill were passed the consumers would be in a worse position than they are today.” Donald C. Luce, president of the Public Service Gas and Electric Co. of N.J., and Brooklyn Union Gas Co. President John Heyke Jr. backed up LeBoeuf, said that continued increases in wellhead rates would “price gas out of the home-heating market.” But the committee did not seem impressed, especially by LeBoeuf’s arguments. When he hinted that Consolidated Edison is so disturbed about the rising costs of natural gas that it is considering increasing its use of manufactured gas, Representative Harris scoffed. He cited Con Edison’s own figures to show that before 1950 it paid seven times as much for manufactured gas as it does now for natural gas. Added Texas’ Democratic Representative Walter Rogers: “I do not think that the records will show that [any saving] was passed on to the consumer. So I cannot have much sympathy for the crocodile tears that have been shed for the consumer.”

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By a new ruling, the U.S. Supreme Court last week added steam to the congressional pressure for the Harris bill. The court held unconstitutional state laws in Oklahoma and Kansas that permitted the states to set minimum prices for gas at the wellhead, thus protecting producers if FPC tried to set rates they thought too low. The court ruled that its decision last June gave FPC sole power over gas rates. Hardly had the court spoken when Texas gasmen went to work to find a way around the ruling. They asked the legislature to pass an “economic waste” bill that would empower the Texas Railroad Commission, which regulates and conserves gas and oil, to close down any field forced to sell gas at an economically wasteful price.