Order 636 and the US natural gas industry

An intent of the U.S. Federal Regulatory Commission's Order 636, promulgate d in April 1992, was to promote competition and efficiency in the transport ation sector of the natural gas industry. Additionally, the Order altered t he roles of the traditional players in the industry by increasing not only their options for purchase and sale of natural gas, but also their risks. I ncreased options have the potential of increasing competition and efficienc y, not only in the transportation sector, but also in the distribution sect or. This paper examines impacts of Order 636, Using annual, aggregate, U.S. price data, a Wilcox rank sum test is employed to test for statistically s ignificant differences between the pre- and post-636 eras. Results indicate median revenues attributable to the transportation sector have declined si nce the implementation of Order 636,(1) Although there are naturally a numb er of factors that may affect transportation revenues, the decline in media n price can be attributed, at least in part, to increased competition, incr eased efficiency, or both. At this level of aggregation the effects can not be segregated. Results also indicate that although decreased costs of tran sportation have at least partially been passed on to final consumers, local distribution companies have not significantly altered their business pract ices when dealing with customers. (C) 1999 Elsevier Science Ltd, All rights reserved.