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Economic Perspectives, 7, No. September/October, 1983
Natural Gas Policy and the Midwest
The complex structure of natural gas market regulations has brought mixed blessings to the Seventh District states of Illinois, Indiana, Iowa, Michiganyt and Wisconsin. Federal price ceilings on the domestic production of gas held down consumer prices for natural gas, but only at the cost of occasional supply shortages that the Midwest experienced in the 1970s. These intermittent shortages in supply moved federal policy to major revision of gas market regulations. The Natural Gas Policy Act of 1978 (NGPA) secured greater gas supplies for interstate pipeline customers, including Seventh District residents, through favorable allocation directives and a schedule for decontrolling producer prices.The NGPA price decontrol schedule intended to gradually raise average gas prices to parity with petroleum by 1985. In this manner, decontrol would not subject gas consumers to price shocks. A regulatory middle way was fashioned between spurring energy production and holding consumer prices at bay.
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