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Until recently, natural gas supply was managed by a production and distribution chain that was regulated by the Government. Producers sold and delivered gas to long-distance pipelines. These pipelines then sold and delivered it to local utility companies. The local utilities distributed the natural gas to residential customers. Prices were fully regulated by federal and state agencies. Throughout the 80s and 90s, these agencies put in place a series of regulatory changes aimed at separating buying and selling natural gas from charges for transporting it through pipelines. The agencies also removed regulated pricing throughout the distribution chain.
This paved the way for “residential choice programs.” In many states these programs give customers the choice between competing natural gas suppliers. Even if they choose a new supplier, customers still get delivery from their current utility company. Prices are based on market conditions, rather than being managed by the Government. 24 states have passed some form of “residential choice.” 10 have put in place full or partial programs: New Jersey, New York, Pennsylvania, Georgia, Illinois, Maryland, Michigan, Ohio, Virginia and the District of Columbia.
As of 1999, Pennsylvania lets local utility companies continue as the only distributor in their service area. However, it calls for these utility companies to deliver natural gas to customers through their pipes, no matter who the gas was bought from. This is why Pennsylvanians see a charge on their bill for "distribution" of natural gas. This charge goes to the utility that delivers the gas. A separate "commodity" charge for the gas itself is collected by the utility and passed to the supplier.
PA gas utility companies also serve as a "default supplier" for customers who do not change to another supplier. The company buys gas at wholesale prices under the Pennsylvania Utility Commission's guidance and sells it to customers at cost. This has held back competition in much of the state, but has kept retail prices down in general compared to other states. In a few regions new opportunities have been created for competitors to enter the market and offer lower prices.