Abstract

After two decades of a somewhat golden age for gas utilities and regulators, the 1970's saw a changing energy market characterized by curtailments and allocations in the natural gas industry. The Natural Gas Policy Act of 1978 provided incentives for new supplies but at increased prices. During a period of rapidly escalating natural gas prices , the operators of municipally owned public utilities were criticized for their failure to meet the needs of the poor and other deprived members of society. The thesis of this paper is that this criticism of operators of municipally owned natural gas utilities stemmed from the observer conceiving of the utility as a social agency of government. This paper investigates the background of the problem and public utilities' obligations because of their status as regulated monopolies. The municipally owned natural gas utility's responsibilities in meeting the social functions of government are considered. This paper argues that such a utility should be viewed as a business rather than a societal agency. Efforts to use a utility's rate structure as a means of satisfying the dictates of a system of distributive justice as investigated. The attempts made by state and local governments are shown to have been ineffective and counter productive. The duty of a utility to offer service to all who request it; without discrimination among people similarly situated; to the limit of its capacity is considered along with consumers' duty to pay just bills. ;Arguments are presented to show that the rate structure, rather than the quantity delivered, is the crucial factor in assuring distributive justice. Pricing is viewing from a philosophical perspective as well as an economic perspective. The only need for equity and economic efficiency in rate structures is identified. Present day two-part rate structures for residential customers are shown to be lacking in efficiency and suspect in providing equity. ;A model of a three-part rate structure is proposed as an alternative to the common two-part rate structure. The paper provides a simulation of the billing for a three year period, in the City of Richmond, Virginia, to compare the effects of both style structures in terms of equity and economic efficiency. This simulation is an easy test of a municipality's current, or proposed, rate structure to view its qualities of equity and efficiency