Public Utilities

Public Utilities

Management Challenges for the 21st Century

David E. McNabb

An introduction to the current issues and challenges facing managers and administrators in the investor and publicly owned utility industry, this engaging volume addresses management concerns in three sectors of the utility industry: electric power, natural gas, and water and wastewater systems. Beginning with a brief overview of the historical development of the industry, the author looks at policy issues and discusses management ethics. He then examines a number of the major challenges in these organizational functions: management and leadership, planning, marketing, accounting and finance, information technology, governance, and human resources. In the final section of the volume he looks at issues specific to each of the three industry sectors.

Chapter 14: Challenges in the Natural Gas Industry

David E. McNabb

Subjects: economics and finance, industrial organisation


Unlike the electric power industry, the natural gas industry has largely worked its way through the minefield of structural and environmental changes that have rocked the energy industry since the middle and late 1990s. The impact of these structural changes – deregulation, restructuring, and introduction of wholesale and retail competition – have been absorbed into the industry, resulting in what has been described as a far more efficient system than existed before. Restructuring – also called ‘retail unbundling’ – is separating the services necessary to supply gas to consumers into various components that can then be separately purchased. Since restructuring began in earnest in 1996, gas distributors and customers have benefited from lower transportation charges, greater and more reliable supplies, and – until recently – generally lower final prices (MacAvoy 2000; MarinerVolpe 2004; Shere 2004). Partially as a result of federally imposed pollution controls, demand for natural gas to fuel electricity generators and industrial processes has expanded significantly. Even as demand for natural gas has grown, the maturing of traditional North American production fields in Oklahoma, Texas, and the shallow Gulf Coast has reduced domestic supply (‘Shallow Gulf Coast fields’ is a natural gas industry term that refers specifically to offshore gas and oil fields that are close to shore rather than in deeper water in the Gulf of Mexico). Together, this tightly balanced supply and demand situation has caused natural gas prices to rise to nearly record highs and to become more volatile than they have ever been. Moreover,...

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