This industry classification consists of companies primarily providing gas distribution services, but also supplying other utility services. Companies in which natural gas distribution accounts for 95 percent or more of revenues are classified in SIC 4924: Natural Gas Distribution.
Natural Gas Distribution
Gas utilities, called local distribution companies (LDCs), provide customers with two services: gas transportation, or moving the gas from the pipeline to the customer, and supply, whereby the LDC buys the gas and resells it to the customer. The LDC transports gas for all its customers and supplies gas to other suppliers. The utility earns a rate of return for transporting gas but receives nothing for supplying it to those other than end-use customers. The LDC earns the same fee for transporting gas, regardless of who supplies the gas.
Gas utilities had several competitive advantages over electric utilities. While electric utilities were just beginning to experiment during the mid-1990s with allowing customers to choose among energy suppliers, large gas customers had been extending the freedom to choose their gas supplier to the smallest of customers, including homeowners. Both industries were deregulated.
By the end of the 1990s, natural gas supplied about half of the nation's energy needs. When electric utilities providers began to use natural gas for electric power generation, a new utilities superpower appeared on the horizon. Instead of natural gas companies buying out their smaller natural gas competitors, they began aligning with electric utilities companies to provide multiple services to end-users. Thus, by the millennium some of the largest utilities providers were in fact "hybrid" entities offering electricity and natural gas services to their customers. Industry leader Ni Source, for example, had 3.3 million natural gas customers and 440,000 electric customers in 2003. These "cogeneration" facilities appeared to be on the rise nationally and internationally. Another spin-off industry from these consolidations was the combination of gas pipelines and fiber-optic networks, thus servicing the energy and communications businesses.
While state governments began to regulate the venting of natural gas in the late 1920s, federal government regulation of interstate sales of natural gas was a product of already existing federal regulations governing interstate sales of electricity. The same public outcry that led to passage...