Canadian natural gas deregulation


University of British Columbia

Date Issued


Document Type



Master of Laws - LLM




Canadian natural gas deregulation has terminated government price setting in favour of prices determined by market forces. However, the transportation of the commodity remains regulated due to the monopolistic nature of the distribution system and the Canadian economies of scale which preclude business rivalry. This paper attempts to discern whether the transition to a new regime is following the legal principles underlying public utility regulation. Promotion of the public interest is therefore a pervasive theme of this paper. While regulatory law allows certain forms of discrimination in the setting of rates and the provision of services, it prohibits undue or unjust discrimination. The thesis proposed herein focuses on regulatory theory and the possibility that incidents of undue discrimination may have been exacerbated by the deregulation process. The examination begins with a review of the discrimination provisions of section 92A of the Constitution Act 1867, the so-called "Resource Amendment". More attention is directed to public utilities theory given its compelling application to the natural gas industry. Deregulation is then discussed including an analysis of "direct sale" contracts involving the commodity as well as the "bypass" of the local pipeline distribution systems. Some conclusions are then made concerning competition and changing commercial conditions. Grave doubts are voiced as to whether the National Energy Board is properly applying the principles of public utility regulation during the transition to a more market oriented natural gas environment. One important conclusion is that direct sale contracts should be encouraged in the core market as well as in the industrial market by the National Energy Board in order to promote upstream competition among gas producers in the public interest. Finally, it is hoped that these doubts will be resolved by the Board in its new (RH-1-88) public hearing which will address issues related to deregulation, including direct sales and the ancillary self-displacement and operating demand volume (ODV) methodology.


Natural gas -- Law and legislation -- Canada

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