Understanding Transportation Service Programs in Energy Deregulation

A Transportation Service Program is a form of natural gas deregulation where large commercial or industrial customers can buy gas from a third-party supplier while their utility still delivers it through existing pipelines. It's common in states where residential customers don't get supplier choice, but big gas users do. 

Instead, it often comes in the form of something called a Transportation Service Program.

Let’s break down what that means, who it’s for, and why it matters.

First, a Quick Refresher on Deregulation

In a fully regulated market, your utility owns both the delivery infrastructure (pipes or wires) and the commodity itself (gas or electricity). You don’t get to choose your supplier—they provide it all.

In a deregulated market, you still get energy through the utility's infrastructure, but you can choose a different company to supply the gas or electricity. This allows for competition, better rates, and more contract flexibility.

But in some states—especially for natural gas—residential customers might not get that choice. Instead, only larger users like manufacturers, universities, or commercial buildings can participate. And they do it through what's called transportation service.

What Is a Transportation Service Program?

A Transportation Service Program is a type of deregulated service where:

• You still get natural gas delivered through your utility’s pipelines

• But instead of buying gas from the utility, you buy the commodity from a third-party gas supplier

• The utility just “transports” the gas to you and charges a delivery fee

Think of it like this: You're allowed to shop for your groceries at any store you want (the supplier), but the same delivery driver (the utility) still brings them to your house.

Who Is It For?

These programs are typically only available to larger commercial or industrial customers who:

• Use a certain threshold of natural gas (e.g., 5,000 therms per year)

• Have steady usage patterns that make alternative contracts feasible

• Are located in utility territories that offer transportation service

Residential customers usually don’t qualify, even in states where this kind of deregulation is technically allowed by law.

Why It Exists

The Transportation Service Program gives large gas users the ability to:

• Negotiate better gas prices through volume contracts

• Hedge against market volatility

• Choose suppliers that offer better terms or green gas products

It also allows the utility to focus solely on what it does best: delivering the gas safely and reliably.

Where It’s Common

You’ll find transportation programs in partially deregulated gas states like:

• South Dakota

• Colorado

• Indiana

• Wisconsin

• Virginia

But just because the option exists doesn’t mean there’s an active market. In many of these places, only a few large customers use the program, and residential choice isn’t available at all.

Key Takeaway

A Transportation Service Program lets large commercial and industrial gas users choose their own supplier while the utility still handles delivery. It's not available to residential customers or in every state, but where it exists, it opens the door to better pricing and contract terms.