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The ground rules for the natural gas pipe line and gas utility industries have been revised by state and federal regulators with the purpose of greater competition through deregulation. The financial returns from deregulation have been modest so far in 1998, but the dynamics of the natural gas (distribution) industry has been altered and wider margins are forecast for the future. Prices for these stocks remain stable and should be sought mainly by income investors.

Local natural gas distribution companies (LDCs) have become self-reliant in response to federal and state regulatory efforts to create an efficient LDC marketplace and competitive trade practices. LDCs have also begun to market beyond their home areas and change the nature of their industry, and this is having an impact on earnings and profit margins. Investors need to select the highest quality stocks in the natural gas distribution industry.

Unbundling has become important to natural gas industry since the Federal Energy Regulatory Commission began to encourage industry competition in the early 1980s. The local distribution companies have gained more self-reliance and offered non-regulater services as a rseult, but greater competition has also meant meager industry profits. Investors seeking income will find several of these stocks, especially local distribution companies, appealing.

The Federal Energy Regulatory Commission has encouraged competition among gas companies since the 1980s with the aim of increasing supplies at low cost. Deregulation has led local distribution companies to form business alliances and seek mergers, and are assuming the role of sellers of natural gas as a commodity. The primary appeal of stocks in the gas distribution industry is income, and few have any price appreciation role for investors.