ONE Gas, Inc. (OGS): 5 FORCES Analysis [Nov-2025 Updated]

You're looking at ONE Gas, Inc. (OGS) as we head into late 2025, and honestly, the story is classic regulated utility: massive barriers to entry-think the $750 million 2025 capex alone-keep new competitors out, and direct rivalry is near zero because they hold a regulated monopoly serving 2.3 million customers across their established network of about 45,800 miles of pipeline. However, that stability comes with trade-offs; while supplier power is low thanks to regulated cost pass-throughs, the long-term threat from electrification and solar/wind is defintely real, even if low natural gas prices keep the immediate pressure moderate. I've mapped out the five forces for you, showing exactly where OGS is insulated by state commissions and where you should watch for shifts in the landscape below.

ONE Gas, Inc. (OGS) - Porter's Five Forces: Bargaining power of suppliers

You're analyzing ONE Gas, Inc. (OGS) and the supplier side of the equation is heavily tilted in the company's favor, largely because it operates as a 100% regulated natural gas distribution utility. This regulatory structure is the single most important factor mitigating supplier power, as it provides mechanisms to recover commodity and transportation costs directly through customer rates. Honestly, the suppliers of the physical gas have less leverage than the regulators who approve the recovery mechanism.

The power of commodity suppliers is significantly dampened by the regulatory framework that allows ONE Gas, Inc. (OGS) to pass through costs. This is not a free-market negotiation; it's a structured recovery process. For instance, the company's ability to recover costs is explicitly cited as a key factor in its operations, often through mechanisms like the Gas Reliability Infrastructure Program (GRIP) in Texas or the Gas System Reliability Surcharge (GSRS) in Kansas. This structure means that while the price of gas fluctuates, the cost to ONE Gas, Inc. (OGS) is generally recoverable, shifting the financial risk away from the utility and toward the end-user.

The near-term financial evidence from 2025 clearly shows the benefit of these recovery mechanisms. When new rates are approved, they immediately flow through to the income statement, effectively neutralizing the cost pressure from upstream suppliers. Here's a quick look at the impact of recent regulatory approvals:

While the outline suggests a diversified supply base, the actual number of 67 natural gas suppliers is not explicitly confirmed in the latest filings, but the operational reality points to a broad sourcing strategy. What is confirmed is the advantage gained from geographic positioning. ONE Gas, Inc. (OGS) touts a competitive advantage stemming from the Proximity to abundant and affordable gas supply across its service territories in Oklahoma, Kansas, and Texas. This proximity reduces the power of suppliers by lowering the necessary transportation and storage costs embedded in the commodity price, giving ONE Gas, Inc. (OGS) better leverage in securing favorable terms for the gas it does purchase.

The reliance on transportation infrastructure presents a more nuanced challenge, suggesting a concentration of power among a few key pipeline operators, even if the commodity supply itself is broad. Although specific pipeline counterparties are not quantified here, the nature of a distribution utility means it must rely on a limited number of major interstate pipelines to bring gas from the production basins to its local distribution network. This creates a segment where supplier power-in this case, the pipeline companies-is higher due to the high fixed costs and regulatory hurdles for building competing lines. Still, ONE Gas, Inc. (OGS) mitigates this by having its supply assets in close proximity to reserves, which may reduce the length of reliance on any single long-haul carrier.

The core mechanism that keeps supplier power in check is the pass-through of commodity price volatility. The utility's business model is designed to ensure that fluctuations in the underlying natural gas commodity price are largely borne by the customer base, not the utility's margins. This is evident in the fact that the company's earnings guidance for 2025, projecting net income between $254 million to $261 million, is built upon the assumption of cost recovery. The primary risk for ONE Gas, Inc. (OGS) suppliers is not ONE Gas, Inc. (OGS) absorbing their price hikes, but rather the regulatory bodies' timing and approval of the corresponding rate increases for the 2.3 million customers served.

To summarize the supplier dynamic for ONE Gas, Inc. (OGS) as of late 2025, you see this:

• Regulated cost recovery mechanisms severely limit supplier leverage.
• Proximity to gas reserves offers a structural cost advantage.
• The customer base is overwhelmingly residential (over 92%).
• The anticipated average rate base for 2025 is $5.8 billion.
• The risk of commodity price volatility is largely transferred to customers.

ONE Gas, Inc. (OGS) - Porter's Five Forces: Bargaining power of customers

You're analyzing ONE Gas, Inc. (OGS) and need to nail down the customer power dynamic. For the vast majority of its customer base, the bargaining power is quite low, which is the hallmark of a regulated utility. This structure is key to understanding OGS's revenue stability.

The core of ONE Gas, Inc.'s business involves serving more than 2.3 million customers across Kansas, Oklahoma, and Texas. Because OGS operates as a regulated monopoly for the final delivery of natural gas, individual residential and small commercial customers have virtually no leverage to negotiate price or terms outside of the regulatory process. They are captive to the delivery infrastructure that is already in place.

The power of the State Public Utility Commissions (PUCs) is the primary check on this monopoly. These bodies act as a powerful proxy for the residential customer interests, setting the rates OGS can charge. We see this regulatory oversight in action through recent filings:

• Kansas Gas Service sought a $7.2 million increase via the Gas System Reliability Surcharge, approved in July 2025.
• Oklahoma Natural Gas requested a $41.5 million base rate revenue increase in its February 2025 filing.
• Texas Gas Service sought combined Gas Reliability Infrastructure Program (GRIP) increases of $23.6 million ($15.4 million + $8.2 million), effective June 2025.

These figures show the commissions are actively involved in approving OGS's revenue requirements, which directly impacts customer bills. It's a high-stakes negotiation, but it's between the regulator and the utility, not the individual customer and the utility.

For large industrial customers, the dynamic shifts to moderate power. These users often have the scale to consider alternatives, primarily fuel switching to propane or electricity, or, in some cases, arranging for direct pipeline access (bypass) if feasible. Still, OGS's entrenched position in major metro areas limits this threat.

Here's a quick look at OGS's market dominance, which reinforces the low power of the average customer:

When you look at the cost of switching, you see a clear asymmetry. Switching the fuel source-say, from gas to electric heating-can have relatively low upfront costs for the end-user, meaning the price of natural gas commodity itself is a competitive factor. But switching the delivery network is a different story entirely. The cost to abandon the existing distribution mains and service lines is prohibitively high for any single customer, which is why OGS's regulated asset base, supported by estimated $750 million in 2025 capital investments, creates a massive barrier to entry and exit for the delivery service itself. The anticipated average rate base for 2025 is $5.8 billion, showing the scale of this fixed infrastructure.

Overall, the power of the collective residential customer is channeled entirely through the PUCs, while large industrial users retain some moderate leverage through fuel optionality. Finance: draft the sensitivity analysis on rate case approval timelines by next Tuesday.

ONE Gas, Inc. (OGS) - Porter's Five Forces: Competitive rivalry

You're looking at the competitive landscape for ONE Gas, Inc. (OGS) as of late 2025. Here's the hard data on rivalry within their business segments.

Low direct competition as OGS is a regulated monopoly in its service territories

ONE Gas, Inc. provides natural gas distribution services to approximately 2.3 million customers.

• Market share in Kansas: 71%
• Market share in Oklahoma: 89%
• Market share in Texas: 13%

Rivalry exists in the capital markets against peers like Atmos Energy and NiSource

The rivalry in the capital markets is best seen when you stack up the market valuations. Here's a quick look at the market caps as of November 2025, plus some key metrics for ONE Gas, Inc. (OGS).

Atmos Energy's long-term earnings growth is pegged at 7.32%, while OGS guides for 4% to 6% through 2029.

Competition for new customer growth in developing areas of Texas and Oklahoma

Growth capital spending targets these developing areas.

• 2025 capital investments for extensions to new customers: approximately $180 million
• Total estimated 2025 capital investments: approximately $750 million
• New manufacturing projects announced since 2022: approximately $87 billion
• New manufacturing projects announced since 2021: nearly $25 billion

Growth is strongest in the major metropolitan areas across the territory.

Rivalry for large commercial/industrial load that can choose alternative energy providers

The risk from alternatives is noted in regulatory filings.

• Alternative energy competition includes: electricity, solar power, wind power, geothermal energy and biofuels
• Legislation context: Natural gas is a core energy resource, backed by energy choice legislation in all jurisdictions

The 2025 guidance reflects the benefit of new rates and customer growth.

ONE Gas, Inc. (OGS) - Porter's Five Forces: Threat of substitutes

You're analyzing the long-term viability of ONE Gas, Inc. (OGS) against shifting energy sources. The threat of substitutes for a regulated gas utility like ONE Gas, which serves approximately 2.3 million customers across Kansas, Oklahoma, and Texas, is a critical factor in any valuation model.

The immediate threat remains moderate, honestly, because the economics of switching are challenging for existing customers. Natural gas prices, while volatile, have offered competitive pricing, with the average household using natural gas for heating, cooking, and clothes drying saving about $1,132 per year compared to electric alternatives as of 2025. Furthermore, OGS is actively investing in its system, with estimated capital investments of approximately $750 million planned for 2025, reinforcing the existing infrastructure.

However, the long-term picture is dominated by the rapid deployment of renewable electricity generation, which acts as a direct substitute for natural gas in power generation and, increasingly, in end-use applications like building heating and cooling. Nationally, developers planned to add 33 gigawatts (GW) of solar photovoltaic capacity in 2025, representing more than half of the total 64 GW of new generating capacity expected to come online. Texas, a key OGS market, is a major driver, accounting for 27% (3.2 GW) of new solar capacity installed in the first half of 2025, with an additional 9.7 GW planned by year-end. This shift is evident as natural gas lost market share in the U.S. electric power sector in early 2025.

The substitution threat manifests across the service territory in different ways, as shown by the state-level energy mix data:

Note: ONE Gas serves approximately 2.3 million customers total across all three states. Oklahoma ranks tenth in the nation for solar power potential.

Electrification mandates and evolving building codes present a clear pathway to limiting future gas hookups, which directly impacts OGS's customer growth projections. While direct mandates in Kansas and Texas are not detailed here, the trend is clear in other major markets. For instance, in New York, new construction under seven stories must be all-electric starting December 31, 2025. If similar regulations are adopted in OGS's service areas, it would directly cap the growth of new residential and commercial gas load. The ~24,000 new meter sets added by OGS on a TTM basis as of August 31, 2025, represent the current growth vector that such mandates would target.

Energy efficiency technologies also erode demand, though the pace can be slow. While the prompt suggests a potential reduction of 20-30%, concrete data for OGS's specific customer base is not available. What we do see is that globally, the primary energy intensity improvement is projected to be 1.8% in 2025, an acceleration from just 1% in 2024. In the U.S., total natural gas consumption is forecast to average a record 91.4 billion cubic feet per day in 2025, but this is driven by increases in the residential and commercial sectors offsetting decreases in the power sector. The slow pace of electrification in the residential sector, with heat pumps covering only around 8% of residential space heating in the EU as of 2025, suggests that for OGS, the immediate impact of efficiency and electrification on existing customers is not yet a rapid decline.

The key actions for OGS to monitor are:

• New building permit applications in major metro areas like Austin and Oklahoma City.
• Adoption of state-level building codes mirroring New York's December 31, 2025, all-electric start date.
• The rate of new solar capacity additions in Texas, which reached 3.2 GW in H1 2025.
• The success of OGS's capital plan, which includes an estimated $180 million for extensions to new customers in 2025.

Finance: draft 13-week cash view by Friday.

ONE Gas, Inc. (OGS) - Porter's Five Forces: Threat of new entrants

You're analyzing the barriers to entry for a new natural gas utility, and honestly, it's a fortress. For ONE Gas, Inc. (OGS), the threat from new entrants is exceptionally low, almost negligible, because the industry is fundamentally structured against newcomers. This isn't like launching a new software company; this is about digging trenches and laying steel across states.

The primary deterrent is the need for a government-granted utility franchise. You can't just decide to serve Tulsa or Kansas City with gas; you need explicit permission from the relevant state commissions, which are designed to protect the incumbent's service territory. This regulatory moat is deep. Furthermore, the sheer scale of the physical infrastructure required presents a massive, almost insurmountable, capital hurdle. For context, ONE Gas, Inc. is planning capital expenditures (capex) of approximately $750 million for 2025, which is largely for system integrity and replacement projects.

To give you a sense of the investment required just to compete on infrastructure, let's look at the capital deployment ONE Gas, Inc. is undertaking in 2025. Remember, this is maintenance and growth capital, not the sunk cost of starting from scratch:

That $750 million figure for 2025 is just ONE Gas, Inc.'s annual spend; a new entrant would need to match or exceed that just to build a competitive footprint, assuming they could even get permission to lay pipe next to OGS's existing lines. Also, consider the existing footprint ONE Gas, Inc. already controls. They have an established network of approximately ~45,800 miles of distribution and transmission pipelines across their service territories.

The regulatory gauntlet is another major blocker. Getting approval involves navigating complex state-level oversight. You'd have to satisfy multiple commissions simultaneously, like the Kansas Corporation Commission (KCC) and the Oklahoma Corporation Commission (OCC), which review everything from safety to financial prudence. ONE Gas, Inc. itself is constantly engaged in this process, for example, filing for rate increases with the KCC and the Texas Gas Service filing for its own program requests.

The regulatory approval process is extensive, involving:

• Securing necessary state utility franchise rights.
• Filing for rate cases to justify infrastructure investment.
• Demonstrating safety and reliability compliance.
• Gaining approval for construction permits across jurisdictions.

To be fair, while the existing ~45,800 miles of pipeline is a physical barrier, the regulatory authorization to build that network in the first place is the real killer for potential competitors. It's a highly regulated utility business for a defintely good reason: public safety and service continuity. Finance: draft sensitivity analysis on regulatory approval timelines by next Wednesday.