Bypass is the act of connecting an end-use customer directly to a gas or electric delivery system other than the customer’s utility distribution system. Customers who elect to bypass utility service are often large industrial customers or power plants whose energy needs are great. Bypass can offer very large financial incentives to such companies because they no longer need to pay for use of the utility distribution system.
An example of bypass is a large gas user that builds its own pipeline to connect to an interstate pipeline system, thus “bypassing” the utility gas distribution system. The gas user would then simply pay transport rates to the pipeline and would no longer be responsible for utility distribution rates.