Gas-Power Interdependence

January 2013

Knock-on Effects of the Dash to Gas

ScottMadden believes that electric/gas convergence poses significant risks, and opportunities, to individual businesses in both the gas and electric industries. Some companies will make money due to this interdependence. And some will find themselves in the newspapers, front page, top of fold.

We recommend that our clients take a longer view of both markets and specifically avoid the herd instinct around gas prices forecasts. Companies impacted by electric/gas convergence should consider cross-gas-electric scenarios during strategic planning and scenario analysis. Identifying and analyzing alternatives that include additional infrastructure build-out and contingency analysis will be important to creating options to address the risks identified above.

Some companies have taken leadership roles in creating dialogue across the two industries, and we believe this is key to reaching resolution. We recommend that our clients participate in and lead the regional discussions taking place. Those leading the dialogue are more likely to agree with the solutions implemented.

This white paper examines the growing interdependence between the natural gas and electric industries.

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