Diverging transportation rate methodologies in the converging gas and electric commodities industries

With electric industry deregulation in full swing, convergence in the gas and electric industries is anticipated. The emergence of fully competitive markets in electric generation and gas production will allow both electric energy and natural gas to be treated and traded as commodities. By concentrating mainly on the “commodity”, the importance of the relative pricing of transportation services between the commodities has been neglected. This is not to say the importance of gas transmission rate design and electric transmission pricing have not been fully discussed. The problem is they have been discussed is isolation. Any industry cross impacts have been virtually ignored. The paper centres on identifying these cross industry impacts. One major impact to be fully explored is the impact of the difference in gas/electric transportation methodologies on siting decisions of new power plants