THERE IS MUCH TALK ABOUT CONVERGENCE.
The Federal Energy Regulatory Commission asks, "What needs to be done to enable the gas and electric markets to work together to become more integrated?" The real question is more direct: "How can the gas industry transform what is presently, at best, a daily market, with daily procedures, to an hourly or quarter-hourly electric generation business and gain benefits at the same time?"
Will the answer come from hourly gas trading and pricing? Yes, but the system won't work smoothly unless something is done about the information and business practice infrastructure underlying gas transportation. Remember that there are two commodities to take into account: the methane and capacity to transport it through time and space. Creating an hourly market for gas title transfers from today's daily market is relatively simple. The real challenge rests with communications (em the acquisition, transfer and coordination of capacity information.
Gas transportation, especially across multiple systems, is plagued with complicated and often conflicting plans for nominations (requests), confirmations (clearing) and scheduling (recording the deal). Moving gas requires the coordination of contracts among buyers and sellers. It involves communication of information to transporters and interconnected parties up and down the line. The simplest transaction involves five parties (em producer, operator, pipeline, local distribution company and end user. The average transaction, which crosses two pipelines, can involve eight or more parties. The parties involved in these transactions are disparately organized with widely varying technological savvy.