1. Gas/Electric Harmonization: Issues, Answers & Risks SNL Knowledge Center December 13, 2012 Lorraine Cross 10 G Street, N.E. Suite 710 Washington, D.C. 20002 (202) 609-9862 cross@co-law.net

2. Framing the Issue Will there be sufficient natural gas infrastructure to supply a fleet of BASELOAD electric generation ▫ In the near term? ▫ In the future? This analysis should be performed by each electric region

3. Why Is This An Issue? SIMPLE ECONOMICS: Low natural gas prices displace coal-fired units with gas-fired units – and will continue to do so based on forecasted low gas prices. REGULATON: Initiatives by the Environmental Protection Agency to control cross-state air pollution; mercury emissions; and regional haze are expected, if or when implemented, to result in the closure of numerous coal-fired generating units. These units will be replaced, in part, by natural gas- fired generation, operating at baseload units.

4. NEAR TERM Projects Where gas delivery infrastructure is fully utilized during peak periods, concerned parties are trying to improve communications between the OPERATORS of gas and electric transporters/transmission. Initiatives to improve communications in emergencies – to urge pipelines to pack-up and/or to prevent utilities from curtailing electric compression.

5. Future Policy Issues SCHEDULING TIMELINES: The gas industry uses a uniform timeline for scheduling deliveries across the US. The electric industry doesn’t. Furthermore, the gas and electric industries use different timelines. Different parties take different positions on “harmonization” depending on whether the electric/gas commenter has a firm contract for gas delivery.

6. LONGER TERM POLICY ISSUE NEW INFRASTRUCTURE: Gas transporters build new infrastructure when the transporter has FIRM customers for the infrastructure. Firm customers have firm contracts requiring future payment. Electric transmission companies build new infrastructure when a FIRM customer agrees to pay for the infrastructure OR when their existing firm customers require additional infrastructure for reliable transmission service, - not less expensive electricity. very different decision-making: the gas industry uses a one – to- one commercial model while the electric industry has the ability to use a group decision-making process, requiring regulatory approval