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April 16, 2012
Brattle Consultants Author Article on Shale Gas Competition and Risk for Public Utilities Fortnightly

Brattle consultants have authored an article discussing the impact of the new landscape of the North American pipeline grid on increased competition and risk for the April 2012 issue of Public Utilities Fortnightly.

In response to high natural gas prices prevalent during the last decade, gas producers in the lower 48 states have developed new sources of supply and technology to access emerging shale gas formations. These newly-formed gas supply sources have changed flow patterns in the North American pipeline grid, which has resulted in a considerable increase in competition and risk, leading to potentially severe consequences for pipelines and their required rates of return.

The article explains how the growth of Marcellus shale supplies has recently become a growing indigenous supply source in the Northeast U.S. that competes with more distant supply sources. These new supplies and the pipelines constructed to serve them have put substantial competitive pressure on existing pipelines, which have reduced the value of capacity on some pipelines, and in some cases, have resulted in considerable amounts of unsubscribed capacity. According to the authors, competition and uncertainty will lead to problems for rate-regulated companies, such as gas pipelines, “because regulation sometimes restrains rates in ways that competition wouldn’t, and competition sometimes restrains rates in ways that regulation wouldn’t.”

The article, “Shale Gas and Pipeline Risk,” was authored by Brattle principals Paul Carpenter, Larry Kolbe, Steve Levine, and Bente Villadsen. To read the complete article, please visit the Public Utilities Fortnightly website.