We discuss the problem of hedging between the natural gas and electric powe
r markets. Based on multiple forecasts for natural gas prices, natural gas
demand, and electricity prices, a stochastic optimization model advises a d
ecision maker on when to buy or sell natural gas and when to transform gas
into electricity. For relatively small models, branch-and-bound solves the
problem to optimality. Larger models are solved using Benders decomposition
and Lagrangian relaxation. We apply our approach to the system of an elect
ric utility and succeed in solving problems with 50 000 binary variables in
less than 4 minutes to within 1.16% of the optimal value.