In a meeting held in Houston on April 22-23, NAESB’s Gas-Electric Harmonization (GEH) Forum continued its efforts to forge a consensus of natural gas and electric industry stakeholders in response to FERC’s Notice of Proposed Rulemaking (NOPR) addressing gas-electric coordination. See Notice of Proposed Rulemaking, Coordination of the Scheduling Process of Interstate Natural Gas Pipelines and Public Utilities, Docket No. RM14-2-000, 79 Fed. Reg. 18223 (Apr. 1, 2014) (available at http://www.ferc.gov/whats-new/comm-meet/2014/032014/M-1.pdf). In the NOPR, issued on March 20, 2014, in Docket No. RM14-2-000, FERC proposed to modify NAESB standards establishing the start of the nation-wide gas pipeline operations day and the related daily deadlines for the submission of nominations and establishment of schedules for transportation of gas on the nation’s pipeline grid. FERC stated, however, that it is willing to consider any alternative proposal to address gas-electric coordination on which the industries are able to reach consensus. It directed NAESB to provide a forum for stakeholders to develop and consider such alternatives. FERC provided a period of 180 days for this NAESB process, and deferred the deadline for comments on the NOPR until 60 days after the date for NAESB to submit any consensus alternative.
The purpose of NAESB’s April 22-23 GEH meeting was the presentation and clarification of stakeholders’ suggested industry alternatives to the changes to the gas day and scheduling standards that FERC proposed in its NOPR. Thirteen entities and groups presented their suggested approaches and answered questions from meeting participants and from the numerous others who participated in the meeting by web and telephone. The presentations describing the alternative proposals are available at https://wrightlaw.box.com/s/j67zre5fr94gq6y31enu.
The proposals now on the table reflect a broad range of views on this long-debated topic. Some presenters suggested that FERC is on the right track, and offered generally relatively minor changes to elements of FERC’s proposals. As one might reasonably expect in an undertaking of such broad potential effects, however, others advocated positions that bracket the suggested tweaks to FERC’s NOPR.
At one end of the spectrum is the view shared by Washington Gas Light Company and Piedmont Natural Gas Company. In their joint presentation to the NAESB forum, they asserted that the real problem underlying the NOPR is the inability of electric generators to obtain sufficient compensation in organized markets to justify committing to the gas infrastructure that is necessary to meet peak electric generation demand in accordance with reliability goals. In short, they said, “if natural gas is going to be successfully used to serve essential generation, key elements of the gas-fired generation fleet will require a similar combination of firm no-notice transportation and storage as the [gas] LDCs currently use.” See Joint Proposal to NAESB by Washington Gas Light Company and Piedmont Natural Gas Company April 2014 (text version at 2-3) (available at http://www.naesb.org/pdf4/geh042214washgas_piedmont_text.pdf).
Therefore, Washington Gas and Piedmont argued, before requiring operational changes that will certainly entail costs to gas pipelines and their customers, FERC ought to be seeking changes to the organized electric markets where reliance on gas-fired generation has raised reliability concerns. Specifically, Washington Gas and Piedmont advocate deferring for up to one year consideration of changes to the gas day and gas scheduling standards “until such time as electric interests reach a consensus on” the following items:
- The development of market or tariff mechanisms (e.g. shared or pooled capacity) to assure that “essential” gas-fired generation facilities in organized markets have access to delivered firm and no-notice fuel supply. ”Essential” gas-fired generation is the generation capacity that organized markets plan to call on to meet estimated market demand at any time of the year.
- The adoption of a uniform, national electric day;
- The adoption of a uniform, national schedule for the day-ahead electric market; and
- That electric generators should be scheduled in the day-ahead market prior to the Timely Nomination Cycle for interstate gas pipelines (as found by FERC in the NOPR).
See id. at 1-2.
At the other end of the spectrum established at the NAESB gathering is the alternative presented by the consultancy Skipping Stone and the Conservation Law Foundation (CLF). The premise of their proposal is that FERC’s NOPR is too limited in scope. What is really needed, they asserted, is a much more comprehensive restructuring and coordination of gas and electric operating days and scheduling parameters. The objective of the present effort, they said, should be synchronization of both the operational and the “economic” days of both industries. By the latter, they refer to ensuring that both the gas commodity market and the market for released pipeline capacity are most liquid during the hours when peak demands for both gas and electricity must be satisfied.
To accomplish this ambitious goal, Skipping Stone and CLF proposed restructuring both the gas and electric operations days to begin at 6 a.m., and to complete gas scheduling and clear the capacity release market prior to start of each “Energy Day.” They would coordinate gas and electric scheduling to provide that electric markets’ acceptance of generators’ day-ahead bids would be posted simultaneous with opening of the capacity release market and during the timely day-ahead gas nomination cycle. Capacity release contracts would have to be completed before the close of the timely gas nomination cycle. Electric operators’ reliability assessments (the basis for out-of-market dispatch orders) would close one hour before the deadline for evening cycle day-ahead gas nominations. For electric markets, they proposed standard peak hours of 6:00 a.m. to 10:00 p.m. and off-peak hours of 10:00 p.m. to 6:00 a.m. The Skipping Stone/CLF proposal also would include four intra-day gas scheduling cycles, providing for two flow changes during the peak electric hours (12:00 noon and 5:00 p.m.), one flow change for the transition from peak to off-peak electric operations (10:00 p.m.), and one flow change mid-way through the off-peak hours (2:00 a.m.). See GEH Presentation, Conservation Law Foundation/Skipping Stone, at 12-16 (available at http://www.naesb.org/pdf4/geh042214clf_skipping_stone.pdf).
The diversity of proposals offered to the NAESB forum at last week’s meeting suggests that stakeholders will find it difficult to reach a consensus on an alternative to the NOPR. However, debate on the merits of the NOPR and the proposed alternatives was expressly excluded from last week’s program. NAESB will begin that part of its process at the next session of the GEH Forum on May 5-6, 2014, again in Houston. NAESB recently distributed a list of the issues on which NAESB members will be asked to vote – see http://www.naesb.org/pdf4/geh050514a.docx. While it may be premature to predict the ultimate outcome of NAESB’s effort, it certainly has its work cut out for it to complete its task by its self-imposed deadline of June 6, 2014. In the event the participants do not reach agreement, FERC will proceed with its rulemaking process, beginning with interested parties’ submission of comments on the NOPR by November 28, 2014.
Please contact Michael J. Thompson (thompson@wrightlaw.com) or call 202-393-1200 if you have any questions or would like further information regarding gas-electric coordination or other gas or electric industry regulatory issues.
