Several cold weather events in the last few years have highlighted the interrelationship between natural gas and electric markets and underscored the need for improvements in coordination across those industries. In an attempt to address what one Commissioner described as “the defining issue” facing FERC over the next few years, the Commission recently proposed revisions to its regulations intended to increase coordination between interstate natural gas pipelines and the electric industry. The Notice of Proposed Rulemaking describes the challenges faced by both sectors due to their divergent scheduling practices, which can create reliability concerns especially during times of peak energy demand. It also proposes scheduling changes to address these challenges.
FERC currently incorporates the standards set by the North American Energy Standards Board (NAESB) for scheduling the transportation service of interstate gas pipelines at 18 CFR Part 248.12. At the same time, the Commission has accepted variation in regional electric scheduling practices. The differences between these scheduling timelines can create various coordination issues. First, the industries maintain different operating days, such that gas-fired generators must schedule transportation across two natural gas operating days to meet their needs during a single electric operating day. This, coupled with the fact that generators are confined by rigid intra-day nomination cycles within an electric operating day, creates the potential for gas-fired generators to deplete their available gas supply for the day during the morning peak period. Second, the timeframe for nominating gas pipeline transportation service does not align with the timeframe in which electric power generators receive bid confirmations to provide service in a given day. For that reason, gas-fired generators must make gas purchase arrangements and submit nomination requests before they know if they will be dispatched by their regional transmission organization or independent system operator. Generators are also unable to take advantage of periods in the daily nomination cycle when the market for transportation capacity is most liquid. In times of the year where pipeline capacity is constrained, this lack of flexibility in arranging gas transportation may threaten generators’ ability to provide reliable service.
To address these problems, the NOPR proposes to amend 18 CFR 248.12 as follows: 1) start the natural gas operating day earlier to ensure that gas-fired generators are not running short on gas supplies during the morning electric ramp periods; 2) move the first day-ahead gas nomination opportunity for pipeline scheduling to a later time, in order to allow electric utilities to finalize their scheduling before gas-fired generators must submit their nominations to the pipelines; and 3) modify the current intraday nomination timeline to provide greater flexibility to all pipeline shippers by creating four intraday nomination cycles rather than the existing two.
The NOPR and two related FERC orders (one available here, and the other here, were presented at an Open Meeting on March 20, 2014. While the Commissioners approved the NOPR in a 3-1 vote, one Commissioner expressed concern about the disproportionate burdens that the proposed scheduling adjustments may place on the natural gas industry. He also encouraged his fellow commissioners to “keep an open mind” about the proposed changes in the NOPR and emphasized that the industries may be in the best position to assess potential solutions to the coordination problem. Because a final rule adopting the proposed amendments would change the NAESB standards, the NOPR requests that the industries respond within 180 days by filing consensus standards developed through the NAESB process that are “consistent with” the NOPR or a notice indicating that the industries are unable to reach consensus. Comments on the NOPR, as well as on any consensus standards filed by NAESB within the 180-day period, are due within 240 days of publication of the NOPR.