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NGSA Opposes Waiver of FERC Capacity Release Bidding Requirements

The Natural Gas Supply Association (NGSA) told FERC it opposes Algonquin Gas Transmission LLC's request for a waiver of the Commission's capacity release bidding requirements, arguing that such a move would harm the New England gas market.

According to a motion for leave to intervene out-of-time the NGSA filed Tuesday with the Federal Energy Regulatory Commission [RP16-618], Algonquin has asked for the waiver of several capacity release bidding requirements. Under such a waiver, certain qualifying electric distribution companies (EDC) with either new or existing firm transportation capacity could release their firm capacity on a prearranged and priority basis to natural gas-fired power generators under a state-approved electric reliability program.

NGSA said that although it supports the concept of EDCs holding pipeline contracts to support new pipeline infrastructure, the association called the waiver "discriminatory" and said it would harm primary and secondary firm transportation capacity markets, and could also impact interruptible capacity and natural gas commodity markets. A waiver would be particularly worrisome in New England, where capacity constraints could lead to electric reliability issues and/or price spikes for natural gas and electricity.

"While supportive of new pipeline infrastructure for New England, NGSA believes that the best approach to solving New England's infrastructure constraints is to focus on market-based solutions in the power market structure, rather than to seek changes to the natural gas market that would compromise its functioning," NGSA said. The association added that a waiver would amount to nothing more than a "quick fix" to problems caused by inaccurate price signals in regional power markets like New England.

"Algonquin's waiver request will lead to adverse market impacts... [it] actually discourages generators from taking actions to make firm transportation commitments that may have otherwise served to underpin new pipeline infrastructure."

NGSA said it believes recent efforts to improve regional power signals in New England -- such as ISO-New England's pay-for-performance proposal [ER14-1050], which provides incentives in its capacity market for increased reliability -- should be given a chance to work. The association added that under the current rules, EDCs can already bring about releases to generators in New England.

Specifically, the NGSA said EDCs can "release capacity to generators on a prearranged basis for deals that are greater than one year at the maximum tariff rate," and shorter-term releases are also possible for one month or less. Third-party asset managers can also manage and EDC's pipeline contracts to make the most efficient use of their primary capacity.

Multi-party contracting, as envisioned under FERC Order No. 809, is another option. FERC issued the order in April 2015 in response to two proposals by the North American Energy Standards Board to revise the interstate natural gas nomination timeline and make conforming changes to their standards (see Daily GPI, April 16, 2015).

"While NGSA strongly encourages eliminating capacity constraints in New England, we do not believe that imposing market dysfunction in the natural gas market is the solution," the NGSA said.

A technical conference on Algonquin's proposal was held on May 9. FERC has not yet ruled on Algonquin's proposal.

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