A major natural gas industrial consumers group has urged FERC to conduct a nationwide review of natural gas pipeline capacity to determine the need for construction to meet the demands of power generators and industrial consumers.
"While the North American Electric Reliability Council is taking steps to analyze potential electricity reliability problems nationwide, we do not see action by the Federal Energy Regulatory Commission to provide a national analysis of natural gas pipeline sufficiency," wrote Paul N. Cicio, president of the Industrial Energy Consumers of America (IECA), in a letter to the Federal Energy Regulatory Commission (FERC) last Thursday.
"The Northeast is already experiencing the natural gas pipeline capacity sufficiency problem, and a recent MISO [Midwest Independent System Operator] study confirms our concerns. We urge the FERC to quickly assess, monitor and report on the sufficiency of natural gas pipeline capacity at expected new peak demand levels. Such a review could enable the accelerated buildout of pipeline infrastructure needed to avoid reliability problems for both electric generators and industrials," he said.
As winter approaches, industrials and power generators are concerned that they could face interruption or curtailment of gas deliveries in the Northeast. The MISO sufficiency study, which was issued in July, found that 65% of the pipelines in the region had insufficient capacity to meet expected coal-fired generation unit retirements with natural gas generation over the next five to six years. "The reason is that the time line for Utility MATS [mercury air toxic standards] implementation is far shorter than the time necessary to build additional natural gas pipeline capacity to meet the rising demand for natural gas-fired generation.
"Since a large proportion of gas supply presently goes to industrial demand in the region, there is concern that industrial gas use will be interrupted or curtailed. Additionally, electricity reliability is at risk. Manufacturers in other organized markets have reason for concern as well. Recently PJM, NYISO and ISO-NE have undertaken an effort to study gas pipeline sufficiency. But that effort appears to be well behind MISO, IECA said. "One major pipeline in the Mid-Atlantic (NiSource) recently made a presentation indicating little or no additional capacity for gas-fired generation on its system. Notably, all gas pipeline sufficiency studies are focused only on electricity reliability," rather than on service to industrials.
The topic of gas pipeline capacity and the coordination between gas and electricity markets has been a major issue at the Commission this year. In August it held five regional conferences on gas-power coordination issues in the Mid-Atlantic, New England, Southeast, West and Midwest regions (see NGI, Sept. 3; Aug. 27). The Commission last month published the "Staff Report on Gas-Electric Coordination Technical Conferences" [AD12-12-000], and called for more conferences aimed at improving the coordination between pipes and power generators.
Pipeline operators have pointed out that FERC will not certificate and investors nor finance additional capacity until and unless power generators and industrial users bite the bullet and sign up for firm capacity to prove it is needed and will be paid for. Both power generators and industrial users historically and currently rely largely on cheaper interruptible transportation rather than sign contracts for firm capacity.
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