Gas Industry Faces Challenge Serving Winter, Summer Peaks
The winter peak in gas demand has a new rival: summer peak
demand. And many market observers are wondering if the two can
co-exist. With rapidly increasing gas-fired generation, the
industry will be hard pressed to meet traditional loads while
serving what once was considered a low priority customer - the
"I think people are coming to the conclusion that electric
generation is not a low priority service," said William Reed, vice
president of regulatory affairs for Sempra Energy. "It has been
treated as the lowest priority customer on the system for decades."
Industry experts who spoke on the subject in Washington at the
National Association of Regulatory Commissioners (NARUC) Winter
Meeting agreed that the industry will have difficulty serving a 30
Tcf market in 2015, particularly when 23% of that market is
represented by power generation load.
During winter 2000-2001, Reed pointed out that power plants in
San Diego operated 37%-60% higher, on average, than the previous
two winters, 174 MMcf/d versus 109-127 MMcf/d.
"Gas demand as a whole is growing," said John Orr Jr., director
of regulatory affairs for Reliant Energy. "Clearly, pipeline
infrastructure is going to have to grow to meet this demand. We are
looking for a level playing field. We are willing to pay for
additional infrastructure provided that there is a level playing
By leveling the field, Orr referred to flexible rates and
allowing generators to subscribe for firm service. Orr also said
the industry needs convergence of nominations and operations in
both markets. "The pipeline world needs to move to the hourly
market in some way, shape or form, and the gas market is going to
as well" to help convergence along, said Orr.
Orr pointed out that in the near-term electric generators
provide a market for excess capacity, but in the long-term
interruptible flexibility will be limited, and all industry
participants must get together to "address demand growth."
Cuba Wadlington, CEO of Williams Gas Pipeline, agreed and said
it is crucial that the industry educate the public on the safeness
of pipelines so that companies can build them without the backlash
that is so common these days.
"We will not be out of gas and we will not be out of
electricity, but we do have to face reality, and reality is we must
be able to drill for natural gas in restricted areas around the
country to have enough gas for all of our needs," said Wadlington.
"We need to significantly increase the infrastructure so we can get
the gas from the wellhead to the burner tip, and we need to
significantly increase the infrastructure relative to electric and
transmission in order to be able to get power from the power plants
to the end-user."
Barbara Heffernan, an attorney with Schiff, Hardin & Waite
put the situation in layman's terms. She said it is not a question
of whether gas will continue to be used for new generation, it's a
matter of how to insure that it can be done without compromising
reliable natural gas service for the local distribution companies