The winter peak in gas demand has a new rival: summer peakdemand. And many market observers are wondering if the two canco-exist. With rapidly increasing gas-fired generation, theindustry will be hard pressed to meet traditional loads whileserving what once was considered a low priority customer – thepower generators.

“I think people are coming to the conclusion that electricgeneration is not a low priority service,” said William Reed, vicepresident of regulatory affairs for Sempra Energy. “It has beentreated as the lowest priority customer on the system for decades.”

Industry experts who spoke on the subject in Washington at theNational Association of Regulatory Commissioners (NARUC) WinterMeeting agreed that the industry will have difficulty serving a 30Tcf market in 2015, particularly when 23% of that market isrepresented by power generation load.

During winter 2000-2001, Reed pointed out that power plants inSan Diego operated 37%-60% higher, on average, than the previoustwo winters, 174 MMcf/d versus 109-127 MMcf/d.

“Gas demand as a whole is growing,” said John Orr Jr., directorof regulatory affairs for Reliant Energy. “Clearly, pipelineinfrastructure is going to have to grow to meet this demand. We arelooking for a level playing field. We are willing to pay foradditional infrastructure provided that there is a level playingfield.”

By leveling the field, Orr referred to flexible rates andallowing generators to subscribe for firm service. Orr also saidthe industry needs convergence of nominations and operations inboth markets. “The pipeline world needs to move to the hourlymarket in some way, shape or form, and the gas market is going toas well” to help convergence along, said Orr.

Orr pointed out that in the near-term electric generatorsprovide a market for excess capacity, but in the long-terminterruptible flexibility will be limited, and all industryparticipants must get together to “address demand growth.”

Cuba Wadlington, CEO of Williams Gas Pipeline, agreed and saidit is crucial that the industry educate the public on the safenessof pipelines so that companies can build them without the backlashthat is so common these days.

“We will not be out of gas and we will not be out ofelectricity, but we do have to face reality, and reality is we mustbe able to drill for natural gas in restricted areas around thecountry to have enough gas for all of our needs,” said Wadlington.”We need to significantly increase the infrastructure so we can getthe gas from the wellhead to the burner tip, and we need tosignificantly increase the infrastructure relative to electric andtransmission in order to be able to get power from the power plantsto the end-user.”

Barbara Heffernan, an attorney with Schiff, Hardin & Waiteput the situation in layman’s terms. She said it is not a questionof whether gas will continue to be used for new generation, it’s amatter of how to insure that it can be done without compromisingreliable natural gas service for the local distribution companies(LDCs).

Alex Steis

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