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Gas/Electric Day Reconciliation Looms Over FERC Technical Conference

Electric generators and natural gas distributors at FERC's technical conference agreed that the gas industry generally performed well during the unusually cold 2013-2014 winter, though price spikes during those cold snaps need to be researched.

But the Federal Energy Regulatory Commission's recent notice of proposed rulemaking (NOPR) to shift the start of the gas day to 4 a.m. central clock time (CCT) from the current 9 a.m. seemed to be on the minds of panelists and commissioners gathered to evaluate the electric grid's performance and review interaction between the gas and electricity markets.

"Gas and electric coordination is critical," said Mel Christopher, senior director of gas system operations at Pacific Gas & Electric (PG&E). "It is key, and we've worked very hard with the California ISO for years...We have a good process, but we are concerned and continue to evaluate the proposal to move the gas day from 7 a.m. [PST] to 2 a.m. and to add two more cycles to make six cycles. We are reviewing not only the implications from our operations of our cycles and our systems to do that, but the reliability implications as well. Starting at 2 a.m. in California, when our system is completely packed, is very difficult, and a lot of supply changes require physical intervention. Sending crews into the field at 2 a.m. doesn't make a lot of sense for us either."

FERC issued the NOPR and established proceedings under the Federal Power Act and Natural Gas Act in an effort to better coordinate the nation's interstate pipelines and gas-fired power plants (see Daily GPI, March 20). The NOPR has quickly become a 'lightning rod," but changes to the current system are inevitable, and the earlier start time isn't non-negotiable, Acting Chairman Cheryl LaFleur said last week (see Daily GPI, March 27).

There were many comments on the records set by the unusual cold that swept across the country and stayed. Those cold temperatures this winter and the impacts they had on electric and gas prices illustrate the need for coordination of the two markets, said John Sturm, vice president corporate and regulatory affairs at the Alliance for Cooperative Energy Services.

"Anytime you get this kind of polar vortex, the mismatch in the gas and power days and the lack of coordinated sequencing in the nomination and generation of awards is going to have a real impact on grid reliability," Sturm said. "We feel like the complete alignment of the gas and power days as well as the coordinated sequencing of those nomination and award periods is imperative."

FERC has had its eye on infrastructure and make sure the markets work properly since requests from the New York ISO (NYISO) grid operator and mid-Atlantic grid operator PJM Interconnection to waive the $1,000/MWh cap on cost-based power generation bids, but LaFleur has said natural gas and electricity price spikes brought on by record cold were a sign that the markets were working (see Daily GPI, Jan. 28; Feb. 20). ).

Multiple polar vortices this winter have driven the number of recorded heating degree days to unusual highs, according to National Oceanic and Atmospheric Administration data (see Daily GPI, Feb. 6). And the 2013-2014 chill is far from over. The Northeast, North Central and lower Mississippi Valley can expect unusually cold temperatures to continue through most of April, according to forecasters at Weather Services International (see Daily GPI, Feb. 4).

In February FERC invoked for the first time its emergency authority under the Interstate Commerce Act to help alleviate "dangerously low" propane supplies in the Midwest and Northeast (see Daily GPI, Feb. 11; Feb. 10).

One possible solution to the coordination problem was offered by Donald Sipe, an attorney with the law firm PretiFlaherty, who was added to the day's list of speakers by Commissioner Phillip Moeller. According to Sipe, problems hindering coordination between the natural gas and electric markets are not physical or supply problems, they are information sharing problems.

"Our basic recommendation is that the Commission investigate and possibly order the implementation of an information trading platform for natural gas that looks somewhat like the RTO trading platforms that you have for electricity, in the sense that you would have an operability region, you would take bids and offers for sale of capacity and commodity both, you would have, if not a clearing mechanism at least a central confirmation mechanism that would manage offers on a short-term basis, you would do this across utility footprints," Sipe said.

The suggestion, according to other panelists and Commissioner John Norris, "won't solve our short term problems, but it deserves conversation."

The natural gas industry will have no problem offering up supply for power generators, according to Southwestern Energy Co. Vice President Jim Tramuto. The question is whether there will be enough pipe to move those molecules to market.

"When we look at our opportunities to serve these markets, we feel as a good producing community very, very comfortable that the gas supply will be there," Tramuto said "What we are concerned about, quite frankly, is the infrastructure...it's about getting the gas to the right markets, and particularly to the Northeast, and that takes infrastructure...

"No one really saw this winter coming...and in spite of the fact that early projections were for a normal winter, what really happened was quite significant," Tramuto said. "But with few exceptions, gas customers that hold firm pipeline capacity got their gas at contract levels, even though we set all new records...the only thing that got interrupted was interruptible load, and that was by contract, and that was by the party's own doing, if you will..."

As for the national pipeline grid, one sure sign of its coast to coast integration was offered by Mel Christopher, senior director Gas System Operations at Pacific Gas & Electric, who noted that despite mild weather in California, gas prices there spiked when gas was pulled away to serve the Midwest and Northeast during the worst onslaughts of the polar vortexes.

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