The Independent System Operator of New England (ISO New England), grid operator for that increasingly gas-dependent region, must "initiate a stakeholder process to develop a proposal to address reliability concerns for the 2015-2016 winter and future winters," FERC said.
The Federal Energy Regulatory Commission order was issued in response to a 2014-2015 Winter Reliability Program previously proposed by ISO-New England and the New England Power Pool [ER14-2407]. FERC accepted that filing, which creates incentives for dual-fuel resource capability and participation, offsets carrying costs of unused firm fuel purchased by generators and provides compensation for demand response services, effective Sept. 9. Associated tariff revisions regarding market monitoring are scheduled to take effect Dec. 3.
ISO-New England's 2013-2014 plan "bridged the reliability gap created by the colder than average winter weather," and ISO-New England had hoped that market improvements would address the region's dependence on natural gas heading into winter 2014-2015. But three factors forced it to conclude that another reliability program was necessary:
The retirement of non-gas generation capable of producing 2.6 million MWh during the winter period could make the region more reliant on natural gas compared with winter 2013-2014;
More natural gas pipeline constraints than expected occurred last year; and
During winter 2013-2014, resources had difficulty replenishing oil inventories mid-season.
"While the commission still prefers a long-term, market-based solution, we agree with most commenters that the program is necessary to ensure reliability this winter," FERC said.
But longer-term strategies to fuel power generation in New England, a region increasingly dependent on natural gas, need to be identified, according to the order. The stakeholder process must begin by Jan. 1, FERC said.
ISO-New England's recently released draft Regional System Plan (RSP) concluded that while plenty of pipelines are being built to carry natural gas away from the Marcellus and Utica shale producing areas, not enough of them are designed to serve New England (see Daily GPI, Sept. 9). The grid operator "has immediate and growing concerns about the availability and flexibility of generating resources -- particularly natural gas- and oil-fired resources -- to reliably serve the daily, round-the-clock demands of electricity consumers in New England," according to the RSP.
The electric power system is the largest consumer of natural gas in New England, and "this dependence on the natural gas fuel-delivery system that has limited local storage, combined with the economic pressures experienced by gas- and oil-fired generating facilities to participate in the wholesale electricity markets while attempting to minimize operating costs, are causing persistent reliability concerns. These concerns, while possible year-round, are most acute during extended cold-weather periods when natural gas demand by LDCs [local distribution companies] is high," the RSP said.
New England turned to natural gas to fuel 42.8% of its capacity and 45.1% of its electric energy production in 2013.