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Widespread Opposition Surfaces to Starting the Gas Day in the Dark

Nearly 100 companies, practically everyone that matters in the U.S. businesses of natural gas production, pipeline transportation, gas distribution, gas storage, gas procurement for core residential and commercial customers, organizations representing industrial customers, and competitive retail electric and gas service businesses, have told FERC they don’t want their gas day to start at 4 a.m. CT.

It’s just not a good idea from a safety and reliability standpoint to start the gas day in the dark, according to the Coalition for Enhanced Electric and Gas Reliability, one of the largest coalitions to surface at the Federal Energy Regulatory Commission in recent years. And what’s more, the proposal is pretty shaky legally.

The main supporters of the Federal Energy Regulatory Commission’s proposal to start the gas day at 4 a.m. CT, instead of the current 9 a.m. CT start, are the main power grid operators and some power generators that are afraid there may be instances where they might not have enough gas left over from the night before to cover the morning ramp-up (see Daily GPI, Dec. 2; Nov. 26).

But, “entities throughout North America have evolved their operations, systems, and practices to meet this [9 a.m.] nationwide standard” which has been in effect for 18 years, the Reliability Coalition said. “The 9:00 a.m. (CCT) Gas Day start time resulted from a comprehensive stakeholder and consensus-building process” by the standards-making predecessor to the North American Energy Standards Board (NAESB) in 1996.

“All the parties agreed that moving either later in the day or earlier into the morning hours would not work for one or more regions of the country. As a result, the decision was made to settle on the earliest time in the morning that was acceptable for all time zones, yielding the 9:00 a.m. (CCT) Gas Day start. Crucially, this time starts the Gas Day in daylight hours for all time zones and provides for the most efficient use of staffing resources as fully staffed crews (and supporting vendors) are on the job and available,” the Coalition said.

Doesn’t Meet NGA Sec. 5 Requirements

Furthermore, “Unless the Commission can demonstrate that the current start time for the gas day is ‘unjust and unreasonable’ and an alternative is ‘just and reasonable’ it has no basis for changing it under Section 5 of the Natural Gas Act.”

Although the notice of proposed rulemaking (NOPR) “discussed general concerns about gas-electric coordination, it provided insufficient evidence that the current Gas Day start is unjust and unreasonable and thus fails to satisfy the NGA Section 5 legal requirements for changing the definition of the Gas Day start that appears in interstate pipeline tariffs,” the Reliability Coalition said.

The Interstate Natural Gas Association of America (INGAA) also “does not believe that the Commission can sustain its burden of proof under Section 5 of the NGA to show that the existing 9:00 a.m. CCT Gas Day start is unjust and unreasonable.” The group suggested FERC make scheduling timeline changes suggested by NAESB, then wait a year to see if those changes were sufficient and make gas day changes unnecessary. 

The Reliability Coalition and INGAA both support adding another cycle and revisions to gas day timeline as proposed by the North American Energy Standards Board (NAESB) instead of the four cycles proposed in FERC’s NOPR. Almost all the commenters to the proposed rule support the NAESB revisions, which were the work of a task force that included hundreds of operating personnel from companies focused on natural gas.

As to implementing cycle changes, the Commission should allow enough time so that “pipelines and all other segments of the gas value chain -- producers, processors, gatherers, interstate and intrastate pipelines, local distribution companies (LDCs), and end users -- can make the necessary physical and transactional changes to their operations to accommodate such modifications. Pipelines will need sufficient time to develop, test and implement the changes to automated business systems to reflect the revised scheduling changes and hire and train additional personnel.”  INGAA suggested an effective date a minimum of nine months after the issuance of a final rule.

The pipeline organization suggested that by moving the nomination deadline for the Timely Cycle from 11:30 a.m. CCT to 1 p.m. CCT the NAESB proposal provides generators a greater opportunity to nominate for pipeline transportation after learning their dispatch obligations. The ISOs and RTOs should revise theirs to maximize the value of the changes. With the addition of an extra cycle and timeline changes the grid operators should be able to avoid difficulties during the morning ramp-up, INGAA said.

More Failures

Spectra Energy pointed out that while it is capable of moving the start time of its pipelines, it questioned whether “all of the other participants in the market -- producers, asset managers, electric generators, LDCs, and other gas buyers -- will be prepared to perform at the new start time. If the Gas Day were to start at 4:00 a.m. CCT, producers must be ready to tender gas for delivery at the appropriate flows starting at that time, and offtakers must be prepared to receive gas at the appropriate flows as well. In some instances, this could include having personnel available at 4:00 a.m. CCT to handle the physical changes that enable gas flow.” Spectra would be able to accommodate failures at either end to some extent, using storage, but could not manage significant discrepancies.

The Process Gas Consumers (PGC) group doesn’t want to get up that early. PGC chimed in with its own comments and the concern of the industrial and manufacturing industry that its members would have to extend staff coverage beyond a normal business day. “PGC members compete in a global market environment. As end users, PGC’s members cannot pass on the costs of increased staffing to anyone else.”

While the American Forest and Paper Association (AF&PA) “certainly agrees that reducing the number of instances in which generators incur imbalances would benefit generators, those imbalances result from taking more gas off the system than is permitted by the pipeline’s tariff, which is not a practice that the Commission should encourage given that over-takes can impact a pipeline’s ability to manage its system.

“Instead, imbalances are better addressed by ensuring generators have the means to recover costs associated with securing a portfolio of natural gas services and assets that can meet unexpected short-term needs in the same way that end-users effectively manage these issues today. AF&PA opposes changing the start of the Gas Day due to cost impact on its customers and concerns regarding loss of flexibility of service to existing pipeline customers.”

A change in the gas day would be worse for those in the Pacific Northwest, according to the Northwest Industrial Gas Users (NWIGU). “4:00 a.m. CCT is 2:00 a.m. Pacific Time. This dramatic change would start the gas day in the middle of the night in the Pacific Northwest, creating operational and potential safety hazards.”

Operators in the natural gas delivery chain (producers, midstream operators, processors, storage providers) may not change their flows at 2:00 a.m. because of operational and safety issues, said NWIGU. If they don’t, “gas supplies may fall behind schedule on the West Coast. A pipeline could take the risk that gas supplies will catch up later in the day. But, another likely outcome arising from the uncertainty about gas supplies, would be for the pipelines to impose restrictions, such as entitlements or Operational Flow Orders.

The Northwest industrials also are concerned because of their reliance on Canadian supplies since Canada won’t necessarily switch its gas day start time. “Mismatches at U.S./Canadian delivery points into the Pacific Northwest pipelines could cause delays and/or interruptions in flows.”

Morgan Stanley Advice to Electrics

Meanwhile, Morgan Stanley Capital Group Inc. (MSCG) believes the Commission’s NOPR will “create a physically unworkable schedule.” The banking group and trader suggested the electric power industry’s participants should:

  • Adapt their schedules to mesh with those of the natural gas industry. “Given the uniform nationwide gas day, this would mean different generation scheduling timelines in different geographic regions.”
  • For generators that are needed for out-of-market reliability purposes, the Commission should require electric system operators to provide confirmed schedules by 9:00 a.m. ET the day prior, allowing generators that are awarded schedules to procure gas during the main daily gas trading window.
  • Electric system operators should be required to allow electricity generators to continuously update bids for any available capacity not given a day-ahead award.

Morgan Stanley also “requests that the Commission discourage the use of non-performance penalties to pipelines and generators that offer services at times of great risk of economic loss, such as extreme weather conditions.

“Additionally, the Commission should require RTOs/ISOs to eliminate price caps -- an ineffective policy mechanism that actually discourages participation in the natural gas markets.”

The Nature of Human Beings

Pacific Gas & Electric (PG&E) said it has assessed its daily operations and concluded that annually, a minimum of 2,200 manual and 3,500 automated operating changes will shift to 4:00 a.m. (CCT) if the start of the Gas Day is changed. This shift from daylight to nighttime operations could result in a significant increase in safety risks the combination utility said. “Human fatigue has often been associated with serious accidents and the National Transportation Safety Board has often included human fatigue on its Top 10 Most Wanted list of issues.

“Regardless of the degree of mitigation employed, a greater chance of problems exists when individuals are asked to conduct more activities at the time of least human alertness, between 2:00 a.m. and 5:00 a.m.,” PG&E said, citing several scientific studies of the impact of fatigue on the ability to perform critical tasks.

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