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ISO New England Ready For 2016-2017 Winter But Warns of Looming NatGas Constraints

New England should have enough electricity to meet consumer demand this winter, ISO New England Inc. (ISONE) said Monday, but the grid operator pointed to a growing need to expand the region’s natural gas infrastructure.

The independent system operator said it has implemented a 2016-17 Winter Reliability Program to guard against “possible natural gas pipeline constraints [that] could limit electricity production from natural gas power plants.” Normal winter temperatures of 7 degrees Fahrenheit would result in 21,340 MW of demand, while extreme temperatures of 2 degrees would mean 22,028 MW of demand, ISONE said. The region’s maximum generating capacity is around 34,000 MW, the operator said.

ISONE COO Vamsi Chadalavada said New England “should have adequate supplies of electricity to meet demand [this winter], barring any unforeseen resource outages or fuel delivery constraints.”

New England’s cold-weather pipeline constraints have been a hot topic in recent years. The region relies heavily on gas-fired electric generation but doesn’t have enough capacity to adequately serve those power plants during periods of peak heating demand. This led to dramatic price spikes at hubs like AGT Citygate and Transco Zone 6 NY during the 2013-2014 and 2014-2015 winters, with the effect more muted during the unusually warm 2015-2016 heating season, NGI’s Daily GPI historical data show.

“Winter has become a challenging time for New England grid operators, especially during the coldest weeks of the year when the availability of natural gas supplies is uncertain,” ISONE said. “Approximately 44% -- about 14,850 MW -- of the total generating capacity in New England uses natural gas as its primary fuel, and natural gas generated 49% of the region’s power in 2015.”

ISONE said residential/commercial heating demand this winter could put roughly 3,450 MW of gas-fired generating capacity at risk “because of pipeline constraints.”

Spectra Energy Partners LP’s Algonquin Incremental Market expansion will help this winter by adding 342,000 Dth/d, but moving forward this capacity is expected to be absorbed by gas local distribution companies (LDC), ISONE said. “Moreover, the region will lose 1,500 MW of coal- and oil-fired generation this spring that will be replaced primarily by new gas-fired generation, and no additional infrastructure to deliver or store natural gas is currently being developed.”

ISONE said liquefied natural gas (LNG) offers an incomplete solution, given that “tankers follow global market spot prices and may elect to go elsewhere, depending on price. They can also be held up by severe weather in winter.”

ISONE’s 2016-2017 Winter Reliability Program will run from Dec. 1 until Feb. 28 and includes incentives for electric generators to build fuel inventories before winter begins. The program will also include demand response measures, the operator said.

“Despite planning for these anticipated risks, if the region experiences any combination of extreme cold for an extended time, power plant outages, and limitations on natural gas delivery, maintaining reliability could require the use of emergency procedures,” Chadalavada said. “Beyond this winter, the situation will grow even more uncertain because non-gas power plants are retiring and being replaced primarily with new, gas-fired generation. We are currently evaluating how the ISO will maintain reliability in the future under these conditions.”

While ISONE has not endorsed a particular project, the grid operator has publicly favored expanding the region’s natural gas infrastructure. ISONE’s warnings Monday come as multiple proposals to add pipeline capacity into New England have struggled to navigate a thorny regulatory environment.

In April, the Marcellus-to-New England Constitution Pipeline LLC hit a roadblock when the state of New York denied a crucial water permit for the pipeline, and the project’s backers have been embroiled in a legal battle to move forward with construction.

Around the same time, Tennessee Gas Pipeline Co. shelved its Northeast Energy Direct project, citing a lack of firm commitments from electric generators.

Meanwhile, Access Northeast, an expansion backed by Algonquin Gas Transmission and Maritimes & Northeast parent Spectra, has gone back to the drawing board after FERC and the Massachusetts Supreme Judicial Court rejected different parts of its plan to have regulated electric distributors contract for capacity on the project. New Hampshire regulators also refused to approve a 20-year ratepayer-backed contract between Algonquin and Eversource Energy, while Connecticut backed off a request for proposals for new pipeline/storage capacity.

Regional LNG and electric generation competitors have also stepped in to oppose Access Northeast, telling the Federal Energy Regulatory Commission that a needed capacity release waiver for the project would have artificially suppressed prices in the region.

New England trading points have experienced particularly strong gains in the forwards markets recently, according to NGI’s Forward Look. For the period of Nov. 23-Dec. 1, January forwards at AGT Citygate shot up $1.22 to reach $8.55, while February rose $1.09 to reach $8.55. The New York January forward price was up 68 cents to $8.595, with February increasing 57 cents to $8.62.

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