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KeySpan Warns of Gas Curtailments to New England Generators This Winter

A top KeySpan Energy official last Wednesday warned federal energy regulators that electric generators in New England face potential natural gas curtailments this winter, given that a large number of them have failed to negotiate firm transportation contracts to ensure the delivery of gas to power their facilities. A spokeswoman for ISO New England, the operator of the region's bulk power system and wholesale electricity markets, said it shares KeySpan Energy's concerns.

" the distribution company have some [generation] facilities on firm supply from KeySpan. However, to our knowledge, many of the large generating facilities that the ISO [New England] addresses have not taken firm transportation on the transmission system, which...can be constrained into the Northeast," David Manning, KeySpan's senior vice president of corporate affairs, told FERC during its fourth annual "State of the Natural Gas Infrastructure Conference" in Washington, DC.

Under normal market conditions, New England gas-fired generators -- absent firm transportation contracts -- would face the possibility of curtailed supply since they are located at the tail end of pipelines from the Gulf. Interruptible capacity on the major pipelines into the Northeast routinely is not available during sometimes extensive peak times during the winter season. Without natural gas, generators' ability to provide electric services to their customers would be hampered. The likelihood of curtailments occurring in New England this winter is even greater due to gas production shut-ins in the Gulf of Mexico.

"So to say that we don't anticipate any challenges this winter would be inaccurate," Manning said. "We, of course as a generator, have taken firm supply for many of our needs in the New York region, and we have encouraged [other] generators to do that," he noted. "I think that [this] should be on the record."

New England ISO estimates that about 3,000 MW of gas-fired capacity, or about 10% of the region's 30,000 MW installed capacity, does not have firm transportation contracts in place, said spokeswoman Ellen Foley. She noted the calculations were based on last year's figures.

The ISO is "concerned" about this situation because it could interfere with generators' ability to meet peak-day demand in the event of a severe cold snap, she noted. About 38% of New England's power generation fleet is gas-fired.

A recent assessment of the impact of the Gulf hurricanes on New England's generation capability noted that "the region depends on two major interstate pipelines to bring in Gulf Coast natural gas. To the extent supply or delivery constraints arise, most of the region's gas-fired power plants could be adversely affected as a result of the 'non-firm' character of their gas supply and transportation services."

The report said ISO New England could mitigate this winter's gas situation in part by increasing its dependency on oil-fired power plants. But while fuel oil supplies are expected to be adequate this winter, "harsh winter weather could pose logistical challenges for truck-transported fuel oil shipments to some power plants, thereby affecting the reliability of fuel deliveries."

This is not the first time that New England has entered winter facing potential power reliability problems, and it probably won't be the last time either. The natural gas pipeline systems serving New England are constrained and have been so for years, but lawmakers from Connecticut, Rhode Island and Massachusetts have steadfastly opposed the construction of new pipeline and liquefied natural gas capacity to remedy the situation.

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