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New England Maintains Deliveries Despite Record Demand, Bitter Cold

New England Maintains Deliveries Despite Record Demand, Bitter Cold

The New England gas industry Thursday had its fingers crossed that its apparent success maintaining deliveries during the sub-zero temperatures so far this week would last through the bitter cold on Friday morning.

Despite record high spot gas prices in response to temperatures cold enough to freeze exposed skin in 15 minutes, gas distributors, pipelines, LNG operators and the power grid have held the delivery system together without a glitch.

"Every company reports that things are going well," said Thomas M. Kiley, president of the Northeast Gas Association, following a meeting of the association's Gas Supply Task Force Thursday. The task force includes representatives from local distribution companies (LDCs) in six New England states, interstate pipelines, Massachusetts LNG import terminal operator Distrigas and utilities from New York. The association on Wednesday made a public plea for gas customers to voluntarily conserve to help reduce the strain on the delivery system.

Kiley said LDCs reported Thursday utilizing all of their available supplies, including long-haul gas supply, stored gas, incremental purchases, LNG imports and peak shaving and propane. "Clearly all their supplemental supplies are on. They are taking their total allotments off the interstate pipelines, but there have been very few problems. In fact no one has reported any problems," he said.

"We are expecting extremely cold weather [Friday] morning. The temperatures, which are already cold are expected to plummet and then more high winds will accompany that, leading to record setting wind chill factors. We could have 30-50 below zero wind chills. That's going to be a test on the system, but as we enter it we are certainly in very good shape. The pipelines are reporting solid linepack, solid access to their underground supplies, so knock on wood. Things are going extremely well."

Carol Churchill, spokeswoman for NiSource reported that Bay State Gas and Northern Utilities were expecting record demand over the 24 hours from 7 a.m. Thursday through 7 a.m. Friday. Demand in meeting the needs of their 300,000 utility customers is expected to reach 620,000 Dth, surpassing the record of 574,000 Dth set last Friday.

"We don't expect any supply problems in New England or elsewhere," Churchill said. "We have curtailed interruptible customers and [Columbia Gas of Virginia] also has asked IT customers to [balance supplies]." Churchill reported no operational problems on the Columbia Gas pipeline system.

New England's largest gas distributor, KeySpan reported that it is expecting 1.49 Bcf/d of gas demand Thursday compared to average of about 750 MMcf/d in January. "We do all of our planning on effective degree days and in Massachusetts are numbers are exceeding [design day] expectations," said Liz Arangio, director of gas supply for KeySpan Energy Delivery New England, which has about 800,000 customers through subsidiaries Boston Gas, Colonial Gas and Essex Gas in Massachusetts and Energy North in New Hampshire.

"Last weekend the weather caused a demand record but didn't exceed design. This is the first time," she said.

"We are obviously in close contact with Algonquin and Tennessee; those are the two pipelines that we connect to physically. They both have 2% balancing tolerances in place right now. Tennessee's is effectively an [operational flow order]. It is basically requiring you to stay within 2% of your nominations. Algonquin has $15/Dth penalties plus the cost of gas" if shippers go outside their 2% tolerance, she noted.

"We heard market prices were anywhere from $50/MMBtu up to $90 [on Wednesday for Thursday flow]. But what we buy today [at these high prices] is a very small portion of what we are actually going to send out." She said LNG, of which KeySpan has about 7 Bcf, makes up about one-third of its supply on a peak demand day.

"It's going to be tight in the market going into Friday morning. It's going to be negative 15 degrees [Thursday] on average, which takes into account wind speed."

Kiley said part of the reason deliveries have gone uninterrupted into New England is because of the far northern concentration of this cold weather. There have not been any wellhead freezeoffs. Demand on the southern half of the long-haul Gulf pipelines is normal to below normal. Tennessee Gas Pipeline and Algonquin Gas Transmission both have 2% tolerance limits with hefty penalties for violations, but those are the extent of the pipeline restrictions into the region.

"We have sizable supplemental supplies here in New England, and they have been utilized quite aggressively during this cold snap," noted Kiley. "The systems are operating well. We have had many LDCs up here upgrade their systems and certainly that has helped. On our conference call, many distribution companies cited and lauded the effort of the interstate pipelines."

Kiley also noted that New England has diverse gas supply sources now, with 500,000 Dth/d of additional gas coming down from eastern Canada through Maritimes & Northeast Pipeline, western Canadian gas coming in through Iroquois and the Portland Natural Gas Transmission System, and Gulf Coast and Appalachian supply coming in through pipelines owned by El Paso and Duke Energy. "When you factor all these things in coupled with the supply of liquefied natural gas that we get through Distrigas, it has been a very positive situation."

"We are going to get through this with a high degree of confidence, assuming that all aspects of the system continue to operate as well as they have been."

One area that has been a concern is the number of gas-fired power generators in the region utilizing interruptible gas transportation contracts. Currently about 8,000 MW of power generation is offline and the New England Independent System Operator reported a demand record Wednesday evening of 22,450 MW. The ISO said it is expecting to break that record Thursday evening with 22,625 MW. The New York ISO also reported record winter demand of 24,627 MW on Wednesday.

About 38% of New England's power generation is gas-fired, and the ISO last year requested that FERC staff examine the IT issue and its potential impact on electric reliability.

In a report released last month, staff said about 61% of the gas purchased by New England power generators is firm supply and about 40% of the pipeline transportation capacity they purchased also is firm. As a result, about 60% of the gas-only power generation in the region could be interrupted (see Daily GPI, Dec. 18, 2003).

While that would pose a significant problem for the region in an extreme case, staff determined that the ISO could handle it through demand reduction measures and regional power transfers from Canada. Staff said that "even with the loss of all operable gas-only generation, the ISO would have sufficient capacity to meet the power needs of the region."

So far, that conclusion has been accurate. The ISO is requesting that customers across New England take voluntary steps to conserve Thursday and Friday, but it anticipates being able to meet record demand.

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