FERC Thursday was asked to take a look at its no-bump rule, which some generators said shows a preference to customers with interruptible (IT) gas delivery service over those with higher priced firm transportation (FT) contracts.
Tennessee Valley Authority (TVA), which provides power to nine million customers in seven southeastern states, is "more than happy" to pay the higher price for firm transportation capacity to ensure reliability, said Valerie Crockett, TVA senior program manager of regulatory and policy. "But we expect to get what we pay for. And under existing nomination timelines and policies, we don't get what we pay for and that's the problem," she said during a Federal Energy Regulatory Commission (FERC) technical conference in Washington, DC, on coordination of the Southeast gas and power markets. It was the Commission's third technical conference on the gas-power coordination issue (see Daily GPI, Aug. 21).
Crockett and other power executives called on the Commission to review its no-bump rule for interruptible service, which states that a shipper that is currently flowing gas cannot be bumped (lose its capacity) because another shipper with a higher priority (firm transportation) has decided to increase its receipt of gas.
"At a certain point of the day if our generation is not already up and running, flowing IT cannot be cut or bumped in order for us to get our FT contracts flowing. That's a problem. We support the pipelines. We want to buy firm transportation, but then it winds up sitting idle. It's a hard message to continue to sell to senior management that we need firm transportation for gas-fired generation if it's really taking a backseat to interruptible that happens to be in the queue before us. That's an issue that I'm facing every day."
Donald Sipe, an attorney with law firm PretiFlaherty, urged the Commission to use caution if it decides to review the no-bump rule. "Even though it may be frustrating to have firm service and [then see an] IT user who put in a reservation ahead of you who can't be bumped, there is nonetheless an economic value in having that infrastructure not setting idle and have it available for someone to use on an interruptible basis," he said.
"So the existing no-bump rule...needs to be looked at not just in terms of just whether or not it's just easy for electric generation to run, but there's an overall economic calculus that we hope the Commission is going to take into account."
Sipe said he wants reliable service just like everyone else, but he wasn't sure how much consumers would be willing to pay for it.
The bumping deadline for IT service was instituted back in the mid-1990s when the energy business was structured around citygate deliveries, Crockett said. "That's not the case anymore. I truly believe that we need to take a look at changing some of the standards that we operate under. As a business, at 5 p.m. (central time), as far as my last cut-off that IT is flowing, there is still 15-16 hours left before the next gas day starts. I'm still in that intraday mode. There is a lot [that can] happen between 5 p.m. tonight and 9 a.m. tomorrow.
"I understand that IT wants to have a level of confidence, but maybe the IT should look at picking up some balancing operations and let the FT use their FT," she said.
Gerry Yupp, senior director of wholesale operations with Florida Power & Light (FPL), also cited scheduling problems with pipelines. "We have become more and more gas dependent and with the low cost of gas, we're 70% gas-fired generation in a typical month. It is very difficult on a daily basis, as weather changes, [to make] adjustments to our gas schedules, purely because we have a lot of large combined-cycle units."
He said FPL receives natural gas from the Florida Gas Transmission (FGT) and Gulf Stream Natural Gas pipelines. "We have almost 2 Bcf of firm transportation capability: roughly 700 MMcf/d on Gulf Stream and 1.3 Bcf on FGT. Over the last couple of years we [have used] our storage facilities much more than in the past."
The Southeast region -- which includes 10 states from Louisiana and Arkansas to North Carolina -- has an installed generation capacity of 288,567 MW, of which 45% is natural gas. In 2010, the last year for which figures are available, 1.06 million GWh of power was actually generated in the region. More than half of that was produced from coal, while natural gas fueled 24% of the generation, according to a FERC report titled "Electric and Natural Gas Infrastructure."
FERC projected that the generation capacity additions in the Southeast in advanced development and under construction will total 19,374 MW by 2020, of which 48% will be gas-fired plants. Currently, the agency said power generation comprises a little more than half of the gas consumption in the Southeast. By 2020, it expects the sector to consume approximately 60% or the region's gas demand.
Michael McMahon, senior vice president and general counsel with Boardwalk Pipeline Partners LP, said Boardwalk worked with TVA to develop an enhanced nomination service to respond to some of its concerns. "Rather than changing nomination [deadlines], we manage them...We sit down with each of the customers and say, 'what is it that you need,' and then we try to design a service, or enhance a current service or create an add-on."
Melissa Casey, director of Transportation Services/1 Line for Williams Gas Pipeline-East, said services also are being offered on Transcontinental Gas Pipe Line (Transco) to accommodate generators. For one, Transco is providing a service that would allow generators to come in before the gas day or during the gas day and put in a contingency-type request for their firm service.
If at the end of the day a generator did not need the service requested on a contingency basis, it would be provided on an IT basis to customers that would need it to stay out of any kind of penalty situation, she said. The company is also offering a new firm delivery lateral service, Casey said.
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