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Massey: RTOs Spell Good News for Gas Generators

Massey: RTOs Spell Good News for Gas Generators

Regional Transmission Organizations (RTOs), a grid interconnection policy and FERC's merger-review policy are issues that have captured the interest of the electric industry, but Commissioner William Massey says natural gas companies should be equally as curious since the measures are likely to favorably influence demand.

"Number one, we believe that RTO formation will stimulate entry for new gas-fired generation. Why is that? Gas-fired generators may often be merchant facilities," which "need large vibrant electric markets to sell their power." The creation of such markets is one of the "stated policy goals of RTOs," which would amalgamate the bulk power market into large regions.

"RTOs I believe, because they will spur new gas-fired generation, will stimulate pipeline expansion in order to achieve this 30-35 Tcf market" that the gas industry forecasts for 2015, he said at the winter meeting of the National Association of Regulatory Utility Commissioners (NARUC) in Washington D.C. last Tuesday.

"The RTOs, I believe, will also facilitate efficient pipeline operation. There will be a load-leveling effect of gas-fired generation, much of which [will] peak in the summer" rather than in the winter, as occurs in traditional gas markets. Furthermore RTOs "will reinforce the need for transactional transparency in gas markets."

"First and foremost, we need to eliminate whatever barriers there are to electric generation interconnect.....An independent generator needs the same right to interconnect to the grid that utility generation has. That should be a feature of our policy, and arguably already is as a matter of fact under Order 888," he noted.

Likewise, parties shouldn't be required to subscribe to long-term transmission capacity as a condition to interconnecting with the electric transmission grid. Massey said the energy industry or the Commission should propose a "uniform agreement" for interconnections. "I believe that gas-fired generation and the entire gas industry will benefit from such a policy."

As for FERC's merger-review policy, Massey noted that "to the extent the Commission ensures that anti-competitive effects of mergers are mitigated, we are essentially promoting markets" for electricity, and gas also.

In the vertical Dominion-Consolidated Natural Gas merger, for example, "we took our basic Order 497 rules [regarding marketing affiliates].....and we applied those rules more broadly, so that the upstream natural gas pipeline could not use its access to sensitive information in a way that would favor its newly acquired downstream generation resources," he said.

Also speaking at the NARUC meeting, FERC Commissioner Linda K. Breathitt said there may be an Internet-effect on FERC proceedings. "....[L]andowners I think, and it may be through the advent of the Internet, are communicating over larger areas with one another, and are getting more organized to bring their issues to local forums, to state forums and to federal forums, such as FERC," she said.

"So they're getting very savvy about new pipeline construction either in a crowded urban area or [in] a new area," which "presents us with more issues on our plate to deal with," Breathitt noted. "I think we are entering into an era.....that raises a lot of new issues for the Commission, and those are landowners' concerns."

Asked what the Commission's plans in the wake of Order 637, she said it will include discussions with stakeholders "about such issues as whether we need to make regulatory changes to accommodate the convergence of energy markets, whether we need to further standardize terms and conditions of service and what rate design changes may be appropriate for the future."

Susan Parker

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