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FERC Would Shake Up Gas Day for Better Power Gen Alignment

Interstate pipelines would have to rise and shine a lot earlier to serve an industry segment that is growing significantly in gas-demand importance -- electric power generators -- under a FERC proposal released Thursday intended to better coordinate the nation's interstate pipelines and gas-fired power plants.

FERC issued a notice of proposed rulemaking (NOPR) that would tackle the long-running and increasingly nettlesome issue of gas-power coordination by shaking up the natural gas day. For starters, the gas day would start much earlier -- at 4 a.m. central clock time (CCT) instead of the current 9 a.m. -- in order to give power generators in every time zone an opportunity to enter the morning demand ramp-up period with fresh gas nominations.

FERC "staff felt that this proposal should largely eliminate the concerns expressed by some electric transmission operators that some gas-fired generators would be unable to run during a substantial part of the morning ramp period because they have burned through their nominated gas before the start of the next gas day," Caroline Wozniak of FERC's of Policy and Innovation, said at the Commission's regular meeting Thursday.

But the proposed changes to the gas day don't stop there. The NOPR also proposes to:

  • Start the first day-ahead gas nomination opportunity for pipeline scheduling, the Timely Nomination Cycle, later -- at 1:00 p.m. CCT -- to allow electric utilities to finalize their scheduling before gas-fired generators must make gas purchase arrangements and submit nomination requests for natural gas transportation service to the pipelines.
  • Modify the current intraday nomination timeline to increase the number of intraday nomination cycles, to provide greater flexibility to all pipeline shippers, not just those shipping on interstate pipelines that voluntarily allow more flexible nomination opportunities. The NOPR proposes to move from two to four standard intraday nomination cycles, which would occur at 8:00 a.m., 10:30 a.m., 4:00 p.m. and 7:00 p.m., all CCT.

"Gas flows reflecting successful intraday nominations would change at noon, 4:00 p.m., 7:00 p.m. and 9:00 p.m. respectively," Wozniak said. "The draft NOPR proposes to maintain the No-Bump Rule during the proposed Intra-Day 4 cycle to provide assurances for interruptible shippers that they will not be bumped without an opportunity to renominate their volumes. At the same time, the proposed timeline would allow bumping during the proposed new Intra-Day 3 cycle to permit firm shippers to utilize the higher priority service for which they are paying.

"In addition, the draft NOPR clarifies Commission policy concerning the ability of a pipeline to permit firm shippers to bump an interruptible shipper’s nomination during any enhanced nomination opportunity proposed by a pipeline beyond the standard nomination opportunities.

"Finally, in order to permit more efficient and effective use of transportation capacity, the draft NOPR proposes to require all interstate pipelines to offer multi-party service agreements, under which multiple shippers can share interstate natural gas pipeline capacity under a single service agreement.

Wozniak was asked by acting FERC Chairman Cheryl LaFleur about the much earlier start of the gas day.

"Staff recognizes that moving the start of the gas day earlier may require manual changes to gas equipment during the night hours," Wozniak said. "But on balance, the overall benefits to both industries of moving the start of the gas day earlier appeared to outweigh the potential for increased costs that may be incurred. However, we believe that industry could arrive at a different start time for the gas day in the course of their work toward possible consensus on alternatives to the Commission's proposals."

The NOPR provides 180 days for the natural gas and electric industries to reach consensus on standards, including any modifications to the Commission's proposed revisions through the North American Energy Standards Board (NAESB). Public comments on the proposals, as well as comments on any consensus standards, are due within 240 days.

Commissioners seemed to take pains during the discussion of the NOPR to emphasize that they are willing to be flexible on what comes out of the NAESB process. Commissioner Tony Clark wanted to give the gas industry more time to work on its ongoing efforts at coordination. However, Commissioner John Norris said it was time to "set a marker down."

During discussion, Norris said the gas industry has been in "an untenable position" in dealing with the gas-power coordination issue. "It's almost like they had to negotiate against themselves because a lot of the sacrifice here is on the gas side," he said. "And at the end of the day, I'm not sure more time would have been any assistance for someone who's in that untenable position. We [FERC] need to take some leadership on this...I want to note the burden that's probably disproportionately on the gas industry, but now that gas generation is becoming their biggest customer, there may very well have to be some adjustments made."

Even with the marker down, the gas-power coordination issue, which has been with the industry for years already, isn't going away anytime soon.

"It's my view that the issue of coordinating the gas and the electric industries is probably going to the defining issue of this commission over the next five years," said Commissioner Phillip Moeller. "We're going through an enormous transformation of shutting down a lot of coal [-fired generation] in a very short amount of time [see related story]. We appear to have long-term supplies of low- to moderately priced natural gas, which is clearly taking up the space of coal.

"We are going to be using quick-ramping machines to deal with the intermittent nature of more renewables on our grid. So this, I believe, whether we like it or not, is going to be with us for at least the next four or five years.

Moeller acknowledged that some industry participants who took part in the NAESB standards-setting process about a decade ago came away from the experience feeling unsatisfied and that little had been accomplished. "It's different this time," Moeller said. "It's different because we are providing the policy guidance and a limited time period in which people can respond. And that will result in a more productive process and one that we have something out there for people to work off of -- much different than 10 years ago...Nevertheless, if consensus can be reached before six months, we'll certainly take it."

In two separate but related orders, FERC established proceedings under the Federal Power Act (FPA) and Natural Gas Act (NGA).

The Commission initiated investigations under section 206 of the FPA into the day-ahead scheduling practices of the regional transmission organizations and independent system operators to determine if they are just and reasonable and to ensure that these entities' scheduling practices correlate with any revisions to the natural gas scheduling practices that may be adopted by the Commission in a final rule stemming from the NOPR. All filings must be submitted to FERC within 90 days of publication of the final rule [Docket Nos. EL14-22-000, EL14-23-000, EL14-24-000, EL14-25-000, EL14-26-000, EL14-27-000].

In a third order, the Commission initiated an NGA Section 5 show cause proceeding requiring all interstate natural gas pipelines to revise their tariffs to provide for the posting of offers to purchase released pipeline capacity in compliance with 18 CFR §284.8(d) of the Commission's regulations, or to otherwise demonstrate full compliance with that regulation. All filings must be submitted to FERC within 60 days of the issuance of the order [Docket No. RP14-442-000].

Staff told the Commission that a sampling of pipeline websites and tariffs "indicates that pipelines are not complying with the requirement to provide for the posting of offers to purchase capacity. Besides requiring the filings at the Commission, the order also asks NAESB to develop business practice and communications standards specifying the information required for requests to acquire capacity; the methods by which the information is to be exchanged; and the location of the information on the pipeline's website.

Moeller expressed satisfaction that FERC has taken up this issue as he has heard many generators are frustrated with their ability to trade gas after hours and on weekends, particularly long weekends. He suggested that the measures proposed would increase transparency and liquidity and reduce price spikes during peak times, particularly over weekends during cold periods.

"This past winter has highlighted the critical and growing interdependence of natural gas pipelines and electricity markets," LaFleur said. "Today's orders take steps to recognize and address that interdependence to optimize the use of our gas and electric networks for the benefit of all customers. We look forward to receiving comments from a wide range of stakeholders."

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