Over the past 10 years natural gas has become the predominant fuel used to generate electricity in New England, a shift that has “provided clear economic benefits” for the region, but has also created “serious reliability threats to the bulk power system,” according to Gordon van Welie, CEO of ISO New England Inc. (ISO-NE).

New England’s generation fleet, once powered by a diverse mix of oil, coal, nuclear and natural gas, now creates more than half of its electricity at power plants fueled by natural gas.

“Wholesale electricity prices are now primarily driven by natural gas-fired generation, but the wholesale electricity market design currently does not provide adequate incentives for generators to provide electrical energy when called upon by the ISO during stressed system conditions, and in particular for gas generators that have not made adequate and reliable arrangements for fuel supply,” van Welie said in testimony during a House Energy & Commerce Committee subcommittee hearing in Washington, DC, Tuesday.

New England has a significant reliance on “just in time” fuel delivery — not an easy match for the natural gas system, he said.

“When power plants do not have the fuel they need to operate, it creates tremendous operational challenges and threatens reliability. We are seeing this on a more frequent basis, and we believe the status quo is unsustainable.”

The CEO’s remarks echoed concerns ISO-NE voiced in a winter forecast the grid operator issued in December (see Daily GPI, Dec. 5, 2012).

New England gets anywhere from 50-70% of its energy from gas-fired units depending on conditions each day, according to Pete Brandien, vice president of system operations at ISO-NE (see Daily GPI, Dec. 4, 2012). Because the region doesn’t have the massive natural gas storage facilities available to some other regions, it is uniquely dependent on natural gas pipelines for its electricity generation.

In January, the Federal Energy Regulatory Commission (FERC) approved an ISO-NE proposal to share real-time information on natural gas-fired power generation resources with interstate gas pipeline operators in order to head off concerns about unreliable generation dispatch (see Daily GPI, Jan. 25). The grid operator requested real time data sharing with pipelines last year, warning of “significant reliability concerns regarding generator performance that may be exacerbated during the upcoming winter” (see Daily GPI, Nov. 15, 2012).

Other problems facing the region’s electricity generation fleet include inadequate natural gas infrastructure, van Welie said. Despite a relatively mild winter this year, wholesale electricity prices in New England were up significantly because of physical constraints moving the lowest-price gas to the region.

“We recognize that we have to address these issues with a sense of urgency,” he said. “Discussions are underway with our stakeholders, and we will be making multiple filings at the FERC over the next 12 months to address the many components of our action plan.”

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