The possibility of blackouts Friday in New England because of lost gas-fired power generation and record demand prompted calls for legislative action by some Congressmen and Senators. But New England’s grid operator managed to keep the lights on, and the gas industry maintained firm deliveries during the bone-chilling cold that led to gas demand and spot price records.

“Every company reports that things are going well,” said Thomas M. Kiley, president of the Northeast Gas Association, following a meeting Thursday morning of the association’s Gas Supply Task Force. 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, but still meeting all their firm delivery requirements. “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.”

The area of greatest concern last week ended up being the power supply situation in New England. For some time now, the industry has cast a wary eye on the amount of gas-fired power generation in New England that is fueled by utilizing interruptible gas transportation (IT) and supply contracts. On Thursday, about 8,000 MW of power generation was offline.

The New England Independent System Operator reported a demand record Wednesday evening of 22,450 MW, another record Thursday evening of 22,727 MW and was expecting yet another record on Friday of 22,800 MW. The New York ISO also reported record winter demand of 24,627 MW on Wednesday and then 25,262 MW on Thursday.

However, 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, FERC 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.

While that would pose a significant problem for the region in an extreme case, FERC 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.”

That conclusion ended up being accurate, but perhaps it would have been a little more accurate to say New England would squeak by a few electrons shy of disaster.

After requesting that customers across New England take voluntary steps to conserve Thursday and Friday, the ISO warned that rotating blackouts were possible in the event of an unexpected loss of a large generation unit or transmission line. The ISO ended up being able to meet record demand on three consecutive days, but talk of such a serious blackout risk certainly didn’t go unheard in Washington.

Senate Energy and Natural Resources Chairman Pete V. Domenici (R-NM) used it as an opportunity to promote the energy bill. “The situation in the Northeast today gives us the perfect reason to stop this senseless filibuster on the energy bill and proceed to a vote on final passage next month,” Domenici said in a statement. “The crisis in the Northeast right now means skyrocketing energy prices, hitting the elderly and poor the hardest. It means more air pollution. Emergency electricity measures such as those being implement[ed] in the Northeast right now means burning more oil, burning more wood and firing up old diesel generators. It means fear and uncertainty for residents of the Northeast.”

He said the energy bill would “diversify our nation’s energy supply, so regions like the Northeast aren’t so dependent on gas and oil for their heat and electricity…”

House Energy and Commerce Committee Chairman Billy Tauzin (R-LA) and House Resources Committee Chairman Richard Pombo (R-CA) also couldn’t pass up the opportunity. In a letter to House Speaker Dennis Hastert, the two congressmen expressed concern that the “nation will face a growing natural gas and energy crisis” if the Senate does not pass a comprehensive energy bill. “As you know, the historic cold weather currently gripping the Northeast and New England is causing great hardship on residents of those areas, and has now led to warnings of potential rolling blackouts of electricity, which would only serve to amplify the suffering,” they said.

However, on Friday the New England ISO reported that, although it was still expecting another day of record demand and requesting voluntary conservation, conditions on the bulk power system had improved. The ISO said that it had “adequate electrical supply to meet demand due to the increased availability of generation units in the region.”

LDCs throughout the region also reported smooth operating conditions despite the severe weather conditions. “We don’t expect any supply problems in New England or elsewhere,” said NiSource spokeswoman Carol Churchill. “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.

She said that on Thursday 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 was expected to reach 620,000 Dth, surpassing the record of 574,000 Dth set the previous Friday.

KeySpan was 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 our 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,” said KeySpan’s Arangio. “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].” Spot prices hit a new all-time record of $76/MMBtu last week at Iroquois Zone 2 in New York, breaking the previous spot price record of $69/MMBtu set at the Southern California border on Dec. 11, 2000. The states of New York and Connecticut may want to reconsider their opposition to the Millennium Pipeline and Islander East pipeline projects. While the delivery system worked consumers are going to pay a price, a record high price.

But Arangio noted that the peaking prices were short-lived and were for small packages of gas that represent a tiny portion of the total gas supply in the region. “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 and it obviously was significantly cheaper last week. Gas in storage cost about $5.20/MMBtu based on price averages over last year’s injection season.

Kiley said part of the reason deliveries went uninterrupted into New England is because of the far northern concentration of the cold weather during the week. The industry had very good luck in avoiding wellhead freezeoffs. Demand on the southern half of the long-haul Gulf pipelines was normal to below normal. While Northeast prices soared over $50, Gulf Coast prices at the Henry Hub remained below $6.25.

Tennessee Gas Pipeline and Algonquin Gas Transmission both had 2% tolerance limits with hefty penalties for violations, but those were 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.”

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