The Federal Energy Regulatory Commission (FERC) shouldn’t take a piecemeal approach to resolving coordination issues affecting the natural gas and electric markets, the Natural Gas Supply Association (NGSA) said Friday.
“FERC should be guided by several important principles in the natural gas-electric coordination reviews: the evaluation should be comprehensive; it should create an environment conducive to dialogue and negotiation; it should clearly identify and prioritize concerns; it should set a national framework and objectives that allow for regional flexibility; and it should take the lead over other bodies in setting policy,” the producer group said.
Both industries should have a “seat at the table” so they can “work together to identify mutually agreeable approaches” to firm and interruptible contracts, scheduling, reliability and other coordination issues, the NGSA said.
It said there are “buckets” of issues to address under the “umbrella of gas-electric integration,” including the differences between gas and electric day scheduling; the operational and cost impacts of generation on existing pipeline shippers; gas and power communications; as well as electric reliability concerns associated with pipeline contracting practices and power market rate structures.
“Electric utilities want to look out the window and see the gas counterpart of a ‘coal pile,’ assuring them that natural gas will be there. A firm contract for natural gas transportation is the equivalent of the coal pipeline. Unfortunately, existing power market rules do not send the kind of price signals needed to secure firm pipeline services,” the group said.
The Natural Gas Council also called on FERC to lead the effort to coordinate the electric and natural gas markets, with the North American Energy Standards Board and North American Electric Reliability Corp. more or less playing supporting roles. “Strong FERC leadership is needed to set a comprehensive coordinated and continued course of action.With greater reliance on natural gas for electricity generation, FERC must address whether the market rules governing wholesale natural gas and electric power markets optimize the ability of the natural gas industry to offer, and the electric power industry to purchase, the natural gas supply, transportation and storage services needed to ensure the reliability of the electric power grid,” it noted.
The council’s and the NGSA’s comments are in response to a proposed rule, which FERC issued in early February, seeking to improve the coordination between the natural gas and electricity industries to avoid a repeat of the severe gas service outage that curtailed energy delivery to thousands of customers in the Southwest last winter (see Daily GPI, Feb. 17).
The proposed rule would amend its regulations to incorporate by reference, with certain exceptions, the latest version of business practice standards adopted by the Wholesale Gas Quadrant of the North American Energy Standards Board with respect to natural gas pipelines.
The new standards include provisions that would support coordination between the gas and electric industries, standards for pipeline postings of information regarding waste heat, as well as revisions to the standards designed to allow more efficient processing of wholesale natural gas transactions, according to the Commission’s proposed rule.
With respect to the standards regarding coordination between the gas and power industries, the new standards provide public utilities and other shippers with clear identification of changes in pipeline system conditions by creating 15 new notice types posted on the pipelines’ websites. The new notice types alert shippers to intraday bumps, operational flow orders and other critical system changes.
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