While natural gas and electric power market representatives wrangled over changes to better align operations of the two markets, a Boston-based industry veteran suggested solving the problem by allowing pipelines to return to their merchant function on a limited basis.
Pipelines ought to be allowed to buy and sell gas as a short-term solution to balancing the market until more pipeline facilities are in place to serve generators, particularly those in New England, which is considered one of the most “illiquid” markets, said Greg Lander, president of the Skipping Stone consulting firm. “That’s a phrase used by generators who can’t find someone to buy gas from on Saturday night,” he said.
Lander said he didn’t know whether the Federal Energy Regulatory Commission was receptive to his idea. Other options that have been recommended are the changing of gas pipeline and power generator schedules so that they are better aligned, and the construction of more pipeline facilities to deliver gas to generators, which are increasingly relying on gas.
The latest FERC technical conference on the coordination of the natural gas and power markets, which was held Thursday, showed the industries are no closer to resolving the coordination issues between the two industries. The markets are progressing “very slowly,” Lander said.
Speaking on behalf of the American Gas Association (AGA), James Stanzione, director of federal gas regulatory policy at National Grid, said the AGA does not support changes to natural gas pipeline schedules. “We don’t see any large incremental benefits” to changing the nomination cycles, he said.
Revisions to scheduling would require additional staffing and system improvements, the costs of which would have to be borne by customers, Stanzione told staffers and members of the Commission at the conference [AD12-12]. The natural gas and power markets, and FERC staffers, have been studying ways to better coordinate the two markets since last August.
“[We] tremendously support” changing the gas day from 10 a.m. [when nominations are due], said New York ISO’s Wes Yeomans, vice president of operations.
Skipping Stone also proposes an “Eastern Energy Day” and a “Western Energy Day” for both gas and electricity markets in these regions. The days would begin at 6 a.m. in each of the Pacific and Eastern time zones, with the Mountain and Central commencements at 7 a.m. and 5 a.m. local time, respectively.
“The benefit to moving the gas day earlier by four hours Eastern and three hours Central, one hour Mountain and one hour Pacific [is] we better align the start of the gas day with the start of the morning burn across the country. This means that instead of an LDC [local distribution company] having to guess on Monday what Wednesday morning’s burn will be, they will be able to nominate on Monday for Tuesday and Tuesday for Wednesday.
“Likewise by moving the electric grid’s electric day to six hours later in each of Eastern and Pacific and five hours later in each of Central and Mountain [time zones], they will be better able to coordinate the scheduling of their next day’s fuel with the gas industry’s start. This sets the stage for better market and operational coordination,” Skipping Stone said.
The idea of an eastern and western gas day doesn’t fly with the North American Energy Standards Board (NAESB), which pointed out the difficulties for a multi-pipe path through a divided grid.
Mark Stultz, BP Energy Co. senior vice president for regulatory policy and communications, questioned how effective the proposal would be. “I think the questions raised around that are, would that really solve the dilemma that you’re facing with the sub-regions that would still exist on the power side? Even if you divided the U.S. in half and had a gas day that started at a different time on the East half versus the West half, you still wouldn’t necessarily be synchronized with those regional power markets,” he said at a recent LDC Gas Forum in Atlanta (see Daily GPI, April 17).
Rather than focusing on moving to a single “energy date,” the Commission should encourage each region to identify its specific issues and develop solutions for that region, said Lin Franks, senior strategist for the Indianapolis Power & Light Co., who spoke on behalf of Edison Electric Institute.
The “discussion on scheduling changes is an important one, but it is important to remember that there are a number of issues, such as the need for additional pipeline capacity in New England, which cannot be resolved simply by making changes to scheduling practices. The Commission should encourage the natural gas industry, especially pipelines, who will be building infrastructure, and producers, who will be [supplying] natural gas, to work with the electric industry on a regional basis to develop innovative solutions,” he said.
Richard Kruse, vice president of regulatory affairs for Spectra Energy, said he was “generally supportive” of gas pipelines moving toward a common energy day, where the gas and electric markets would operate on the same time frame. Columbia Pipeline Group also said it was not opposed to a single energy day.
Responding to the concerns that it heard during five regional conferences last August, FERC is seeking to bolster the coordination between natural gas pipelines and power generators.
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