The interdependence of the natural gas and electric industries is an issue that has captured the focus of the Federal Energy Regulatory Commission (“the Commission”) since 2011. In February 2011, widespread power outages occurred in the Southwest United States when low temperatures caused natural gas compressors to freeze, cutting off the supply for natural gas-fueled electric generators that were facing an increased demand for electricity at the time. This “Southwest cold weather event,” as the Commission refers to it, “brought to the forefront the close relationship between the natural gas and electric industries and highlighted certain challenges.” As a result, the Commission opened a proceeding (Docket No. AD12-12) to address the interdependencies of the natural gas and electric industries. With the increasing use of natural gas as fuel for generating electricity, it is of paramount importance that the industries are equipped to work together seamlessly. Taking note that stakeholders in the industries and some state/local officials were already taking action to assess the impact of increased gas-fired electricity generation, the Commission directed in its November 15, 2012 Order Directing Further Conferences and Reports that staff provide a report on this industry activity to the Commission at least once each quarter during 2013 and 2014. The first Quarterly Update on Gas-Electric Coordination Activities to the Commissioners, Item No. A-3, Docket No. AD12-12, recently was presented by the Commission staff covering September 2012 to February 2013. The update addressed several industry, regulatory and legislative activities at the national and regional levels, which we highlight below.
FERC Technical Conferences: In its November 15th Order, the Commission also directed staff to hold two technical conferences to explore communication between the natural gas and electric industries and scheduling discontinuities between the industries. These were two common issues raised during the five regional gas-electric coordination technical conferences that the Commission held in August 2012. The Communications Technical Conference was held on February 13, 2013 and the Scheduling and Capacity Release Technical Conference was held on April 25, 2013:
Communications Technical Conference: A major issue driving concerns about communications between the natural gas and electric industries for the purpose of coordination is the prohibition against engaging in undue discrimination or providing an undue preference in violation of the Natural Gas Act and Federal Power Act. The staff’s Quarterly Update indicated that both industries agreed during the February 13th Technical Conference that increased information sharing and communications should not be limited to emergency situations and that protocols for information sharing should be the same in all situations, while abiding by non-disclosure agreements and the restrictions of federal legislation and regulations. Both industries agreed that additional clarification is needed regarding such regulations.
The Quarterly Update also indicated that issues in the New England region dominated the discussion at the Communications Technical Conference. The independent system operator (“ISO”) that services New England’s electricity markets expressed that it lacks information necessary to “identify risks for reliable operations and to make more accurate decisions during the operating day.” The ISO-NE requested additional pipeline data, including information on fuel supply availability. In response, pipeline operators expressed concerns regarding how the requested data would be interpreted and limitations on their ability to provide the requested fuel supply information. Electric generator representatives similarly expressed concerns over the ability of pipeline operators to provide accurate and complete fuel supply information because they do not necessarily know “a generator’s complete fuel supply picture or options available.”
Scheduling and Capacity Release Technical Conference: The Scheduling Technical Conference was held on April 25, 2013, after the staff’s Quarterly Update was issued. We will discuss highlights from the April 25th Technical Conference in another post.
National Coordination Initiatives: The staff’s Quarterly Update highlighted activity engaged in by several industry organizations, including the North American Electric Reliability Corporation (NERC) which is developing a two-phased special reliability assessment on natural gas and electric power interdependency in the United States. The Quarterly Update also noted two U.S. Congressional hearings held by the House Energy and Commerce Committee, Energy and Power Subcommittee related to gas-electric coordination: (1) the March 5, 2013 hearing “American Energy Security and Innovation: The Role of a Diverse Electricity Generation Portfolio” focused on reliability and affordability issues and (2) the March 19, 2013 hearing “American Energy Security and Innovation: The Role of Regulators and Grid Operators in Meeting Natural Gas and Electric Coordination Challenges” focused on gas-electric coordination problems and possible federal, regional, state and local solutions.
Regional Coordination Initiatives: The staff’s Quarterly Update provided detailed discussion regarding gas-electric coordination initiatives at the regional level. There are far too many initiatives to delineate in the space of this post, so this highlights the Quarterly Update for each region:
- New England: The New England States Committee on Electricity (NESCOE) Gas-Electric Focus Group is leading efforts by facilitating monthly communication meetings between the industries with a goal of issuing a final evaluation of the challenges identified, the potential short-term, intermediate-term and long-term solutions, and a multi-phase study of pipeline capacity by Black & Veatch. The ISO-NE also has engaged with stakeholders to discuss reforms to prepare for winter and will file for Commission approval of such reforms.
- Mid-Atlantic: The ISO-NE, the New York ISO, PJM, the Midwest ISO (“MISO”), the Ontario IESO and the Tennessee Valley Authority partnered to conduct a multi-regional natural gas/electric analysis of interstate, intrastate, and local natural gas infrastructure serving the Eastern Interconnection. The work is expected to be completed by the end of 2014.
- Central region: The Electric-Natural Gas Coordination Task Force formed by MISO and its stakeholders has held monthly meetings resulting in the identification of several high priority gas-electric issues and sessions to educate the industries about each other’s operations and needs. A Gas-Electric Coordination Task Force was recently formed by the Southwest Power Pool and the Electric Reliability Council of Texas has engaged in many activities involving the Interstate Natural Gas Association of America, the Texas Energy Reliability Council, the Texas Railroad Commission, and the Texas Pipeline Association.
- West: There are several sub-regional natural gas-electric coordination initiatives, including initiatives by the State-Provincial Steering Committee (SPSC), the Power and Natural Gas Planning Task Force made up of natural gas pipelines and electric utilities in the Pacific Northwest, ColumbiaGrid’s Gas-Electric Interdependencies Study Team, and the California ISO, which is launching gas-electric coordination discussions with the state’s gas companies.
- Southeast: The largest generator of electricity initiated discussions with natural gas pipelines, resulting in a decision to coordinate planned gas and electric system outages on a monthly basis beginning in November 2012.
Gas-Electric Coordination Related Filings at the Commission: The Quarterly Update discussed seven filings submitted by natural gas pipelines at the Commission related to gas-electric coordination: three seeking increased capacity, three seeking increased service flexibility via additional nomination opportunities and cycles, and one seeking enhanced daily scheduling and gas balancing flexibility.
For additional details regarding the first Natural Gas-Electric Coordination Quarterly Update, you can read the full update here. The next Quarterly Update will be presented to the Commission at the open meeting in June 2013. We will keep you informed of additional developments in the Commission’s Natural Gas-Electric Coordination Docket.