The Federal Energy Regulatory Commission (FERC) recently employed the somewhat unusual device of issuing data requests to electric power industry participants in an attempt to obtain information that might support a controversial proposed rulemaking that would change the ways in which the natural gas and electric power industries interact.  Not only did the responses fail to provide objective support for FERC’s proposal, they suggest that significant portions of the United States might not realize any benefit from the changes FERC has proposed.

In March 2014, FERC issued a notice of proposed rulemaking (“NOPR”) in which it proposed to change the start of the “Gas Day” – the 24-hour period during which natural gas transportation through pipelines is nominated and scheduled – from 9:00 a.m. to 4:00 a.m. Central Clock Time (CCT), and to make other changes to the natural gas transportation nominations schedule, to better coordinate the scheduling of natural gas and electricity markets (Docket No. RM14-2-000).  The NOPR is part of FERC’s ongoing effort to promote electric supply reliability by encouraging improved coordination between the natural gas and electric power industries. 

The proposed change in the Gas Day is FERC’s response to electric industry requests to make the Gas Day coincide with the electric day, which generally begins at 12:00 midnight local time.  Noting the benefit of a standardized nationwide Gas Day, rather than one that begins at different times, FERC has declined to make this change.  Instead, FERC proposed changes in the Gas Day that it reasoned would promote electric generation efficiency by allowing generators to schedule their gas transportation and supply on a day-ahead basis.  The 4:00 a.m. Gas Day would start before the morning ramp-up in electric demand.  With the current 9:00 a.m. CCT Gas Day, the morning ramp-up occurs near the end of each Gas Day, a time at which there is little flexibility for generators to arrange changes in gas supply and transportation arrangements.

Over 75 individuals, groups and organizations filed comments on FERC’s NOPR in late November.  The comments reflect a sharp disagreement between natural gas and electric industry participants.  Electric industry comments, filed by independent electric transmission system operators (“ISOs”), regional transmission organizations (“RTOs”) and electric power generators, strongly support the proposed 4:00 a.m. CCT Gas Day start time.  Electric sector interests generally concur that the change would achieve the benefits that FERC describes in the NOPR.  Commentors aligned with the natural gas industry, on the other hand, strongly oppose the change in the start of the Gas Day, citing safety and staffing concerns.  They observed that advancing the start of the Gas Day to 4:00 a.m. CCT would compel industry participants to undertake significant activities in the middle of the night, and that computer system modifications required to implement the modified Gas Day would be costly.  One commentor estimated that it would cost the natural gas industry “hundreds of millions of dollars” to implement the Gas Day change. 

Shortly after receiving comments on the NOPR, FERC solicited information that might support its proposed rulemaking.  In December 2014, FERC sent data requests to six ISOs and RTOs seeking information regarding circumstances that might be mitigated by the proposed rulemaking. The recipients were California ISO (“CAISO”), Southwest Power Pool (“SPP”), Midcontinent ISO (“MISO”), ISO-New England (“ISO-NE”), New York ISO (“NYISO”), and PJM Interconnection (“PJM”).  FERC asked how often natural gas-fired generation facilities were declared unavailable or operated at reduced output because the generators had exhausted their daily nomination of natural gas transportation service before the end of the Gas Day.  The ISOs and RTOs filed responses on January 22, 2015. 

CAISO stated that it has not located any record of a natural gas-fired generator that had to de-rate a unit because the generator had exhausted its daily nomination of natural gas transportation service before the Gas Day had ended.  CAISO went on to state that “natural gas-fired generators operating in the CAISO balancing authority generally do not face problems securing sufficient fuel to meet the morning electric ramp under existing electric and gas market timelines.” 

MISO stated that its data “does not contain the level of detail and specificity to reflect if the fuel-related outages were specifically due to the generators having exhausted their daily nomination of natural gas transportation service prior to the end of the gas day.”  But it noted that “MISO has not experienced any significant impacts caused by generators running out of natural gas during the morning ramp.” 

SPP said it does not collect data on the underlying causes of generation de-rates.  SPP noted that it does not require generators to submit information related to their nominated gas transportation, and thus does not have information that would be responsive to the request.

Only ISO-NE, NYISO, and PJM indicated that they had experienced circumstances in which gas-fired generators had to de-rate because they had exhausted natural gas transportation service nominations prior to the morning ramp.  Even these responses, however, were less than decisive.  ISO-NE stated that “ISO-NE does not have specific information regarding whether the de-rates occurred solely due to the exhaustion of gas nominations, but given the timing of the de-rates, ISO-NE believes this is likely the cause of the de-rates.”

Several organizations subsequently filed comments asserting that the RTO/ISO responses do not justify FERC’s proposed changes to the Gas Day.  The Natural Gas Council (“NGC”), representing ten major natural gas industry and customer associations, characterized the NOPR as based on “unsupported assertions” that generators would benefit from an earlier Gas Day.  NGC stated that the “RTO/ISO responses clearly confirm that there is not a nationwide problem during the morning electric ramp associated with the current start time of the Gas Day.”  It was also critical of the grid operators for failing to provide details on whether generators claiming insufficient fuel had contracted for firm or interruptible transportation services.  These comments mirror earlier comments that had noted generally that the change in Gas Day start time cannot overcome electric generators’ election to refrain from contracting for firm services.  Commenters offering this observation stated that firm contractual commitments on the part of electric generators would provide support for the development of needed pipeline infrastructure.  Comments raising similar arguments were filed by American Public Gas Association, the New England Local Distribution Companies and the Coalition for Enhanced Electric and Gas Reliability.

The ISO/RTO responses to FERC’s data requests fall short of providing objective support for FERC’s proposed Gas Day rulemaking.  At most, they suggest that the potential benefits of changes to the Gas Day would be limited to certain regions. 

Before the ISOs and RTOs had filed their responses, a number of observers seemed to regard FERC’s adoption of the proposed changes to the Gas Day and nominations schedule as a near certainty.  These responses and subsequent comments may make it more difficult for FERC to justify a rulemaking decision that commentors argue would saddle the natural gas industry with significant costs, but may only have limited benefits to the electric industry. 

FERC is expected to act on the NOPR as early as this spring.

William E. Rice
Washington, D.C.
+1 202 626 9602
wrice@kslaw.com
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