FERC Issues NOPR Regarding Coordination of the Scheduling Processes of Interstate Natural Gas Pipelines and Public Utilities

by King & Spalding
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At the March open meeting, FERC issued a notice of proposed rulemaking (NOPR) in which it proposed changes to the Gas Day and pipeline nominations schedule (Docket No. RM14-2-000, 146 FERC ¶ 61,201). The NOPR is part of the Commission's ongoing program to enhance coordination between natural gas pipelines and electric generators in support of increased reliance on natural gas as fuel for electric generation.

The NOPR proposes to shift the start of the Gas Day from 9:00 a.m. CCT to 4:00 a.m. CCT. FERC's intent is that the Gas Day start before the electric morning ramp up, thus allowing the highest demand portion of the electric day to fall within one Gas Day. The electric morning ramp up schedule varies across the country by time zone; however, FERC recognized the benefit of maintaining a standardized nationwide Gas Day.

The NOPR also proposes changes to the natural gas pipeline nomination schedule. These changes include a later closing time for the Timely (day ahead) Cycle and adding two intraday cycles (for a total of four). The later Timely Cycle closing time is intended to allow electric generators time to purchase gas and arrange for transportation after their day ahead bids to generate electricity have been accepted by the transmission operators. The additional intraday nomination cycles are intended to afford electric generators increased flexibility to revise their nominations in response to real time changes in electric demand.

Coincident with the NOPR, FERC issued an order pursuant to Section 206 of the Federal Power Act initiating investigations of ISO and RTO scheduling practices (146 FERC ¶ 61,202). Six transmission operators are named in the order: CAISO, ISO-NE, PJM, MISO, NY-ISO and SPP. The investigation is intended to insure that ISO and RTO scheduling practices dovetail with the revised Gas Day and related nominations schedule changes that may be adopted pursuant to the NOPR.

The Commission included several unique procedural provisions in the NOPR, which appear to acknowledge the far reaching effects of the proposed changes in natural gas scheduling. The NOPR establishes a 180-day period during which electric and gas industry representatives are encouraged to work through the North American Energy Standards Board (NAESB) to develop consensus scheduling standards. FERC appears to recognize that its natural gas scheduling proposal, while reflective of industry input, might not be the optimal solution. FERC indicates that it is open to an industry consensus on the issues. NAESB has reportedly formed a Gas and Electric Harmonization (GEH) Forum to work on consensus standards.

The NOPR also establishes an 240-day comment period, ending roughly two months after the 180-day consensus period (comments are due by November 28, 2014). In addition, the NOPR discusses a 90-day period following the effective date of any new rules for NAESB to adopt conforming changes to its standards. The Section 206 Order directs that the ISOs and RTOs shall must make filings within 90 days following the publication of the Gas Day final rule in the Federal Register proposing any changes to their scheduling practices necessary to conform to the Gas Day and nominations cycles announced in such final rule. FERC states that it expects to respond to the ISO and RTO filings within a further 90-day period.

FERC's proposed changes to the Gas Day and nominations schedule will require considerable time to implement. Because of the eight-month comment period, it is not likely that FERC could issue a rulemaking order before 2015. Following issuance of the order, FERC allows 90-180 days for NAESB and the ISOs/RTOs to make conforming changes. In addition, all interstate natural gas pipelines will need to make changes to their tariffs to incorporate the new rules and changes to the NAESB standards and will need to make changes to their computer systems to accommodate the modified Gas Day and nominations schedule. In similar proceedings, changes to pipelines' computer systems have taken up to a year. Electric generators, gas marketers, index publishers and other market participants also will likely need to make changes to their systems and procedures.

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

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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