FERC Issues Order No. 809 On Gas/Electric Coordination

Eversheds Sutherland (US) LLP

On April 16, 2015, FERC issued a Final Rule in Coordination of the Scheduling Processes of Interstate Natural Gas Pipelines and Public Utilities, Order No. 809, Docket No. RM14-2-000, 151 FERC ¶ 61,049 (2015). Recent cold weather events, as well as associated gas supply difficulties and high electricity prices, indicated a need to better coordinate the scheduling practices of interstate natural gas pipelines and gas-fired electric generators. The Final Rule requires interstate natural gas pipelines to make tariff filings incorporating the changes below by February 1, 2016, to be effective April 1, 2016.

The Final Rule adopts the following changes to interstate natural gas pipelines’ transportation quantity nominations timeline proposed by the North American Energy Standards Board (NAESB):

  • The Timely Nomination Cycle deadline is changed from 11:30 a.m. CCT to 1:00 p.m. CCT, with notice to shippers of scheduled quantities at 5:00 p.m. CCT. This change is intended to enable gas-fired generators to better coordinate their gas transportation nominations capacity with their electric dispatch obligations.
  • The existing bumpable Intraday 1 Nomination Cycle will continue to start at 10:00 a.m. CCT, but pipelines will issue scheduled quantities at 1:00 p.m. CCT, one hour earlier than currently required, and gas flow will begin at 2:00 p.m. CCT, three hours earlier than under the current standard.
  • The existing Intraday 2 Nomination Cycle is now bumpable and will start at 2:30 p.m. CCT, with pipelines issuing scheduled quantities at 5:30 p.m. CCT, and gas flow beginning at 6:00 p.m. CCT. The additional bumpable nomination cycle affords firm shippers another opportunity to adapt their nominations to load and weather changes.
  • A new no-bump Intraday 3 Nomination Cycle will start at 7:00 p.m. CCT, with the schedule issuing and gas flow beginning at 10:00 p.m. CCT. The later no-bump nomination cycle should give firm shippers another opportunity to adjust their nominations and provide certainty to interruptible transactions.

FERC found broad support in both the gas and electric industries for the revised nomination timeline. Because the modified timelines reflect reduced intraday processing times, FERC requested that the gas and electric industries, through NAESB, explore the potential for faster, computerized scheduling and a streamlined confirmation process.

Although both NAESB and FERC’s Notice of Proposed Rulemaking (NOPR) had proposed moving the start of the Gas Day from 9:00 a.m. CCT to 4:00 a.m. CCT, FERC ultimately declined to adopt this proposal. FERC found little evidence that the proposed change would provide sufficient benefits to outweigh its operational, safety and cost implications. While recognizing that certain regions might benefit from the proposed change in Gas Day start times, FERC noted that there were regional efforts already underway to address the misalignment between the Gas Day and the regional Electric Days. FERC appears content to defer to these regional developments, at least for the foreseeable future.

Lastly, the Final Rule adopted the NOPR’s proposed regulation requiring pipelines to offer multi-party firm transportation contracts. FERC, however, modified the NOPR’s proposal, so that pipelines need to offer this multi-party contracting option only if requested to do so by a shipper.

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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