NAESB to Seek Industry Comments on Proposed Modified Standards Prepared in Response to FERC Gas-Electric Coordination NOPR

by Moore & Van Allen PLLC

The Notice of Proposed Rule Making re: Coordination of the Scheduling Processes of Interstate Natural Gas Pipelines and Public Utilities (Docket No. RM14-2-000) (“NOPR”) issued by the Federal Energy Regulatory Commission (“FERC”) on March 20, 2014 has spawned an extraordinary effort by the North American Energy Standards Board (“NAESB”) and natural gas and electric industry participants to develop a consensus on standards for coordinating the scheduling processes of the natural gas and electricity markets. In a previous post, we discussed the ongoing efforts of the NAESB Gas-Electric Harmonization Forum (“GEH Forum”), which provided industry stakeholders, regulators, consumer advocacy groups, and others an avenue to work towards a consensus proposal to submit to the NAESB Board of Directors for consideration, and ultimately to FERC in response to the NOPR. Nearly 470 people reportedly participated in the four GEH Forum meetings held in Houston, TX and nearly 700 people monitored the effort through distribution lists. Throughout the course of the meetings, more than 13,000 individual votes were cast on 56 ballots. After presentations of several alternative proposals, the GEH Forum narrowed the proposals down to four for consideration in a vote in early June. None of the four proposals garnered the requisite level of support from the GEH Forum participants to constitute a consensus. However, the NAESB Board of Directors noted that “there appeared to be broad support from interested parties in both the gas and electric industries for changes to the intraday scheduling cycles and the day-ahead nomination cycles.” Accordingly, the NAESB Board voted to modify the Wholesale Gas Quadrant (“WGQ”) Annual Plan to assign standards development work to several WGQ Subcommittees in order to implement changes to these cycles consistent with the timelines presented in the final proposal considered by the GEH Forum.

On June 18, 2014, NAESB submitted a status report to FERC which detailed its efforts thus far and provides a timeline for continued efforts prior to the submission of NAESB’s response to FERC in September 2014. The NAESB report states that it is merely a status report and “NAESB does not advocate that the Commission take a particular position on any of the issues presented.” NAESB’s efforts to modify its standards have continued through the WGQ Subcommittees, with the most recent meeting on July 8. NAESB’s timeline calls for the posting of proposed modified standards for industry comment by July 18, 2014. We describe in more detail below the outcomes of the GEH Forum and NAESB Board votes on alternative proposals, and highlight the WGQ Subcommittee’s work and timeline for presenting a response to the FERC NOPR. 

Outcome from GEH Forum June 2-3, 2014 Meeting & Vote on Alternatives to FERC NOPR Proposal:

The final binding votes on the four alternative proposals were taken on June 2-3, with one alternative being eliminated through each successive vote. A table in Appendix A of the GEH Forum Comparison of FERC Proposal to Existing NAESB Standards outlines the four alternatives considered by the GEH Forum, as well as an alternative that does not include the specification of a gas day start time and a comparison of the proposal outlined in the NOPR and current existing NAESB standards.

The NAESB Board of Directors had determined in April 2014 that to reach a consensus of the GEH Forum there must be a super majority affirmative balanced vote of 67% of each of the WEQ and WGQ participants and at least 40% affirmative balanced vote of each of the segments. The GEH Forum did not achieve a consensus vote on any of the four proposals. The proposal with a 9 am CCT gas start day received the most votes on a balanced basis. However, the 9 am CCT gas start day still failed to meet the required super majority and balanced votes, and it failed to garner a simple majority balanced vote of one of the quadrants. The ISO Group, which includes ISO-NE, NYISO, PJM, MISO, SPP and ERCOT, had supported the 4 a.m. CCT start to the gas operating day and submitted IRC Comments on 4AM Gas Day. A table reflecting each vote can be found in Appendix B of the GEH Forum Comparison of FERC Proposal to Existing NAESB Standards.

Outcome of NAESB Board of Directors Meeting on June 4, 2014:

Despite the lack of consensus from the GEH Forum, the NAESB Board reported that the analysis and work that the GEH Forum completed was helpful. The Board of Directors met June 4, 2014 and voted on the following motion:

Although consensus was not reached on a complete alternative to the proposed changes in the NOPR there appeared to be broad support from interested parties in both the gas and electric industries for changes to the intraday scheduling cycles and the day-ahead nomination cycles. Accordingly, the Board directs the WGQ Executive Committee (EC) to:

Add an item to the WGQ annual plan instructing the WGQ EC to write standards to reflect the timely and evening next day nomination cycles, and the 3 intraday nomination cycles as described in the last motions of the NAESB GEH Forum, remaining silent on the start of the Gas Day with the assumption the Commission will establish the gas day start best suited to achieve the objectives defined in the NOPR. Once an order is issued by the Commission in the NOPR proceeding, the WGQ EC will make the appropriate changes to the standards to reflect changes as ordered by the Commission.

This motion is for the purpose of initiating work on the revisions to the standards and does not limit or restrict in any way those voting in favor of the motion from taking whatever position they deem appropriate to their interests in the NOPR.

Based on a simple majority vote by each quadrant of the Board, it modified the WGQ Annual Plan to assign the following standards development work to the WGQ Business Practices Subcommittee (BPS) and to the WGQ Information Requirements and WGQ Technical Subcommittees in support of the timeline defined by the GEH Forum:

Develop new standards and modify existing standards to support the timelines for timely, evening, ID1, ID2 and ID3 nomination cycles as specified in Attachment A of this plan and make corresponding changes where necessary to other standards such as those that support capacity release programs. The standards should be neutral on gas day start times; meaning that all references to the 9 am CCT start of the gas day should be removed.

WGQ BPS Efforts & Timeline for Industry Comment

The WGQ subcommittees have initiated work on standards development with the goal of voting on a recommendation containing the modified or new standards by July 18, 2014. The BPS has worked to identify standards that require modification and has held several meetings to discuss potential modifications since June 5, 2014, with the most recent being on July 8, 2014. You can access minutes and information from several of the BPS meetings, which outline the standards discussed: June 5, Draft Minutes (redlined),June 12, Final Minutes, June 26, Final Minutes, July 8, Draft Minutes. A possible vote was on the WGQ BPS July 10, Meeting Agenda, but the meeting has since been cancelled.

The NAESB timeline outlines the following schedule for additional work on the standards development:

  • By July 18 – Subcommittee will vote on a recommendation containing the modified or new standards and post standards for a thirty-day industry wide comment period.
  • August 18 – Industry comment period ends.
  • August 22 – WGQ Executive Committee will consider the recommendation and comments submitted, and will vote on recommendation. If approved, the recommendation will be distributed for ratification by NAESB membership.
  • September 22 – Ratification Ballot Period ends. If ratified, the standards become NAESB final action.
  • September 29 – NAESB standards filed with FERC.

Upon issuance of a final rule by FERC, NAESB plans to respond by integrating FERC regulations into its standards within 90 days of the effective date of the final rule and will notify FERC when the standards have been approved.

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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