Pursuant to the Federal Energy Regulatory Commission (“FERC”) November 15, 2012 Order Directing Further Conferences and Reports, the FERC Staff issued its third Gas-Electric Coordination Quarterly Report to the Commission  (“Third Quarterly Report”) on September 19, 2013, which provides updates on coordination efforts for the period June 2013 through August 2013 via FERC initiatives, regional initiatives, and filings in FERC dockets.  Notably, FERC issued a notice of proposed rulemaking on July 18th to address the barriers to coordination between the natural gas and electric industries caused by a lack of communication and information sharing.  We highlight the status of the FERC proposed rulemaking and additional initiatives covered in the Third Quarterly Report below.

FERC Coordination Activities

            On July 18th, FERC issued a notice of proposed rulemaking seeking comments on a proposed rule that is designed to close the communication gap between the natural gas and electric industries. (Docket No. RM13-17-000).  FERC noted that events over the last few years “illuminate the crucial interconnection between natural gas pipelines and electric transmission operators and the need for robust communication between these industry sectors to ensure that both systems operate safely and effectively for the benefit of their customers.”  The proposed rule reportedly builds on the results from conferences and comments filed with FERC following the February 13, 2013 Technical Conference on Coordination between Natural Gas and Electricity Markets (AD-12-12), and would impact coordination by (1) authorizing interstate natural gas pipelines and electric transmission operators to share non-public operational information to facilitate carrying on day-to-day operations, planned outages, scheduled maintenance, and in other non-emergency situations and (2) implementing a No-Conduit Rule that would prohibit recipients of non-public operational information from directly or indirectly disclosing the information to a third party.  FERC received 33 comments on the proposed rulemaking.  A copy of the proposed rule can be found here. 

Regional Coordination Initiatives

            The Third Quarterly Report reviewed the coordination activities organized at the regional level in New England, the Mid-Atlantic, the Central region, and the West.  Regional efforts largely consisted of task force and working group initiatives, roundtable discussions/conference calls, and commissioning of studies and whitepapers on a variety of pertinent issues.

Task Force Initiatives:

• The New England States Committee on Electricity (“NESCOE”) Gas-Electric Focus Group has made significant progress in achieving its goal of exchanging information and discussing potential short-term supply reliability solutions, setting forth a short-term winter plan in ISO-NE’s Winter Reliability plan currently pending before the Commission.  NESCOE will continue to meet as needed to develop medium to long-term plans.
• In the Mid-Atlantic region, the PJM Gas Electric Senior Task Force will be focusing on gas electric issues in upcoming months. 
• The Desert Southwest Task Force discussed potential strategies to meet reliability, market, and long-term capacity needs, including adjustments to the application of the no-bump rule for scheduling interruptible service on natural gas pipelines, adjustments to the pipeline nomination cycles, moving the start of a gas day, and creating a new transportation service for gas-fired power plants.

Roundtable Discussions/ Conference Calls

• In August, the Eastern Interconnection States’ Planning Council (“EISPC”) conducted roundtable discussions in which FERC Commissioner Moeller, national electric and natural gas industry associations, and other end-user associations participated. Panelists expressed concerns and contributed potential solutions to be considered in the long-term Electric and Natural Gas Infrastructure Requirements Study and Whitepaper that the EISPC will prepare.
• On July 10th, ERCOT participated in a Texas Energy Reliability Council conference call to discuss gas storage, the effects of summer electric generation needs on gas demand, and the potential for planned pipeline maintenance to affect delivery. No issues were raised during the call.

Studies

• NESCOE will meet in October to discuss the New England pipeline capacity study conducted by Black & Veatch. The three-phase study was recently finalized and recommends a short-term strategy (immediate deployment of dual-fuel generation, demand response measures, and the seasonal purchase of LNG), as well as a long-term plan (a cross-regional natural gas pipeline solution) which is estimated to be twice as beneficial to consumers than a Canadian energy imports solution.  
• The Eastern Interconnection Planning Collaborative (“EIPC”) Study is a multi-regional effort to analyze major interstate, intrastate, and local natural gas infrastructure serving the Eastern Interconnection.  “[T]he primary objectives of the study are to develop a baseline of the electric and natural gas systems; evaluate the adequacy of the regional gas systems to supply gas-fired generation needs over a 5-10-year horizon; identify contingencies on the natural gas system that could adversely affect the electric system and vice versa; and review the benefits and costs of dual-fuel capability compared with securing firm gas transportation.”  The study involves ISO-NE, NYISO, PJM, MISO, Ontario IESO and TVA.  It is being led by PJM and is expected to be complete by May 2015.  The stakeholder steering committee is scheduled to meet on October 29-30 in Washington, DC.
• The EISPC will conduct an Electric and Natural Gas Infrastructure Requirements Study that will produce a long-term analysis of the potential electric and natural gas infrastructure requirements for 2011-2030 under several build-out scenarios.
• In June, Levitan & Associates presented NYISO with findings from its Fuel Assurance Study which provided a costs-benefit analysis of providing fuel assurance through dual-fuel capability vs. securing firm transportation entitlement from a liquid sourcing point (Task 1), and analyzed grid security (Task 2).
• In August, the MISO Electric-Natural Gas Coordination Task Force presented initial results of Phase III of the MISO Gas-Electric Interdependency Analysis.  The study analyzed the capability of natural gas infrastructure to serve growing demand, and identified areas of pipeline congestion, changes in flow patterns, and development trends.  Final results were to be presented on September 15, 2013.
• The SPP Gas-Electric Coordination Task Force conducted a survey of natural gas-fired generators and is considering conducting a study in the Central region similar to the EIPC study.
• The Western Gas-Electric Regional Assessment Task Force issued an RFP and selected contractors for its Western Natural Gas – Electric and System Flexibility Assessment.  The two-phase study will analyze “adequacy of the natural gas infrastructure to meet the long-term (10 years) needs of the electric industry in the Western Interconnection” in Phase I and “short-term adequacy of natural gas operational flexibility to meet the Western Interconnection’s operational flexibility needs with increasing integration of renewables” in Phase II.  Preliminary results are expected to be completed in 9 months, with final results being completed by the end of 2014.
• Pacific Northwest Utilities Conference Committee’s (“PNUCC”) Power & Natural Gas Planning Taskforce is considering a second phase to the ColumbiaGrid Gas-Electric Interdependencies I-5 Corridor Study. The second phase of the study will explore hourly gas demand and how the current infrastructure would respond to increased natural gas generation in the I-5 corridor and large swings caused by gas demand from power plants and direct service companies.

Whitepapers

• The EISPC is preparing a Whitepaper that will “provide additional focus on natural gas and electric system operations and market structure; address issues such as contracting, planning, regulatory, and confidentiality procedures; and provide recommendations on potential payment options and future actions to improve the coordination between the electric system and the natural gas system.” The whitepaper should be completed by June 2014.
• MISO has several whitepapers in progress that will address various issues including, the potential misalignment of gas and electric schedules; communication enhancements and operational awareness improvements; resource adequacy; and adjustments to the energy and capacity markets.

Other Initiatives

• ERCOT has several additional initiatives underway, including a project to determine the electric supply needs of gas facilities that supply fuel to black start and next start electric generators, and implementing a Non-Disclosure Agreement that will allow gas pipelines, suppliers, ERCOT, transmission and distribution companies, and black start resources to share protected or confidential information about electric and gas infrastructure.
• ISO-NE considered and filed market rule changes and other proposed solutions to address gas-electric issues with FERC.
• SPP hosted sessions to train personnel from gas pipelines and marketers, and also deployed a visual pipeline mapping tool.

Natural Gas & Electric Filings in FERC Dockets

            The Third Quarterly Report reflected the following filings with FERC related to natural gas and electricity coordination:

Natural Gas Filings.  The Commission received three applications related to gas-electric coordination – two applications to expand pipeline capacity serving electric generation and one application to increase operational flexibility:

1. Eastern Shore Natural Gas Company filed a proposal to build a 5.5 mile pipeline lateral to transport 55,200 Dth per day for Calpine Energy Services to use in the Garrison Energy Center combined cycle power plant. (Docket No. CP13-498)
2. Transcontinental Gas Pipe Line Company proposed to add 225 MMcfd of firm transportation capacity to serve two anchor shippers that operate a significant percentage of gas-fired generation in the Southeast and Florida. (Docket No. CP13-523)
3. Gulf South Pipeline Company & Petal Gas Storage filed proposals for a new Alternative No-Notice Service to provide a flexible no-notice service for local distribution companies, electric generation markets, and other customers. (Docket Nos. RP13-1245-000 & CP13- 532-000)

Electric Filings:  The Third Quarterly Report reflected seven electric filings, most of which came from the Northeast region:

1. Dominion Energy Marketing, Inc. previously filed a request seeking recovery of $336,095 in fuel costs and regulatory costs related to maintaining reliability during a cold weather event.  FERC granted the request subject to Dominion filing a detailed report of actual regulatory costs, and required ISO-NE to revise its tariff to reflect a method for similar cost recovery in the future.  In August, Dominion and ISO-NE filed the requisite reports and tariff revisions, which are currently under consideration by FERC. (Docket Nos. ER13-1291-000 and EL13-72)
2. ISO-NE and New England Power Pool Participants Committee (NEPOOL) filed market rule changes to adjust the Forward Reserve Failure-to-Reserve Penalty in order to incentivize appropriate scheduling by reserve resources.  The changes were accepted for filing, effective October 1, 2013. (Docket No. ER13-1733)
3. ISO-NE and NEPOOL submitted a filing to ensure that market prices more precisely reflect the cost of ISO-NE efforts to maintain system reliability. The proposal was accepted for filing, effective October 1, 2013. (Docket No. ER13-1736-000)
4. ISO-NE and NEPOOL submitted proposed tariff changes that would change the current scheme, which permits changes to energy market supply offers only once between 1:30 – 2:00 pm, to allow market participants to change their offers in real-time throughout the operating day. (Docket No. ER13-1877)
5. ISO-NE and NEPOOL proposed a Winter Reliability Program under which they would ensure electric system reliability by acquiring oil from oil-fired and dual-fuel generators to prepare for any potential natural gas supply problems during Winter 2013-2014 (Docket No. ER13-1851).
6. ISO-NE submitted the results of its Winter 2013-2014 Reliability Program bidding process, including information regarding the bidders that it proposes to select as providers of demand response and oil inventory services. (Docket No. ER13-2266).

            For additional details regarding the gas-electric coordination initiatives highlighted above, you can access the full Third Quarterly Report, and Q3 FERC Staff presentation.  For more information about recent coordination efforts, read our First Quarterly Report blog post and Second Quarterly Report blog post.  The Staff’s next quarterly report is due in December, 2013.