PIOGA Launches Gas/Electric Coordination Effort With PJM

by McNees Wallace & Nurick LLC

In Harrisburg on April 2, 2013, the PIOGA End Use Subcommittee convened its inaugural Gas/Electric Coordination Task Force meeting. Attendees included PIOGA-member representatives of Local Distribution Companies, Exploration and Production Companies, interstate pipelines, service companies, mid-stream pipelines, large and small generators, marketers, and end user representatives. Also participating were representatives of PJM, the Regional Transmission Organization (RTO) that coordinates movement of wholesale electricity in all or parts of 13 states and the District of Columbia. (www.pjm.com)

The genesis of a PIOGA Task Force originated at an October 2012 End Use Subcommittee meeting, in which Frank Koza, PJM's Executive Director of Operations Support, provided a thorough and detailed presentation on the "Electric Perspective" on natural gas and electric integration and the critical interrelationships between these industries. Mr. Koza illustrated how in just the next few years, PJM is expecting to retire approximately 18,000 MW of its coal plants, or about 10% of its total generation fleet. The proximity and abundance of Pennsylvania natural gas forms the perfect replacement fuel, but some contend that electric power generation can be less than an ideal gas customer due to its real time variability. Industry periodicals have recognized the importance of gas and electric synchronization. A recent Gas Daily issue noted: "Regions all over the U.S. are forming task forces, holding meetings and drafting studies to improve coordination between the gas and electric industries and figure out whether the gas system is adequate to meet electricity demands…." In pursuit of identification and resolution of these coordination issues, ISO-New England, NY ISO, Midwest Independent Transmission System Operator (MISO), the Southwest Power Pool, and the Electric Reliability Council of Texas, among others, have embarked on efforts to further regional gas-electric industry coordination.

Continuing interest was further developed in February at the PIOGA Winter Meeting, in which approximately 45 PIOGA members engaged in vigorous discussion with a panel and guest speaker regarding the criticality of timely coordination and communication between the gas and the electric industries. Participants endorsed formation of a PIOGA Task Force.

PIOGA is enormously pleased to partner with PJM to identify and work to resolve the most critical coordination and communication issues between the gas and electric industries. The PIOGA Gas/Electric Coordination Task Force has identified key objectives that include:

  1. Identify and articulate short- and long-term issues related to gas/electric coordination issues throughout Pennsylvania and the surrounding states;
  2. Address infrastructure, scheduling (daily and seasonal) and contractual challenges involved with continued provision of reliable natural gas to Pennsylvania (and the surrounding states') electric generators;
  3. Coordinate development and implementation of recommended solutions; and,
  4. Meet with all interested parties including regulators and legislators to raise awareness of the gas industry's perspective regarding resolution of these gas and electric coordination issues.

The PIOGA Task Force presents a balanced team of industry representatives who are well-positioned to consider all relevant factors for near-term and long-term infrastructure and economic benefits of gas supply.

The April Task Force meeting included vigorous and frank discussions regarding base underlying issues and requisite need for inter-industry cooperation, coordination and communication. Issues raised by Task Force members at the April meeting included: capacity; pricing; reliability; flexibility; communication; market rule and Code of Conduct; storage; timing and gas/electric scheduling synching. All of these issues will be further fleshed out in future Task Force meetings.

An example of one of the key issues discussed in detail regards whether a new mechanism or methodology is now required that situates service and pricing options somewhere between firm and interruptible service. The physical and technical considerations of this issue, as well as the likely cost/pricing implications were raised and discussed by participants at the April meeting. Very many new and novel ideas were raised as long-term remedies as well as interim "backstop" applications.

Similarly, the role of state and federal regulatory organizations (e.g., Federal Energy Regulatory Commission (FERC), North American Electric Reliability Corporation (NERC), the North American Energy Standards Board (NAESB) and state PUCs, etc.) was discussed in light of the increasing reliance of the U.S. electric grid on gas-fired electric generation. In fact, one attendee posited that reliability of the national electric system is now as dependent on "pipelines" as it is on high-voltage "power-lines." All Task Force members agreed that timely feedback from the regulators (and perhaps legislators) would be insightful and helpful in continuing the dialogue. Accordingly, the Task Force is hopeful that state regulators will attend one of the forthcoming meetings to apprise of ongoing gas-electric harmonization efforts. Task Force members agreed that action is required to avoid what may very well be shaping up to be a considerable gas and electric coordination crisis similar in cause, but larger in scope, to that which occurred throughout New England during the mid-1990s.

The PIOGA Gas-Electric Coordination Task Force agreed to meet every other month in Harrisburg to continue these meetings, and report its findings and conclusions as they emerge. Importantly, the Task Force would warmly welcome input from PIOGA members on these critical issues.

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.

© McNees Wallace & Nurick LLC | Attorney Advertising

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