By Ted Caddell

The Federal Energy Regulatory Commission set a six-month deadline for the natural gas and electric industries to better align their daily schedules, adding urgency to changes already proposed by RTO and pipeline representatives.

In a Notice of Proposed Rulemaking (NOPR), FERC said Thursday it wants to start the natural gas operating day earlier, move the Timely Nomination Cycle later and give natural gas shippers more times per day to react to rapid demand changes.

The FERC proposal (RM14-2) largely parallels a “strawman” proposal by the Natural Gas Council, except for the commission’s call to move the start of the gas day to 4 a.m. Central Time (CT) from the current 9 a.m. CT start. The Council, a group of natural gas suppliers and pipeline operators, rejected an earlier start time, saying it would cause safety and contractual problems.

FERC also issued two other orders aimed at addressing natural gas shortfalls in times of high demand.

“This past winter has highlighted the critical and growing interdependence of natural gas pipelines and electricity markets,” Acting Chairman Cheryl LaFleur said. “Today’s orders take steps to recognize and address that interdependence to optimize the use of our gas and electric networks for the benefit of all customers.”

In February, RTO Insider reported that the Natural Gas Council had tentatively agreed after meetings with officials of PJM and other RTOs to move their nominating schedules to later in the day. PJM officials said they would seek to move the RTO’s day-ahead schedule forward. (See Pipelines, PJM to Align Daily Schedules.)

The strawman proposal would:

• Extend the Timely Nomination deadline to 1 p.m. CT (from the current 11:30 a.m.);
• Provide two intraday cycles during the business day with firm bumping rights; and
• Add a third, evening intraday cycle for early morning gas flow with no bumping rights.

Conflict over Gas Day Start

Unlike FERC’s proposal, however, the strawman proposal by the Gas Council would retain the 9:00 a.m. CT start of the gas day.

The council said it “thoroughly considered” changes to the start of the gas day, looking at three earlier starts (12 midnight, 3 a.m., 6 a.m. CT) and one later (12 noon CT).

It said nighttime starts “raise significant safety concerns” and could make shipper imbalances more difficult to manage. It also noted that some existing contracts are based on the start of the gas day and that different start times would “have vastly different impacts by region.”

As a result, the Council said its consensus was that the gas day must remain unchanged.

FERC’s NOPR would begin the gas day at 4 a.m. CT, the beginning of the morning electric ramp in the East, and before the morning electric ramp in other regions of the country. The change would ensure that generators in all regions would enter the morning electric peak with new daily gas nominations.

“This should largely eliminate the concern that some gas-fired generators will be unable to run during a substantial part of the morning ramp period, because they have burned through their nominated gas before the start of the next gas day,” the commission said. “… As a consequence, gas-fired generators should be less likely either to incur imbalances on pipelines or inform electric transmission operators that they are unavailable.”

Timely Nomination Deadline

The Gas Council said moving the Timely Nomination deadline to 1 p.m. would give generators a greater opportunity to participate in the timely nomination cycle, during which most pipeline capacity is confirmed. It also would increase the value of firm transportation and reduce forecasting errors, the Council said.

This matches the change FERC proposes.

The tradeoff: a 20% to 30% increase in hours for schedulers and traders. In addition, pipelines and LDCs would have less time to confirm and schedule, and producers and customers would have less time to react.

Intraday Changes

The Council said providing two “bumpable” intraday cycles during business hours would help generators manage intraday variations in load and changes in dispatch orders. This, too, would increase staffing costs and create operational challenges on particularly active days.

The proposed third intraday cycle would have a 9 p.m. deadline, with gas flowing at midnight.

This would reduce the gap between the last scheduling opportunity and the end of the gas day to 12 hours, making it easier for generators to arrange for fuel supplies at the beginning of the electric day and avoid derates during the morning ramp.

The Council said that because of limited liquidity in the evening, this cycle may be primarily used to move gas into or out of storage. It, too, would require increased staffing.

To ensure that schedulers and traders can end their day knowing that their gas will flow, the late cycle would not allow bumping.

The Gas Council said it was eager to reach consensus with FERC and electric industry stakeholders, fearing that the alternative would be “contentious and time consuming with substantial uncertainty as to outcome.”

FERC proposed to move from two to four standard intraday nomination cycles, which would occur at 8 a.m., 10:30 a.m., 4 p.m. and 7 p.m., but is predicated upon a 4 a.m. start to the gas day.

180-Day Deadline

The NOPR provides 180 days for the natural gas and electric industries to reach consensus on standards through the North American Energy Standards Board.

FERC issued a separate order investigating RTO and ISO day-ahead scheduling practices.  It also issued a rule to show cause, requiring interstate natural gas pipeline operators to revise their tariffs to allow posting offers to purchase released pipeline capacity.

At Thursday’s FERC meeting, Commissioner John R. Norris applauded efforts to improve coordination between the two industries.

“I recognize that finding solutions is particularly challenging for the natural gas industry which faces a greater share of the burden with respect to necessary changes,” Norris said in a statement. “I support today’s order because I believe a more formal process with a specific timeline for action is needed now to bring together all segments of the gas and electric industries to find solutions to gas-electric issues facing our industry.”

Norris said the orders will ensure the existing pipeline infrastructure is optimized “before investing additional funds in new infrastructure.”

But the Gas Council said additional pipeline capacity was also needed, saying the “central issue of how to expand gas infrastructure, particularly in the Northeast, will not be solved by scheduling issues.”