A modified proposal to set earlier deadlines for power plants seeking exemptions from participation in PJM’s capacity market auctions won approval from the Markets and Reliability and Members committees Thursday.
The current rules require 120 days’ notice before the opening of the auction.
Stu Bresler, PJM vice president of market operations, said that’s not enough time for PJM to analyze the impact of plant retirements on system operations and determine whether the RTO needs transmission upgrades to ensure reliability.
Andy Ott, executive vice president for markets, said the changes also will give market participants more information in advance of the auctions.
The change will require generators seeking exemption from the “must-offer” requirement to file notice by Sept. 1 for the annual base residual auction (BRA) and 120 days before incremental auctions. The exemptions apply to generators that will be unable to provide capacity because they plan to retire.
In response, PJM and the Market Monitor changed the proposal to provide generators more flexibility and to mask the identities of individual power plants:
Retirement requests must be made by September 1 but can be based on a conditional deactivation analysis. The submission would specify the conditions that are creating uncertainty, such as pending negotiations on fuel or labor contracts. The finalized deactivation plan would be required by December 1 unless the request is withdrawn.
PJM will post information on pending plant retirements in the first week of September but will do so using zonal aggregation rather than identifying individual generators. For each transmission zone, PJM will specify the amount of capacity scheduled to retire within one of the following ranges:
Less than 100 MW
100 MW to 500 MW
500 MW to 1000 MW
Total capacity to be retired will be specified if a zonal total exceeds 1,000 MW.
The revised proposal was approved by a 4.11-0.89 sector-weighted vote in the MRC, with support from six generators. Five generators voted no and three abstained. The Members Committee approved it 4.35-0.65.
John Horstmann, director of RTO affairs for Dayton Power & Light Co., supported the modified proposal, saying the changes made the proposal “a lot less onerous” for generation owner. But he said the earlier deadlines don’t apply to about 20,000 MW of demand response, energy efficiency and imported generation capacity, giving them a competitive advantage. “It’s a free option,” he said.
“We’re aware of that,” Bresler responded, saying PJM would consider the issue in the future.
Neal Fitch, representing NRG Energy, also praised PJM’s revisions to the proposal but said it was still an “overcorrection.”
Susan Bruce, representing the PJM Industrial Customer Coalition, spoke in support. “It’s an important step to help the market operate efficiently,” she said.
Virginia regulators last week approved Dominion Virginia Power’s request to build a 1,358 MW natural gas-fired generator near Lawrenceville in Brunswick County.
Dominion said it plans to start construction immediately on the $1.3 billion combined cycle plant, which is expected to go into commercial operation in the summer of 2016.
The Virginia State Corporation Commission approved a Certificate of Public Convenience and Necessity for the project and a rate adjustment clause to recover construction costs. The commission also approved the construction of a 13.5-mile 500 kv transmission line to connect the generator to the grid.
The rate rider will generate $43.5 million in its first year, increasing the monthly bill of a residential customer using 1,000 kilowatt-hours of electricity by 81 cents.
Dominion said the plant, which is being added to serve load growth and replace retiring coal plants, will save $96 million in fuel costs in its first full year of operation.
PJM members Thursday abandoned a year-long effort to establish a long-term capacity product.
The Markets and Reliability Committee voted to strip development of a “Long-Term Capacity Auction or alternative multi-year mechanism” from the revised charter for the Capacity Senior Task Force.
“We feel that we’ve spent more than enough time on this issue,” said Bill Schofield, representing the PJM Public Power Coalition.
The committee initially rejected the proposed charter, which listed five issues, including two newest problem statements approved in May and June, by a 2.33-2.67 sector-weighted vote.
The committee then approved, by a 3.39-1.61 vote, the charter with the two new problem statements — regarding treatment of demand response as an operational resource and the unit-specific review process under the Minimum Offer Price Rule (MOPR) — but without the long-term capacity issue.
Schofield’s motion to strip the issue was seconded by Jason Barker, of Exelon, while representatives of Pepco and the Maryland Public Service Commission spoke in opposition.
“We think some sort of long-term capacity support is needed,” said Walter Hall, energy market advisor for the Maryland PSC. “We would read [removal] as PJM throwing up their hands.”
Gloria Godson, VP, Federal Regulatory Policy for Pepco Holdings Inc., urged members not to give up on the “thorny issue,” noting that officials in Maryland and New Jersey have attempted to create their own solutions because of PJM’s inability to solve the issue.
“I think the PJM marketplace can resolve that concern. PJM has a lot of smart people,” she said. “We can get a resolution to that issue.”
The task force was created in early 2012 to develop a long-term capacity auction. The issue charge approved by MRC set an August 1, 2012 deadline for filing a proposal with the Federal Energy Regulatory Commission for a long-term auction to provide adequate long-term revenue assurances to support entry of new capacity resources.
In April, the Federal Energy Regulatory Commission approved a tariff change resulting from the CSTF that provides new capacity resources with a mechanism to avoid clearing the capacity auction for one year if they require multi-year price assurance to be a viable project. (See Capacity Market: Three-year Price Guarantee for New Capacity.)
The task force said it would consider whether additional changes are needed after reviewing results of the May auction. While other proposals on the contentious issue have been discussed, none found enough support to win consensus.
In June and August, 2012, the MRC added two items — issues related to demand response providers capacity offers and aligning the capacity market auctions with the regional transmission expansion plan (RTEP) — to the task force’s assignments. In May, the group was tasked with considering revisions to standardize the unit specific review process in the Minimum Offer Price Rule (PJM Demand Response Providers Decry Scrutiny, “Freight Train” of Changes).
It was the latter two issues that led to last week’s charter revision. MRC’s decision to eliminate the task force’s original charge sparked a parliamentary debate with some members saying the committee would also have to vote to eliminate the problem statement. Dave Pratzon, of GT Power Group asked, “Is this a second bite at the problem statement apple?”
MRC secretary Dave Anders said that a vote on the problem statement was not needed.
Members voted Thursday to approve a problem statement to consider modifying the design of the Reliability Pricing Model to ensure physical delivery of resources that clear the capacity auction.
Jason Barker, of Exelon, proposed the inquiry, saying it was needed to prevent potential reliability issues because PJM is becoming increasingly reliant on proposed new generation to maintain its reserve margin. Some planned generators that cleared for delivery two years from now “haven’t broken ground yet,” he said.
“While there doesn’t appear to be any reliability threat imminently, we believe this issue is pressing,” he said.
Some players may be speculating without any intention of bringing physical capacity by bidding into the base auction and then buying replacement capacity at a discount in the interim auctions. Barker said one goal of the inquiry would be to “parse speculation from legitimate covering” of shortfalls and increasing penalties for those who offer capacity resources but fail to produce them in the delivery year.
The problem statement was approved by a 4.15 to 0.85 vote but not before several members expressed concerns over the inquiry.
“We could potentially create more problems than we’re solving,” said Frank Francis, director of regulatory affairs for Brookfield Energy Marketing LP,
Gloria Godson, vice president federal regulatory policy for Pepco Holdings Inc., said her company has legitimate reasons for buying in the incremental auction. “How can you define intent?” she asked.
Dan Griffiths, of demand response aggregator Comverge, said his company doesn’t speculate but needs to use the incremental auction to respond to changes in market rules. “Every year the rules change. That forces us to reevaluate our needs.” “We don’t have regulatory certainty.”
Susan Bruce, an attorney representing the PJM Industrial Customer Coalition, said the initiative should not quash competition: “I want to make sure we are keeping the welcome mat out for new resources and that we don’t discriminate.”
Barker insisted, “It is not our intent to create barriers to competitive entry.” Any increase in deficiency penalties would apply to all resources, he said.
PJM Executive Vice President for Markets Andy Ott said the issue would be assigned to either the Capacity Senior Task Force or the Market Implementation Committee.
Saying it has a “moral obligation” to do more to combat climate change, Maryland Gov. Martin O’Malley last week called on the state to get one-quarter of its electricity from renewable sources by 2022, a 25% increase from the current Renewable Portfolio Standard.
O’Malley also restated his support for a regional cap-and-trade program to cut carbon dioxide emissions and pledged to improve the state’s lagging energy efficiency programs.
The governor, who will leave office in 2015, wants to strengthen his environmental credentials as he prepares for a possible presidential run.
The state has reduced its greenhouse gas emissions by 8% since 2006. But current efforts are likely to result in only a 17% cut by 2020, short of its 25% reduction target.
Renewable Portfolio Standard
Electricity consumption is responsible for about 41% of the state’s emissions. Thus boosting the RPS goal to 25% would make up a large part of the gap in GHG reductions, O’Malley said.
Renewable power provides almost 8% of Maryland’s electricity, up from less than 6% in 2007. Increasing the state’s RPS targets — currently 18% by 2020 and 20% 2022 — would require the support of lawmakers, who doubled the state’s original RPS goal in 2008.
Doing so would be a boon for renewable generators both in the state and — because the state imports 28% of its electricity — elsewhere in PJM.
Energy Efficiency
The 2008 EmPOWER Maryland Energy Efficiency Act pledged to reduce Maryland’s per capita electricity consumption and peak load demand by 15% below 2007 levels by 2015. Thus far, peak electricity demand has declined by nearly 11% and per capita consumption is down by more than 9%.
More than 430,000 households and businesses have participated in EmPOWER programs, putting the state on track to exceed its 15% peak demand reduction goal. But it is likely to reach only a 14% reduction in per capita usage based on current policies. O’Malley said the state can improve its performance with lessons from states that are reducing consumption faster.
Cap-and-Trade
O’Malley also reiterated the state’s commitment to the Regional Greenhouse Gas Initiative (RGGI). In February, Maryland and the eight other Northeast and Mid-Atlantic states in RGGI pledged to lower their 2014 carbon dioxide emissions to 91 million tons and to reduce the cap by 2.5% annually between 2015 and 2020.
Carbon emissions from power plants subject to RGGI declined from 165 million tons to 92 million tons between 2008 and 2012. Most of the reduction is the result of the 2008 recession, milder weather and the rise of natural gas at the expense of coal with the remainder coming from energy efficiency and renewable energy programs funded by auction revenues.
O’Malley’s support of RGGI is in contrast with that of New Jersey Republican Gov. Chris Christie, another potential presidential candidate, who pulled his state from the program in 2011, saying it was expensive and ineffective.
O’Malley’s call for an increase in RPS standards also contrasts with the policy of many Republicans. Twenty nine states and Washington, D.C. have RPS standards. In 2011 and 2012, at least 14 states considered 50 bills to lower or weaken RPS standards, five of which succeeded.
The Members Committee Thursday approved the following four issues by acclimation:
Proposed errata revisions to the OA and Tariff
Reason for change: The committee approved corrections to errors inserted in Schedule 1 of the PJM Operating Agreement and Attachment K of the Tariff in 2008 and 2009. One correction will clarify how deviations occurring within one zone are associated with PJM’s Eastern or Western region for purposes of Operating Reserve charges. The other will insert a cross reference to tie language concerning forgiveness of positive demand deviations to the shortage pricing “trigger.”
FTR modeling changes developed by the FTR Task Force
The committee approved two proposals for lowering the risk of Financial Transmission Rights revenue shortfalls. The two proposals were developed by the FTR Task Force and approved May 8 by the Market Implementation Committee.
Reason for changes: The two proposals reduce or remove infeasibilities in the FTR model and may allow increased counterflow FTRs to clear.
Impact: Under the first option (FTR Task Force option 2J), PJM “may model normal facility capability limits, if possible, for all Stage 1A over allocated facilities in FTR Auctions.” The second option (option 3G), would allow PJM to “model normal facility capability limits, if possible, on facilities which are infeasible as a result of modeled transmission outages in monthly FTR Auctions.”
Suspension of the day-ahead market after loss of Internet
PJM will suspend its Day Ahead market if it loses Internet service under a contingency plan the committee approved.
Reason for change: PJM’s Tariff and Operating Agreement do not specify procedures for responding to an extraordinary event, such as an Internet failure, that disables the RTO’s eMKT application.
Impact: Under the tariff changes approved in July by the Markets and Reliability Committee, all market settlements would be done in real time in such circumstances. (See MRC OKs Contingency Plan for Loss of Internet.)
New benefit test for market efficiency projects
The committee approved changes to the way PJM determines beneficiaries of market efficiency transmission projects and how PJM planners add generation in market efficiency simulations.
Reason for change: The changes, which were approved by MRC in July, were developed by the Regional Planning Process Task Force to align modeling and beneficiary determinations with the revised cost allocation formula approved by the Federal Energy Regulatory Commission in PJM’s Order 1000 compliance filing.
Impact: Benefits of regional projects will be calculated on a 50/50 ratio based on their impact on production costs and net load payments (energy benefits) or impact on capacity costs and net capacity payments (capacity benefits). Benefits of local, low-voltage projects will be determined entirely on the change in net load or capacity payments for zones that experience decreases.
Under the previous method for both regional and local projects, 70% of benefits were calculated based on production or capacity cost savings, with the remainder based on change in net load or capacity payments.
Below is a summary of the issues scheduled to be brought to a vote at the Markets and Reliability Committee and Members Committee meetings Thursday. Each item is listed by agenda number, description and projected time of discussion, followed by a summary of the issue and links to prior coverage in RTO Insider (previously PJM Insider).
RTO Insider will be in Wilmington covering the discussions and votes. See next Tuesday’s newsletter for a full report.
Markets and Reliability Committee
2. PJM MANUALS (9:10-9:25)
A. Manual 12: Balancing Operations
Reason for change: PJM is changing the regulation requirement to align it with operational needs and address volatility in light load periods.
Impacts:
Changes On-peak (05:00-23:59) requirement to 700 effective MW, a decrease in the requirement for 52% of days, an increase for 48% of days. Net daily decrease of about 60 MW (section 4.4.3).
Changes Off-peak (00:00-04:59) requirement to 525 effective MW, an increase for 66% of days and a decrease for 34% of days. Net daily increase of about 20 MW (section 4.4.3).
Changes regulation scoring methods:
Performance scoring for small regulation allocation: Historical performance scores will be used if the control signal has an average absolute value less than 1% of the regulation assignment (section 4.5.6);
Performance scores when data is not available: Historical performance scores will be used if data is not available and for intervals less than 15 contiguous minutes (adds section 4.5.9);
Regulation Assignments: Scoring will be suspended for 10 minutes after assignment to allow time to ramp into position (adds section 4.5.10).
PJM contact: Rus Ogborn
B. Manual 19: Load Forecasting and Analysis.
Reason for changes: Integration of East Kentucky Power Cooperative (EKPC), addition of annual demand resources and need to ensure accuracy of load shed programs.
Impacts:
Adds EKPC to load forecast model;
Revises assumption for winter load management;
Makes minor typo fixes and clarifications for NERC audits;
Changes demand resources available in winter months due to addition of annual DR product;
Codifies guidelines for switch operability studies for load management programs. The guidelines are designed to ensure the accuracy of load shed estimates for participants in direct load control programs. The study must be designed for a minimum 90% confidence level and based on a randomly selected sample from the entire population of participating customers. No customers can be excluded.
PJM contact: JohnReynolds
C. Manual 20: PJM Resource Adequacy Analysis
Codifying procedure approved by FERC. The changes were endorsed by the Planning Committee in October 2012.
Impact: Revises section 5 to add Test 2 for the six-hour duration requirement for the Limited DR Product. The Test 2 procedure is effective with the 2016/17 Delivery Year.
PJM contact: Tom Falin
D. Manual 1: Control Center and Data Exchange Requirements
Reason for change: New rules for access to PJM Energy Management System (EMS).
Impacts:
Added new section 2.5.7 detailing rules for transmission owner read-only access to PJM’s EMS. No screen scraping is allowed;
Modified section 3.2.3 to clarify procedures for data communication outages;
Modified section 4.2.4 to clarify repeating of All Call messages;
Adds details to Information Access Matrix in Attachment A.
Wind farms that fail to follow PJM’s electronic dispatch signals will no longer receive lost opportunity cost payments under a tariff amendment the MRC will be asked to approve.
Reason for change: Some wind generators are not following their economic basepoint, requiring PJM to issue manual dispatch instructions. This delays generators’ responses, causing less efficient market operations and a potential risk to system reliability, PJM says.
PJM proposed the new language as a Tariff change in response to a May 29 Federal Energy Regulatory Commission order that rejected its earlier proposal to incorporate the new rules in the Operating Agreement. The commission said the OA language “failed to provide any detail or tariff language describing the specific circumstances under which compensation would be reduced or how the compensation would be reduced.”
Impact: Would add language to section 3.2.3 of Tariff Schedule 1 to deny lost opportunity credits to pool-scheduled or self-scheduled wind generators that fail to follow PJM dispatchers’ electronic instructions to reduce output. (See PJM to Tighten Penalties on Wayward Wind.)
4. MUST-OFFER EXCEPTION DEADLINE (9:45-10:00)
Hatfield’s Ferry Power Plant (Source: FirstEnergy)
To overcome generators’ objections, PJM and the Market Monitor have modified this proposal, which would set earlier deadlines for power plants seeking exemptions from participation in PJM’s capacity market auctions.
Reason for change: PJM says the current rules, which require 120 days’ notice before the opening of the auction, don’t give it enough time to analyze the impact of plant retirements on system operations.
Impact: The proposal would require generators seeking exemption from the “must-offer” requirement to file notice by Sept. 1 for the annual base residual auction (BRA) and 120 days before incremental auctions. The exemptions apply to generators that will be unable to provide capacity because they plan to retire.
In response, PJM and the monitor changed the proposal to provide generators more flexibility and to mask the identities of individual power plants. Under changes announced yesterday at the Members Committee Information Webinar:
Retirement requests must be made by September 1 but can be based on a conditional deactivation analysis. The submission would specify the conditions that are creating uncertainty, such as pending negotiations on fuel or labor contracts. The finalized deactivation plan would be required by December 1 unless the request is withdrawn.
PJM will post information on pending plant retirements in the first week of September but will do so using zonal aggregation rather than identifying individual generators. For each transmission zone, PJM will specify the amount of capacity scheduled to retire within one of the following ranges:
Less than 100 MW
100 MW to 500 MW
500 MW to 1000 MW
Total capacity to be retired will be specified if a zonal total exceeds 1,000 MW.
5. CSTF CHARTER UPDATES (10:00-10:15)
MRC will be asked to approve changes to the charter of the Capacity Senior Task Force.
Reason for change: Recently approved problem statements require a change in work scope.
Impact: The charter will be changed to reflect two recent problem statements:
Demand Response as an Operational Capacity Resource – A problem statement approved by MRC June 27 charges the CSTF to investigate and develop recommended solutions on the following issues: Changes to DR obligations to move from administrative procedures to economic dispatch; diversifying notification time requirements based on physical response capability, similar to current requirements for generators; allowing DR to operate with a dispatchable range; caps on the amount of Limited DR that can be cleared above the quantity specified in the reliability analysis and changes in the way DR is modeled in PJM planning studies. The task force is expected to complete its work in time for a December 1, 2013 filing for implementation in the 2014/15 Delivery Year. (See PJM Demand Response Providers Decry Scrutiny, “Freight Train” of Changes.)
Unit-specific review process under Minimum Offer Price Rule (MOPR) – MRC instructed CSTF to research this issue on May 23 in response to a FERC Order (docket ER13-535) which suggested PJM conduct a stakeholder process to consider revisions to standardize the unit specific review process. The task force will consider changes to financial modeling assumptions and ways to increase the transparency of the process. The task force is expected to complete its work in time for a December 1, 2013 filing for implementation in the 2014/15 Delivery Year. (See PJM, Monitor Push New MOPR Changes.)
Jason Barker, of Exelon, will seek MRC approval of a problem statement to consider modifying the design of the Reliability Pricing Model to ensure physical delivery of resources that clear the capacity auction.
Reason for Change: Barker told the MRC in July that the current design lacks sufficient penalties for those who offer capacity resources but fail to produce them in the delivery year.
He said the problem statement was needed to address reliability concerns caused by the increase in non-firm, planned resources clearing in the past three base residual auctions — including uncontracted demand response, planned internal generation, and existing and planned external generation that lacks firm transmission service.
Reason for change: The committee will be asked to approve corrections to errors inserted in Schedule 1 of the PJM Operating Agreement and Attachment K of the Tariff in 2008 and 2009. One correction will clarify how deviations occurring within one zone are associated with PJM’s Eastern or Western region for purposes of Operating Reserve charges. The other will insert a cross reference to tie language concerning forgiveness of positive demand deviations to the shortage pricing “trigger.”
C. FTR modeling changes developed by the FTR Task Force
The committee will be asked to approve two proposals for lowering the risk of Financial Transmission Rights revenue shortfalls. The two proposals were developed by the FTR Task Force and approved May 8 by the Market Implementation Committee.
Reason for changes: The two proposals reduce or remove infeasibilities in the FTR model and may allow increased counterflow FTRs to clear.
Impact: Under the first option (FTR Task Force option 2J), PJM “may model normal facility capability limits, if possible, for all Stage 1A over allocated facilities in FTR Auctions.” The second option (option 3G), would allow PJM to “model normal facility capability limits, if possible, on facilities which are infeasible as a result of modeled transmission outages in monthly FTR Auctions.”
D. Suspension of the day-ahead market after loss of Internet
PJM will suspend its Day Ahead market if it loses Internet service under a contingency plan the committee will be asked to approve.
Reason for change: PJM’s Tariff and Operating Agreement do not specify procedures for responding to an extraordinary event, such as an Internet failure, that disables the RTO’s eMKT application.
Impact: Under the tariff changes approved in July by the Markets and Reliability Committee, all market settlements would be done in real time in such circumstances. (See MRC OKs Contingency Plan for Loss of Internet.)
E. New benefit test for market efficiency projects
The committee will consider changes to the way PJM determines beneficiaries of market efficiency transmission projects and how PJM planners add generation in market efficiency simulations.
Reason for change: The changes, which were approved by MRC in July, were developed by the Regional Planning Process Task Force to align modeling and beneficiary determinations with the revised cost allocation formula approved by the Federal Energy Regulatory Commission in PJM’s Order 1000 compliance filing.
Impact: Benefits of regional projects will be calculated on a 50/50 ratio based on their impact on production costs and net load payments (energy benefits) or impact on capacity costs and net capacity payments (capacity benefits). Benefits of local, low-voltage projects will be determined entirely on the change in net load or capacity payments for zones that experience decreases. (See chart.)
Under the previous method for both regional and local projects, 70% of benefits were calculated based on production or capacity cost savings, with the remainder based on change in net load or capacity payments.
The Federal Energy Regulatory Commission last week accepted PJM’s revised plan for compensating frequency response providers, rejecting a rehearing request from PSEG Companies.
The commission’s order concerned PJM’s January 15 compliance filing in response to Order 755, which required regional transmission operators (RTOs) and independent system operators (ISOs) to institute a two-part payment method for compensating frequency regulation resources. The order required RTOs and ISOs to make a capacity payment for making the resource available when needed and a performance payment based on the amount of work performed in response to the system operator’s dispatch signal.
PJM’s January 15 submission — its third compliance filing in response to Order 755 — addressed FERC’s November 16 ruling that PJM’s methodology would allow resources to be paid differently even when their performance is comparable.
PSEG asked the commission to reconsider the November order, arguing that PJM’s use of a “benefits factor” in determining compensation was unjust and unreasonable. The commission rejected PSEG’s challenge on procedural grounds Thursday, saying it raised issues settled in a previous order.
The commission also said PSEG failed to support its argument that PJM’s methodology would lead to overpayments to regulation resources, saying the company “has neither demonstrated when overcompensation occurs nor how it ought to be measured.”
The commission decided in PSEG’s favor on one point, saying PJM had failed to fully comply with its November order. The commission ordered PJM to make an additional compliance filing within 90 days that revises a section of its Operating Agreement.
The Federal Energy Regulatory Commission (FERC) Thursday endorsed revised business practices and communication standards to comply with commission Orders 890 and 676.
The Notice of Proposed Rulemaking (RM05-5-022) would accept version 3 of the standards, which were drafted by the North American Energy Standards Board (NAESB).
In Order 890 and companion orders (order 890-A through 890-C), the commission added greater specificity and transparency to the pro forma Open Access Transmission Tariff (OATT) created in Order 888.
Order 676 adopted business practices and communication protocols as well as creating a process for reviewing and upgrading the Commission’s OASIS rules and other wholesale electric industry business practices.
Among the topics covered in version 3 are: Service across multiple transmission systems (SAMTS); network integration transmission service (NITS); rollover rights for redirects and available transfer capacity (ATC) credits; gas/electric coordination and smart grid standards (defining use cases, data requirements, and a common model to represent customer energy usage).
Comments on the proposals will be accepted for 60 days after publication in the Federal Register.
Federal regulators moved Thursday to give gas pipeline operators explicit permission to exchange non-public operational information with PJM and other RTOs.
The Federal Energy Regulatory Commission approved a Notice of Proposed Rulemaking (RM13-17) that it said would improve planning and reliability by revising the commission’s Standards of Conduct.
The proposed rule is the first regulatory change by FERC since it began an inquiry on gas-electric interdependence in February 2012 (AD12-12-000) due to concerns over gas-fired generators obtaining reliable fuel supply during the winter heating season.
While the commission has urged increased communication between gas pipelines and electric grid operators, numerous parties filed written comments or told FERC at regional conferences that they feared sharing operational information would run afoul of commission rules.
The Interstate Natural Gas Association of America (INGAA), for example, told FERC that pipelines could be accused of violating the Natural Gas Act’s prohibitions against undue discrimination for providing a grid operator with non-public transmission information without simultaneously disclosing that information to all other shippers or potential shippers.
Communication Permitted
As a result, the commission said last week, it was proposing revisions to its Standards of Conduct rules to provide assurances. “This is just to clarify that this [communication] is permitted under our current regulations,” said Commissioner Cheryl LaFleur.
Natural gas generation provided nearly 19% of PJM’s electricity in 2012, a nearly 40% jump over its production in 2011. In ISO-NE, natural gas’ share has increased ten-fold in 20 years, from 5% in 1990 to 51% in 2011.
Commissioners said they expect to take additional actions to prevent a collision between the needs of gas heating customers and gas-fired electric generators.
“We’re going to get a cold winter one of these years and we have to make sure we have enough energy to go around,” said Commissioner Philip Moeller.
The new regulations, (proposed sections 38.3(a) and 284.12(b)(4) of the commission’s regulations) would allow electric grid operators and gas pipelines to share non-public information for reliability and operational planning. In a presentation, commission staff said information sharing should be the rule “not just during emergencies, but also for day-to-day operations, planned outages, and scheduled maintenance.”
No List
The NOPR does not propose a list of non-public, operational information that can be shared, but gives examples, including:
real-time and anticipated system conditions with potential to change gas flows;
actual and anticipated electric service interruptions to gas compressor locations;
actual and projected gas transportation restrictions to electric generators;
real-time flow and operational capacity data at receipt and delivery points;
nominated and scheduled quantities of shippers who are or who supply gas-fired generators; and,
scheduled dates and duration of generator, pipeline, and transmission maintenance and planned outages.
Assurances
Much of the NOPR explains why communications between the two industries does not violate applicable rules and laws.
It notes, for example, that the commission’s Standards of Conduct apply to communications only within the same organization and do not limit communications between unaffiliated pipelines and electric transmission providers.
It also notes that the Federal Power and Natural Gas acts only prohibit “undue” preferences, advantages and prejudices. “A difference in treatment is not unduly discriminatory when the difference is justified,” the commission said.
The undue discrimination provisions are intended to ensure equal treatment for “similarly situated” customers.
“Transmission operators are not similarly situated to other customers because they require access to non-public scheduling and other types of information from a variety of sources to help them ensure the reliability and integrity of the transportation and transmission systems. In addition, natural gas pipelines are generally not customers of electric transmission operators. Likewise, in the case of RTOs/ISOs, they are not shippers on pipelines,” the commission said.
The commission also noted that gas pipelines and electric transmission operators have long shared non-public information with their counterparts. “For example, pipeline operators routinely exchange nomination and scheduling information with other pipeline operators and with upstream and downstream entities (that may be shippers on the pipeline) to confirm transportation nomination requests and to coordinate flows between the parties. Transmitting electric utilities similarly coordinate the sharing of non-public interchange schedule information on a routine basis through mechanisms such as, for example, e-Tags.”
No-Conduit Rule
The NOPR includes a “No-Conduit Rule” to prohibit recipients of non-public information from relaying that information to marketing employees or others who could profit from it.
Comments will be accepted for 30 days after posting of the NOPR in the Federal Register.
FERC contacts:
Technical Information: Caroline Daly, Office of Energy Policy & Innovation, (202) 502-8931, caroline.daly@ferc.gov
Legal Information: Anna Fernandez, Office of the General Counsel, (202) 502-6682, anna.fernandez@ferc.gov
