The increasing reliance on natural gas to fuel electricity generators has sparked a need for more coordination between the operators of gas pipelines and electricity grids. Up to now, markets and operations in the two sectors have proceeded independently, but some differences between them have become problematic. Differences are especially problematic in New England, where reliance on natural gas-fired electricity increased from 5% in 1990 to 51 % in 2011. FERC recently launched three initiatives to address some of the problems.

The most far-reaching action is a Notice of Proposed Rulemaking (NOPR) to revise the operating day and scheduling practices of interstate gas pipelines. Generators are challenged in managing fuel procurement risk because of the different operating days used by the gas and electric industries, and because the timeframes for nominating gas pipeline transportation service are not synchronized with the timeframe during which generators receive confirmation of their bids in the day-ahead electric markets. This can cause significant price and/or supply risk for gas-fired generators because, to obtain the best gas price, the generators would need to nominate pipeline transportation service before they know if their electric bid has been confirmed. To address these timing issues, FERC proposed to:

  • Start the natural gas operating day earlier (4:00 AM Central instead of 9:00 AM) to ensure that gas-fired generators are not running short on gas supplies during the morning electric ramp periods.
  • Start the first day-ahead gas nomination opportunity for pipeline scheduling later (1:00 PM Central instead of 11:30 AM) to allow electric utilities to finalize their scheduling before gas-fired generators must purchase gas and submit nominations for gas transportation service.
  • Modify the current times during the day when pipeline nominations may be made and add two additional nomination cycles to provide greater flexibility.

The NOPR also proposes to require pipelines to offer multi-party service agreements that can provide multiple shippers the flexibility to share interstate pipeline capacity to serve complementary needs.

FERC is allowing 180 days for the natural gas and electric industries to reach consensus through the North American Energy Standards Board (NAESB) on any revisions to the proposals and either file consensus standards or notify FERC of the failure to reach consensus. Comments on the consensus standards, or on FERC’s proposals if consensus is not reached, are then due 240 days after the NOPR issues.

FERC also started a proceeding under section 206 of the Federal Power Act (FPA) to ensure that the scheduling practices of Independent System Operators (ISOs) and Regional Transmission Organizations (RTOs) correlate with any revisions to the natural gas scheduling practices ultimately adopted by FERC in the NOPR proceeding. Ninety days after FERC adopts a final rule, each ISO and RTO must either propose tariff changes to adjust certain of their schedules or show why changes are not necessary.

Finally, FERC instituted a proceeding under section 5 of the Natural Gas Act (NGA) to ensure that interstate natural gas pipelines are providing notice of offers to purchase released pipeline capacity. Stakeholders say that it would be beneficial to be able to post offers to purchase pipeline capacity when needed, for example to transport natural gas to a gas-fired electric generator. Such offers would inform potential releasing shippers of interest in taking a prearranged release of capacity and the terms offered. FERC’s regulations already require pipelines to provide, on an internet website, notice of offers to release or purchase capacity and the terms of such offers but compliance has been spotty. Accordingly, FERC is requiring all interstate pipelines to submit filings within 60 days that revise their respective tariffs to provide for the required postings of offers or otherwise demonstrate that they are in full compliance with the regulations.