ISO New England chief addresses power, natural gas issues

Speaking at a forum on electric and gas interdependence Nov. 14 in Baltimore, ISO New England President Gordon Van Wiele offered a path forward to solving the challenges posed by the lack of integration between the two sectors.

The ISO New England chief offered his assessment at the National Association of Regulatory Utility Commissioners (NARUC) annual meeting.

Van Wiele said that such reforms at his ISO may include seeking the authority to monitor the fuel inventories of generators via audits; gaining ability to share information on generator operations with pipelines and better alignment between the gas and electric business day.

 The grid operator plans to file for forward capacity market incentives in 2013 which would take effect in 2018-2019. Van Wiele wants the ISO to be able to pay for performance whereby over performing generation resources will be paid a premium (funded through revenues taken away from underperforming generation resources). He cautioned that this could raise costs to consumers as generators raise their offer price to account for this new policy.

 The ISO New England President suggested several entities that might be able to contract for new natural gas pipeline infrastructure. This might include the electric or gas utilities, if cost recovery assurances could be obtained, or even the natural gas producers.

Van Wiele said gas generators were unlikely to contract long-term for new pipeline infrastructure given their fragmented nature and short-term focus. Finally, he said that the New England States Committee on Electricity was doing a study on the issue.

 Highlights of the remarks of the other speakers discussing the gas-electric interdependence issue included:

 ** Navigant Consultant Rick Smead said the gas system had been “bench tested” this year, with the warm winter and low gas prices causing natural gas to be used for baseload power, and it performed well. In regions like New England, where there is no excess gas pipeline capacity, work is needed, Smead said.

** North American Energy Standards Board  (NAESB) President and COO Rae McQuade noted that a report by her organization addressed several gas, electric issues. These include the need for more flexible pipeline nominations, the need to synchronize the gas day and electric day market times, curtailment policy changes, and information sharing.

 ** American Electric Power (NYSE: AEP) Vice President/Generation Mark McCullough detailed the differences between the RTO nomination cycles in the day ahead market and the gas day. He admitted many AEP generators have interruptible service due to the low capacity utilization of such units.

 **Vectren (NYSE: VVC) Executive Vice President Ronald Christian supports the direct use of gas to heat homes and warm water. He said direct use is more efficient than if done by electricity which was only 20% efficient. Also, he noted that natural gas interstate pipelines are designed to serve gas utilities and not the instant demand of combined-cycle power plants.

 ** Texas Public Utility Commission member Ken Anderson summarized his state’s experience with the issue. Anderson noted that in February 2011 210 generators failed to respond properly during a cold snap. A Black and Veatch study urged the identification of critical facilities that should not be curtailed during an electric shortage.