News Flash: FERC issues NOPR on natural gas-electric scheduling practices

FERC on March 20 issued a notice of proposed rulemaking (NOPR) to improve scheduling between the natural gas and electric markets (RM14-2).

“While the nationwide natural gas nomination timeline has proven resilient over the last 17 years, recent developments in electricity markets signal that changes to the gas nomination schedule may be needed,” FERC said in the NOPR. “Reliance on natural gas as a fuel for electric generation has steadily increased in recent years. This trend is expected to continue, resulting in greater interdependence between the natural gas and electric industries.”

Since 2012, FERC has been engaged in assessing, through technical conferences and paper proceedings, the potential for better coordination between the natural gas and electric industries.

“Generators and transmission operators raised concerns that managing fuel procurement risk can be a challenge because of the different operating days used by the natural gas and electric industries and because the timeframe for nominating natural gas pipeline transportation service is not synchronized with the timeframe during which generators receive confirmation of their bids in the day- ahead electric markets,” FERC said. “These differing timelines 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.”

In the NOPR, FERC said it had identified three major areas in which revisions to the nationwide natural gas scheduling system seemed appropriate:

  1. Start the natural gas operating day (Gas Day) earlier in order to ensure that gas-fired generators are not running short on gas supplies during the morning electric ramp periods. FERC has proposed moving the start of the Gas Day from 9:00 a.m. Central Clock Time (CCT) to 4:00 a.m. CCT.
  2. Start the first day-ahead gas nomination opportunity (Timely Nomination Cycle) for pipeline scheduling later than the current 11:30 a.m. CCT. “Due to the fact that the Timely Nomination Cycle is the most liquid of the gas nomination cycles, this change will allow electric utilities to finalize their scheduling before gas-fired generators must make gas purchase arrangements and submit nomination requests for natural gas transportation service to the pipelines,” FERC said, adding that it proposed the Timely Nomination Cycle to 1:00 p.m. CCT.
  3. Modify the current intraday nomination timeline to provide four intraday nomination cycles, instead of the existing two, to provide greater flexibility to all pipeline shippers. FERC proposed revising the existing standard intraday nomination cycles, including adding an early morning nomination cycle with a mid-day effective flow time and a new late- afternoon nomination cycle during which firm nominations would have precedence over or be permitted to bump already scheduled interruptible service. “However, bumping would not be permitted during the proposed final intraday nomination cycle,” FERC said. In summary, FERC proposed providing four standard intraday nomination cycles to occur at 8:00 a.m. CCT (bump), 10:30 a.m. CCT (bump), 4:00 p.m. CCT (bump) and 7:00 p.m. CCT (no-bump).

FERC said the NOPR also clarifies its policy concerning the ability of a pipeline to permit firm shippers to bump an interruptible shipper’s nomination during any enhanced nomination opportunity proposed by the pipeline.

FERC said it would provide the natural gas and electric industries, through the North American Energy Standards Board (NAESB), 180 days after publication of the proposed rule in the Federal Register to reach consensus on any revisions to FERC’s proposals and to either file consensus standards with FERC or notify FERC of their inability to reach consensus on any revisions to the FERC proposals.

“Our orders today offer one potential set of solutions to the challenges we are facing due to the increased reliance on natural gas in recent years,” FERC Commissioner John Norris said in a statement. “But, these orders are not the only answer to the problems facing industry related to reliance on natural gas as a fuel source. We will keep an open mind as we consider any results of the NAESB consensus process and any additional comments placed in the record regarding today’s orders. While we have conducted comprehensive outreach to industry over the last two years and today’s orders represent the results of that outreach, I also believe that industry is in the best position to assess potential solutions. I want to emphasize that I am not committed to the specific proposals set forth in the NOPR. Rather, I am truly open to other options that may be proposed by industry, both the gas and electric sectors, that address the Commission’s gas-electric coordination concerns. In that respect, I urge all of you to participate in the NAESB process and provide your essential input to find solutions to these looming issues.”

In the NOPR, the commission also proposed requiring all interstate pipelines to offer multi-party service agreements, similar to those already offered by some interstate pipelines.

“Such multi-party service agreements can provide multiple shippers the flexibility to share interstate pipeline capacity to serve complementary needs in an efficient manner,” FERC said.

More NOPRs coming

The commission said it plans a series of orders to revise regulations for natural gas and electric system coordination, FERC said in the NOPR (Docket No. RM14-2). This NOPR is designed to deal principally with the revision of the operating day and scheduling practices used by interstate pipelines to schedule natural gas transportation service, FERC said.

As the proposed revisions affect the business practices of the natural gas industry, which the industry has developed through the North American Energy Standards Board, and which the commission has incorporated by reference into its regulations, FERC said it would give the natural gas and electric industries 
six months to reach consensus on standards, consistent with the commission’s guidance, including any revisions or modifications to the NOPR proposals.

In a separate order, FERC is instituting a proceeding, under Section 206 of the Federal Power Act (FPA), to coordinate the day-ahead scheduling of ISOs and RTOs with the revised interstate natural gas pipeline schedule.

In another separate order, FERC is instituting a proceeding, under Section 5 of the Natural Gas Act (NGA), to examine whether interstate natural gas pipelines are providing notice of offers to purchase released pipeline capacity in accordance with section 284.8(d) of FERC regulations.

About Rosy Lum 525 Articles
Rosy Lum, Analyst for TransmissionHub, has been covering the U.S. energy industry since 2007. She began her career in energy journalism at SNL Financial, for which she established a New York news desk. She covered topics ranging from energy finance and renewable policies and incentives, to master limited partnerships and ETFs. Thereafter, she honed her energy and utility focus at the Financial Times' dealReporter, where she covered and broke oil and gas and utility mergers and acquisitions.