FERC took the unprecedented step of delaying the filing of comments in its March 20 NOPR, proposing changes to the gas pipeline nomination and scheduling timetable (Docket No. RM14-2; http://www.ferc.gov/whats-new/comm-meet/2014/032014/M-1.pdf) to provide the North American Energy Standards Board (NAESB) the opportunity to develop a counterproposal broadly supported by the industry.  The NOPR requires NAESB to submit any counterproposal developed by the industry by September 16, 2014.  NAESB filed a status report with FERC on June 18, 2014.  This post is the second in a series addressing various issues related to gas-electric coordination.

The NOPR points out that, under the current scheduling timelines in the gas and electric industries, natural gas-fired generators in ISO and RTO markets must purchase and nominate gas before they know whether they will be called upon in the Day-Ahead energy markets.  [NOPR at P 29.] In areas other than ISO and RTO markets, the NOPR indicates that gas-fired generators may benefit from additional nomination opportunities in order to reflect weather conditions or other operating needs.  [Id. at P 30.]  In response, FERC proposed to move the start of the Gas Day from 9:00 am Central Clock Time (CCT) to 4:00 am CCT, to institute four intra-day nomination opportunities for pipeline shippers, and to maintain the no-bump rule for the final intra-day cycle.

In response to the NOPR, NAESB convened several meetings of its Gas Electric Harmonization Task Force (GEH Task Force) after FERC issued the NOPR.  The NAESB Board imposed super-majority voting requirements on the GEH Task Force.  No proposal would pass unless it obtained at least 2/3 of the votes from the Wholesale Electric Quadrant (WEQ) and the Wholesale Gas Quadrant (WGQ).  In addition, proposals would need at least 40% of the votes from each segment of the WEQ and WGQ in order to pass.  The GEH Task Force, which consisted of well over 400 participants, solicited proposals from any interested entity.  Thirteen companies or groups submitted proposals for consideration by the GEH Task Force.  As the various proposals were discussed, the participants were able to synthesize the most controversial issues for consideration:

•           What time should the Gas Day start?

•           How many intra-day nomination cycles should be adopted?

•           Should the final intra-day cycle be subject to the no-bump rule?

A.        Start of the Gas Day

This issue was by far the most controversial discussed by the GEH Task Force.  The eastern ISOs – particularly PJM, NYISO, and ISO-NE, maintained a strongly held position that the start of the Gas Day must precede the morning ramp in the electricity industry and, therefore, could be no later than 4:00 am CCT.  The eastern ISOs were supported by a number of participants in the WEQ.  Many participants from the West, however, opposed such an early start, which would be 2:00 am Pacific time, and, in fact, the CAISO remained neutral on the appropriate start to the Gas Day.  In addition, many members of the WGQ – particularly from the LDC segment – opposed the 4:00 am CCT start to the Gas Day due to concerns regarding safety and the ability to manage imbalances at a time so far outside of normal business hours.  Participants proposed alternatives to the 4:00 am CCT and 9:00 am CCT starts to the Gas Day, but none of the alternatives obtained substantial support.

After substantial discussion and a number of straw polls, the GEH Task Force took binding votes at a two-day meeting held June 2-3, 2014.  Neither the 4:00 am CCT nor the 9:00 am CCT obtained super-majority support.  The 9:00 am CCT Gas Day, however, received slightly more support than the 4:00 am proposal.  As a result, NAESB will not propose an alternative to the NOPR’s proposal to commence the Gas Day at 4:00 am CCT.

B.        Number of Intra-Day Nomination Cycles

In contrast to the deep disagreements among GEH Task Force participants regarding the start of the Gas Day, the Task Force seemed to reach consensus on the number and timing of intra-day nomination cycles.  With little disagreement, the GEH Task Force agreed that timely nominations should be due at 1:00 pm CCT prior to the Gas Day, evening nominations should be due at 6:00 pm, the first intra-day nominations should be due at 10:00 am on the Gas Day, the second intra-day nominations should be due at 2:30 pm, and the third and final intra-day nominations should be due at 7:00 pm.  As discussed below, the first and second intra-day nomination cycles would be bumpable under the GEH Task Force proposal, while the no-bump rule would apply to the third intra-day nomination cycle.

When the GEH Task Force considered this timeline without a proposed start to the Gas Day, the group was unable to muster super-majority support, as many participants expressed concern about supporting an incomplete proposal.  Nonetheless, the NAESB Board voted to direct the WGQ to draft standards adopting this timeline without a proposed Gas Day start.  If the WGQ is successful and its standards are adopted by the NAESB Board and the NAESB membership, NAESB will submit those standards – without a proposed start to the Gas Day – to FERC as an alternative to the nomination and scheduling timeline proposed in the NOPR.

C.        The No-Bump Rule

With respect to the applicability of the no-bump rule, a group of natural gas customers in the desert Southwest (Desert Southwest Group) claimed that, unlike the concerns of gas-fired generators in the Northeast, gas-fired generators in the Southwest face issues in the late afternoon if solar facilities are unable to deliver the expected levels of energy.  The Desert Southwest Group holds firm pipeline capacity, but states that its members are sometimes precluded from accessing that capacity late in the Gas Day due to restricted intra-day nomination opportunities and the no-bump rule.

The remaining participants agreed that additional intra-day nomination cycles should be adopted (see Section B, above), but overwhelmingly rejected any attempts to make the final cycle bumpable.  Many noted that the Desert Southwest Group’s issues seemed regional in nature and could possibly be resolved by discussions with the interstate pipelines serving the region.

D.        Next Steps

Comments on the NOPR are due on November 28, 2014.  If NAESB elects to support the pipeline scheduling and nomination timeline, minus a proposed start to the Gas Day, interested parties may simultaneously submit comments on that proposal.  The GEH Task Force process demonstrates that the energy industry’s views on the NOPR vary widely by region and by segment, which may make it difficult for FERC to issue a Final Rule that is not subject to time-consuming rehearing and appellate processes.