In a move that will affect gas-fired generators, shippers on interstate natural gas pipelines, and the pipelines themselves, FERC has adopted changes to its rules that will modify the nomination timelines for scheduling interstate natural gas pipeline transportation service. The changes, set forth in an order issued concurrently with FERC’s April 16, 2015 monthly meeting, (1) extend the deadline for the day-ahead Timely Nomination Cycle from 11:30 am Central Clock Time (“CCT”) to 1:00 pm CCT, and (2) add a third intraday nomination cycle on top of the existing two, with new intraday nomination deadlines of 10:00 am, 2:30 pm, and 7:00 pm. The changes will become effective 75 days after the forthcoming publication of FERC’s order in the Federal Register.
Crucially, FERC’s final rules do not implement any change to the start of the natural gas operating day (“Gas Day”). In its proposed rules issued last year, FERC proposed moving the start of the Gas Day from 9:00 am CCT to 4:00 am CCT, but based in large part on the response of the natural gas industry, FERC decided it was unclear whether the benefits of the change outweighed the costs. Additionally, instead of adopting the two new intraday nomination cycles that it initially proposed, FERC has decided to add just one extra intraday nomination cycle. In the end, FERC’s final rules reflect the results of the North American Energy Standards Board (NAESB) stakeholder process that took place in the middle of 2014 in response to FERC’s proposed rules.
The difference between the proposed and final rules reflects in part the different interests of the electric and natural gas industries. For example, many in the electric industry favored moving the start of the Gas Day earlier in the day so that the Gas Day would better align with the electric operating day, which begins at 12:00 am. The gas industry, on the other hand, generally opposed moving the start of the Gas Day due to increased costs as well as safety and operational issues. FERC ended up deferring to the gas industry’s concerns by maintaining the status quo. On the changes FERC did adopt in the final rule, there was more of a consensus between the electric and gas industries that the changes would be beneficial.
FERC’s rule changes are part of the agency’s effort to better coordinate natural gas and electric industry scheduling practices as a result of the growing use of natural gas as a fuel for electric generation. For instance, by extending the Timely Nomination Cycle deadline to 1:00 pm CCT, electric generators will have the opportunity to submit nominations in the Timely Nomination Cycle (when the market is most liquid) after they know whether their bids have been selected in the day-ahead electric market (and thus what their gas transportation needs will be). Likewise, FERC believes that offering an additional intraday nomination cycle will give shippers (including electric generators) more flexibility to adjust their gas needs based on changes that occur during the Gas Day.
Aside from the nomination timeline changes, FERC’s order also requires pipelines to offer, upon request, multi-party transportation contracts, whereby multiple shippers share pipeline capacity under a single firm transportation service agreement. FERC believes that the use of shared capacity will make the purchase of firm capacity more affordable for gas-fired generators.
FERC indicated at its April 16 meeting that it will continue to explore improvements to natural gas and electric industry scheduling practices and coordination. One possibility, suggested by Chairman Norman Bay, is that the use of computerized scheduling could reduce nomination processing time for natural gas transportation and allow for additional intraday scheduling options. Commenting on the April 16 rule changes, Commissioner Cheryl LaFleur stated that they were an “important step, but not the last step.”
A copy of FERC’s order on the rule changes can be found here. The Appendix to the order lists all of the timing changes FERC has adopted.