Natural gas is fuel increasingly used to generate electricity. To better coordinate the scheduling timelines and practices of natural gas pipelines with electric utilities, the Federal Energy Regulatory Commission (“FERC”) issued two significant orders. First, FERC issued a notice of proposed rulemaking on the Coordination of the Scheduling Processes of Interstate Natural Gas Pipelines and Public Utilities (“NOPR”) requesting comments from the natural gas and electric industries by November 28, 2014. FERC proposed changes to: (1) the natural gas operating day (“Gas Day”); and (2) the natural gas intra-day scheduling practices.
Second, in a separate investigation order, FERC noted that each Independent System Operator (“ISO”) and Regional Transmission Organization (“RTO”) has defined a unique electric day. FERC initiated an investigation into the ISO and RTO scheduling practices and established a paper hearing process. However, FERC did not propose any changes to its pro forma Open Access Transmission Tariff nor did FERC dictate specific language changes to the tariffs of the ISOs and RTOs at this time.
Instead, FERC required each ISO and RTO to make a filing 90 days after FERC issues a final order in its rulemaking proceeding that either: (1) proposes tariff changes to adjust the time when each ISO or RTO posts the results of its day-ahead energy market and reliability unit commitment process so that there is enough time before the Timely and Evening Nomination Cycles, respectively, to allow gas-fired generators to procure sufficient natural gas supply and transportation; or (2) shows why such changes are not necessary.
For each of the proposed changes in the NOPR, FERC provided the natural gas and electric industries until September 24, 2014 to reach a consensus through the North American Energy Standards Board (“NAESB”). No later than September 24, NAESB must notify FERC whether it has or has not reached a consensus. If the industries are unable to reach a consensus by September 24, FERC will go forward on its proposal.
FERC proposed changing the Gas Day to better align the Gas Day with the demand for natural gas driven by the electric morning ramp and peak. Currently, the Gas Day begins at 9 a.m. Central Clock Time (“CCT”) (this is the time in the Central Time Zone accounting for Daylight Saving Time). The Gas Day now begins in the middle of the morning ramp or near the morning peak for the electric industry in all time zones. FERC proposed to change the Gas Day to begin instead at 4 a.m. CCT, which would occur well before the morning ramp in all regions.
FERC proposed requiring all interstate natural gas pipelines to have standard natural gas scheduling practices across the country and added two additional Intra-Day nominations to the Gas Day.
Summary of FERC's Proposed Daily Nomination Schedules
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Current NAESB Gas Nomination Schedule
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Part of the reason that FERC proposed the new nomination schedule was to accommodate west coast natural gas shippers. Under the current schedule, west coast firm natural gas shippers can only take advantage of their service’s firmness if they nominate additional gas by 10 a.m. CCT (8 a.m. Pacific Time). FERC reasoned that this excessively diluted the value of firm service and therefore proposed a nomination schedule that would allow more intra-day nominations that could bump interruptible service.
FERC stated that there is confusion regarding when a nomination period can be bumpable and non-bumpable for pipelines that offer intra-day nominations in addition to those FERC requires. FERC clarified that those pipelines with additional intra-day nomination cycles should be permitted to bump interruptible shippers at least until the time when the bumping notice under the proposed Intra-Day 3 schedule is provided (currently, 6:00 p.m. CCT). FERC also stated that it would consider on a case-by-case basis proposed nomination services that permit bumping of interruptible services after 6:00 p.m. to determine whether the proposal provides an adequate later opportunity to renominate any bumped volumes.
FERC also sought comment on its proposal to revise its regulations to require all interstate pipelines to offer multi-party service agreements. In order for multiple shippers to take advantage of this type of service agreement, FERC proposed two conditions: (1) the shippers and their agent must demonstrate their agency relationship in writing; and (2) the shippers are willing to be treated collectively as one shipper for nomination, allocation and billing purposes under the service agreement. FERC explained that it would mean that each shipper and their agent would be jointly and severally liable for the entire contract. Treating the group collectively as one shipper is how the multi-party agreements would satisfy the Shipper-Must-Have-Title rule.