On March 20, 2014, the Federal Energy Regulatory Commission issued three related orders addressing the lack of harmonization between the nomination and scheduling timelines currently used by interstate natural gas pipelines and electric transmission providers. These orders are further attempts by the Commission to cope with problems related to gas-electric coordination and the increased use of natural gas as a fuel for electric generation. The first order is a Notice of Proposed Rulemaking (Docket No. RM14-2) proposing changes to the nomination and scheduling timelines used in the natural gas industry. The second order (Docket No. EL14-22) institutes an FPA Section 206 proceeding into the day ahead scheduling practices of RTOs and ISOs to determine if they should be modified to better coordinate with the natural gas industry. The third order (Docket No. RP14-442) institutes an NGA Section 5 investigation to determine whether pipelines permit potential shippers to post offers to purchase released capacity.
NOPR, Docket No. RM14-2
The Notice of Proposed Rulemaking proposes substantial changes to the nomination and scheduling deadlines that have been adopted by NAESB and are currently used by all interstate pipelines in the country. The Commission, however, recognizes that the natural gas and electric industries are currently discussing proposed changes to the timelines and that an industry consensus proposal would be preferable to one imposed by Commission fiat. As such, the NOPR affords industry participants six months (180 days from the date the NOPR is published in the Federal Register) to develop a consensus proposal. If the industry is able to reach consensus in a timely fashion, interested parties will be afforded the opportunity to comment on that proposal 60 days later. If no consensus proposal is developed, interested parties may comment on the NOPR’s proposal 240 days after it is published in the Federal Register.
The NOPR’s most significant changes proposed to pipeline nomination and scheduling deadlines are a change in the start of the Gas Day, a change to the first Timely Nomination deadline, and the addition of a fourth intra-day nomination opportunity. Currently, the Gas Day begins at 9:00 a.m. Central Clock Time (CCT) and ends 24 hours later. The Commission proposes to move the start of the Gas Day to 4:00 a.m. CCT in order to accommodate the fact that electric usage begins to increase in the early morning hours. NOPR at P 40. The NOPR states that gas-fired generators may no longer have sufficient gas available to meet this early morning increase in demand when the Gas Day has nearly expired. The Commission recognizes that a 4:00 a.m. start to the Gas Day may raise issues regarding natural gas operations in darkness, but believes those concerns can be successfully resolved. Id. The NOPR also proposes to move the first Timely Nomination Deadline from 11:30 a.m. to 1:00 p.m. to provide electric generators with sufficient time to obtain gas supplies prior to submitting bids to the Day Ahead electric markets. Id. at P 48. In addition, the Commission proposes to add a fourth intra-day nomination opportunity to the Gas Day in order to provide generators an additional chance to modify their gas supply arrangements to meet actual electric demand. Id. at P 63.
In addition to the timing changes, the NOPR clarifies the applicability of the “No Bump Rule.” The No Bump Rule provides that, once gas has been scheduled during the Gas Day, even if it is scheduled as interruptible service, gas will continue to flow even if a higher priority service attempts to nominate gas to flow at an intra-day nomination deadline. Currently, the No Bump Rule applies only to the third and final intra-day nomination deadline. Thus, if a firm shipper makes an intra-day nomination at either the first or second opportunity during a Gas Day, a firm shipper can bump previously scheduled interruptible service. The firm shipper may not, however, bump scheduled interruptible service if it waits until the third intra-day nomination deadline to attempt to nominate additional volumes. The NOPR does not propose significant revisions to the No Bump Rule, other than to recognize that a fourth intra-day nomination will be available under the NOPR’s proposal. NOPR at PP 69-70. The No Bump Rule would apply only to that fourth and final intra-day nomination opportunity. Id. If pipelines permit nominations in addition to those required by the NOPR, they may permit firm shippers to bump interruptible shippers provided that the interruptible shippers are afforded an a opportunity to re-nominate the bumped gas. Id. at P 75.
The NOPR’s proposed changes to the gas pipeline nomination and scheduling timeline, based on a 4:00 a.m. CCT start to the Gas Day are as follows (NOPR at P 64):
Intra-Day 1: Nominations due by 8:00 a.m. to be effective by noon
Intra-Day 2: Nominations due by 10:30 a.m. to be effective by 4:00 p.m.
Intra-Day 3: Nominations due by 4:00 p.m. to be effective by 7:00 p.m. (notice to bumped shippers by 6:00 p.m.)
Intra-Day 4: Nominations due by 7:00 p.m. to be effective by 9:00 p.m. (No Bump Rule applies)
The NOPR proposed one other important change to the ability to nominate and schedule service on an interstate pipeline. The Commission proposes to require all pipelines to permit shippers to enter into multi-party firm transportation service agreements. NOPR at P 80. In other words, multiple shippers may sign a firm service agreement for the same pipeline capacity and may, in effect, share that capacity. Shippers electing such multi-party service agreements will be jointly and severally liable under those agreements.
FPA Section 206 Proceeding, Docket No. EL14-22 (“Paper Hearing Order”)
The Commission is commencing an investigation into the justness and reasonableness bidding schedules applicable to the Day Ahead markets in all RTOs and ISOs. Specifically, the Commission believes that RTOs and ISOs should notify generators if their Day Ahead bids have cleared the market before the proposed 1:00 p.m. on CCT Timely Nomination Deadline for pipelines. All RTOs and ISOs will have to demonstrate that their bidding deadlines are just and reasonable 90 days after the publication of a Final Rule in Docket No. RM14-2. Paper Hearing Order at PP 17, 19. In addition, the Commission indicates that RTOs and ISOs should complete their reliability unit commitment processes prior to the Evening Nomination Cycle, and the order requires the RTOs and ISOs to show that the timing of their current reliability unit commitment processes remains just and reasonable. Id. at PP 18-19.
NGA Section 5 Proceeding, Docket No. RP14-442 (“Show Cause Order”)
The Commission also commenced an investigation to determine if all pipeline tariffs permit potential shippers to post offers to buy released capacity. The Show Cause Order states that section 284.8(d) of the Commission’s regulations requires pipelines to post offers to sell and to purchase released capacity. Show Cause Order at P 3. Within 60 days of the publication of the NOPR in the Federal Register, pipelines must either demonstrate that their tariffs fully comport with Section 284.8(d) or propose tariff medications that are fully compliant. Id. at P 6.