FERC Gives New England Electric Market Gas Scheduling Latitude

June 2013, Vol. 240, No. 6

The Federal Energy Regulatory Commission (FERC) took a first, tentative step to give New England utilities more flexibility in arranging for natural gas supplies. But the Order issued on April 24 left at least one pipeline executive wondering whether the Commission actually accomplished anything of value.

Bottlenecks in New England mostly during peak periods have been something of a cause celebre at the commission in the past year, as it has held a number of technical conferences aimed at generating ideas on how natural gas pipelines and electric utilities–and the ISOs which serve utilities–can better communicate and schedule with one another in times of high natural gas demand. New England is the prime troubled spot with the Midwest also experiencing gas supply shortfalls.

At the latest FERC conference on April 25, Commissioner Cheryl LaFleur referred to the Order the commissioners had approved the day before allowing the New England Power Pool (NEPOOL) new flexibility with regard to the timing of natural gas purchases. On Feb. 7, ISO New England, Inc. (ISO-NE) and NEPOOL jointly submitted two alternative sets of proposed revisions to the day-ahead market activities in ISO-NE’s Transmission, Markets and Services Tariff. ISO-NE is the regional transmission organization (RTO) and essentially the electricity market regulator. The NEPOOL is composed of electric generators and wholesale electric markets operating in the market.

But the FERC Order left Richard Kruse, vice president for Regulatory Affairs at Spectra Energy, at a loss. Spectra owns Algonquin Gas Transmission, LLC and Maritimes & Northeast Pipeline, L.L.C. which bring gas to New England. Spectra’s capacity to New England is fully booked, which is a problem for New England utilities switching to natural gas that are desperate for the cheap Marcellus Shale gas Algonquin and Maritimes bring to New England. Kruse says, “Neither proposal really did anything from a gas pipeline standpoint. It was a huge fight over a one-hour difference. I don’t understand what they were fighting about. From a gas/electric scheduling standpoint, the Order did not help them at all, neither ISO-NE nor NEPOOL.”

In fact, Algonquin has been marketing its Algonquin Incremental Market (AIM) expansion project for years, and is in the process of signing precedent agreements. “But the New England electric markets are not stepping up for our capacity,” he states. “In our view, electric generators are not getting a price signal out of ISO-NE to make it worthwhile for them to sign up for firm capacity.”

Both ISO-NE and NEPOOL asked for earlier clearing of the day-ahead energy market and earlier completion of the initial Reserve Adequacy Analysis (RAA). But the ISO-NE proposal began and ended the processes one hour sooner than under the NEPOOL proposal. NEPOOL argued that the extra hour between 9 a.m. and 10 a.m. provided under the NEPOOL proposal is critical because it enables gas-fired units to benefit from reasonable transparency, robust price discovery, and competition in the natural gas commodity marketplace when formulating day-ahead energy bids.

The FERC Order came down on the side of NEPOOL with the Commission arguing it has the potential to not only enhance reliability but also better account for market efficiency. “To the extent that there could be incremental benefits associated with issuing an initial RAA at 4 p.m. under the ISO-NE Proposal, as opposed to 5 p.m. under the NEPOOL Proposal, we do not believe that these potential benefits outweigh the market inefficiencies associated with the earlier submission deadline for day-ahead offers,” the Commission stated.

EPA Criticizes State Department Keystone XL Draft EIS

The Environmental Protection Agency (EPA) says it has some fairly significant problems with the State Department’s draft environmental impact statement on the Keystone XL Pipeline. The State Department draft supplemental EIS (DSEIS) was based on assessment of a new alternative route proposed by TransCanada. That route now avoids the environmentally-delicate Sand Hills region of Nebraska but does still pass through the Ogallala Aquifer, which could be badly fouled in the event of a pipeline spill. The EPA wants State to take a closer look at alternative routes which parallel the existing Keystone Pipeline.
The letter from Cynthia Giles, Assistant EPA Administrator For Enforcement and Compliance Assurance at the EPA, on April 22 to the two state department officials running the EIS says the State Department strengthened past analyses but that three areas in the draft EIS needed work. The State Department’s central thesis in the DSEIS is the Canadian tar sands would be carried to the U.S. by railroad if not by pipeline, and therefore no greenhouse gas emissions would be achieved by scuttling the XL project.

EPA questioned the accuracy of that conclusion and said the draft SEIS needed “a more careful review of the market analysis and rail transportation options.” The EPA also underlined the potential environmental dangers to public health and safety from a pipeline spill, differentiating between an oil spill and a diluted bitumen spill such as the Enbridge oil pipeline spill in the Kalamazoo River in 2010 The diluted bitumen, called dilbit, sank to the river bottom and mixed with the soil. The river has not come clean in the last three years.
EPA said a dredging of the river is now required. Lastly, EPA argued the DSEIS did not contain a detailed analysis of Keystone Corridor Alternative routes, which would parallel the existing Keystone pipeline and would “likely reduce further impacts to groundwater resources.”

The State Department, which has the final say on Keystone XL approval, has already said the risks of an environmental disaster along the latest route are minimal, especially given the extra safety steps TransCanada has committed to take. State is probably leaning even more toward approval, given a vote of 62-37 by the Senate in late March in support of the project.

EPA Moves Up GHG BAMM Pipeline Reporting Deadline

The Environmental Protection Agency moved up the deadline by a few months for an annual greenhouse gas emissions application which gas pipelines can submit. That is the request from a pipeline to use best available monitoring methods (BAMM) for specified parameters in subpart W of the Greenhouse Gas Reporting Rule where additional time is needed to comply with the monitoring and quality assurance/quality control (QA/QC) requirements that are otherwise in force.

When subpart W was finalized in 2010, companies wanting to use BAMM had to apply to the EPA by Sept. 30 of the previous year. In February 2013, the EPA proposed to move that submission date up to June 30 of the previous year. No one objected, so in April the EPA made the new June date final. Utilizing BAMM gives pipeline operators flexibility, upon approval, to estimate parameters for equations by using supplier data, engineering calculations, other company records or monitoring methods currently used by the facility that do not meet the specifications of subpart W.

Meanwhile, the House Transportation Committee approved 33-24 a measure May 16 that would allow construction of Keystone without action by President Obama, the third panel to push the pipeline bill this year. The Republican-led initiative is largely symbolic. The Democratic-controlled Senate isn’t considering a similar bill and it would be subject to a veto by Obama. The House Natural Resources Committee and the Energy and Commerce Committee previously approved the Keystone bill. The measure seeks to bypass the permit process that requires the State Department to review and decide on the pipeline.

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