1. Natural Gas –generation intersection
Michael Goldenberg
The views expressed are those of the presenter and do not necessarily reflect the views of the Federal Energy Regulatory Commission or any Commissioner

2. NATURAL GAS & ELECTRICITY

3. The Problem
Coal Fired Plant
Natural Gas Plant

4. Electric
Natural Gas
Speed of Light: 186,000 mi/sec
10-20 mph

5. Load of a Gas Fired Generator
NERC: 2011 Special Reliability Assessment: A Primer of the Natural Gas and Electric Power Interdependency in the United States

6. Factors Affecting Availability of Natural Gas for Generation
Non-coincident peaks
Diversity of Generation Resources
Diversity of Gas Resources
Line Pack/Storage
Excess Pipeline Capacity
Vertically Integrated Electric Utilities

7. Projected Increase in Natural Gas vs. Coal Generation
Electricity generation capacity additions by fuel type, including combined heat and power, (gigawatts)
EIA, Annual Energy Outlook 2013,

8. RTO Generators’ Reliance on IT or Released Capacity
R. Kruse.Harvard Electricity Policy Group,

9. Non-RTO Utilities
“[For Southern Companies’ gas-fired resources] sufficient amounts of firm gas transportation and storage capacity are maintained for the reliable operation of such facilities when needed to satisfy system demand.”
Comments of Southern Companies, Docket No. AD12-12, at 2.

10. Non-RTO Pipeline Capacity Sharing
Commission accepted contract under which Southern Company Services, as agent, purchased transportation capacity it could share among various operating entities:
“the Commission agrees with the assertions of Southern that such an arrangement is convenient for the affiliated utilities which are jointly and severally liable for the demand charges of Southern …”
Southern Natural Gas Co., 123 FERC ¶61263 (2008)

11. Basis Differentials During Vortex
NGI’s Daily Gas Price Index, Avg. Daily Prices

12. Effect on Generation Availability
PJM reported to the Commission:
Pipelines issued operational flow orders so IT shippers could not nominate.
Pipelines issued notices affirming the restriction of customers to their hourly schedules and the penalties that would apply if they went over their ratable amounts.
Reduction in supply from the Marcellus due to the cold weather.
As such, gas availability for power generation was tight over the entire footprint.
January 10, 2014 report

13. Recent Commission Waivers
Granted PJM waiver of OA to permit communication with pipelines pursuant to Order No PJM, 146 FERC ¶61,003 (2014)
Granted PJM and NYISO waivers to permit make-whole payments for generators with costs greater than offer cap. PJM,146 FERC ¶61, ), NYISO, 146 FERC ¶61,061(2014).
Granted PJM Temporary Waiver of $1,000 Offer Cap for cost-based generator offers. PJM, 146 FERC ¶61,078 (2014).

14. PJM Uplift Charges
PJM IMM reports $630 million in uplift charges for January 2014 alone. Market Monitor Report, (Feb. 24, 2014).
$74 million is Day-Ahead and Real-Time lost opportunity costs.
$392 million due to conservative operations
IMM Issues to be addressed:
Improve incorporation of conservative operations into pricing
Gas/electric scheduling/commitment.

15. Discussion Questions Firm Transportation in Organized Markets
Free rider problem
Capacity Markets
RTO’s System Planning
Gas Market Flexibility
Weekend Gas Purchasing
Pipeline Scheduling
Capacity and Natural Gas Reassignment or Resale