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REGULATION

Fears Grow Over New England Gas/Power Reliability 'Catastrophe'

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Federal and state regulators must take a more aggressive role in addressing New England’s increasingly tenuous gas/electric reliability posed by extreme winter weather to avoid a potential calamity, industry and government officials warned last week.

“We know that the root of New England’s winter electric system reliability challenge is the significant dependence on natural gas in these extreme conditions, along with gas supply constraints,” Federal Energy Regulatory Commission (FERC) member Alison Clements said on the heels of FERC's New England Winter Reliability Forum.

“‘Extreme’ is no longer synonymous with ’unusual.’ It’s what we need to manage. [That] requires collaboration across the commission, state, regulators, together with ISO New England and market participants, to consider a suite of solutions that likely span federal, state and even local jurisdictions.”

“For almost two decades, … finding alignment on a path forward has been challenging," she said at FERC's Sep. 22 meeting. "This commission can and must lead in charting a course … It is no longer acceptable to sit back and wait to see what the region may bring forward at some point.”

She echoed calls for a “resource neutral” study that explains the “ ’when,’ ‘where,’ and ‘why’ of electric system risks so that the commission, states, and stakeholders can objectively evaluate needs over different timeframes and across jurisdictions.” She invited stakeholders to expand upon market reform ideas that would address the region’s challenges, but she also opened the door to “non-market solutions.”

“I am open to a specific proposal on that front to address the near-term risk should it come before the commission,” Clements said. “But ultimately, we must move toward a sustainable, resource-neutral solution, and there is no time like the present to begin that work in earnest.”

Edge of a Crisis

New England is not the only part of the US coping with reliability challenges. During extreme weather, California and Texas power grids have faced critical shortages resulting in calls for conservation, rolling blackouts, and out-of-market interventions.

Although New England has been able to avoid the worst outcomes so far, Kim Watson, president of Kinder Morgan Interstate Gas Pipelines, one of the region's key gas infrastructure operators, warned that New England sits on “the edge” of a reliability crisis because of “a lack of pipeline infrastructure and a misalignment of market incentives.”

“New England has avoided a catastrophe like what occurred in Texas … through actions such as winterization of facilities and exceptional coordination among ISO-NE, pipelines, and shippers willing to release their capacity or resell their gas supplies, yet the region cannot continue to rely solely on these measures going forward,” Watson said in remarks filed ahead of the forum. “There is not enough natural gas pipeline and storage infrastructure serving New England to provide firm transportation to natural gas-fired power generators that have not already contracted for it.”

Generators' practice of relying on excess capacity sold by gas utilities onto the secondary market leaves generators “scrambling for natural gas transportation,” leaving generators and consumers “paying significantly more for electricity that people living in areas with adequate pipeline capacity," according to Watson. "This demand-supply imbalance will increase exponentially as demand for electricity in New England grows and the region increasingly relies on resources like gas-fired generators to balance variable renewable energy resources.”

Meanwhile, gas utilities "are not permitted to build a reserve margin into their supply portfolios and, consequently, operate on very thin margins during winter months when demand is highest,” said Andrew MacBride, director of FERC regulatory affairs at National Grid, the company responsible for delivering energy to most of the region’s power and natural gas customers.

“In the near-term, demand for natural gas continues to grow, and we believe it is incumbent on regional stakeholders to consider all options to address these challenges," he said in filed documents. "Indeed, for electric generators to even think about securing firm pipeline capacity, additional infrastructure is needed in New England and the Northeast more broadly.”

Plugging a Regulatory Gap

MacBride said “increasing and more variable demand” for gas has led to “a notable uptick in short-term operational incidents” such as “pressure reductions, near misses, and in some instances, curtailments of firm transportation service.” Such events could be prevented with more robust FERC oversight, and the commission could achieve this by relying on powers it has already been granted by Congress, he argued.

While FERC focuses on regulating transportation rates and terms of service, the Pipeline and Hazardous Materials Safety Administration (PHMSA) has oversight of the safe operations of pipelines, “but neither agency is … asserting much authority over service reliability,” he said.

MacBride argued that FERC should exercise its authority under sections 4 and 5 of the Natural Gas Act to require “enhanced incident reporting … for interstate pipelines when firm transportation service is interrupted as well as baseline annual reporting requirements for all interstate pipelines on reliability metrics and integrity management plans.” The agency could monitor this information and use its “authority to pre-emptively address these concerns before they result in service curtailments.”

“Interstate pipelines are granted considerable discretion with respect to how they operate their facilities,” he argued. “While interstate pipelines have a commendable record when it comes to service reliability, the risk of a service interruption on the region’s interstate pipeline are too great to continue this hands-off approach.”

Topics:
Policy and Regulation, Gas Pipelines, Gas-Fired Electricity
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