On March 20, 2014, FERC initiated three separate, but related, proceedings in order to address the challenges that the electric industry is facing due to increasing reliance on natural gas. First, FERC issued a Notice of Proposed Rulemaking (“NOPR”) proposing to amend its rules relating to the scheduling of transportation service on interstate natural gas pipelines in order to (i) better coordinate with the scheduling practices of the electric industry and (ii) provide additional scheduling flexibility to all shippers on interstate natural gas pipelines. Second, FERC initiated investigations pursuant to section 206 of the Federal Power Act (“FPA”) into the day-ahead scheduling practices of regional transmission organizations (“RTOs”) and independent system operators (“ISOs”) to ensure that such scheduling practices correlate with any revisions to the natural gas scheduling practices that may be ultimately adopted in the NOPR proceeding. Finally, FERC initiated a show cause proceeding under section 5 of the Natural Gas Act (“NGA”) requiring all interstate natural gas pipelines to comply with FERC’s regulations by providing for the posting of offers to purchase released pipeline capacity in their tariffs.
Commissioner John R. Norris released a statement explaining that FERC chose to issue the NOPR and related orders because “a more formal process with a specific timeline for action is needed now to bring together all segments of the gas and electric industries to find solutions to gas-electric issues facing our industry.”
The NOPR primarily focuses on revision of the operating day and scheduling practices used by interstate pipelines to schedule natural gas transportation service. The practices were developed by the industry through the North American Energy Standards Board (“NAESB”) and have been incorporated into FERC’s regulations by reference. As the natural gas and electric industries have become more intertwined, FERC identified a misalignment between the gas and electric operating days that it believes has become increasingly problematic. Under the NOPR, FERC proposed to (i) start the natural gas operating day earlier; (ii) move the Timely Nomination Cycle later; and (iii) increase the number of intra-day nomination opportunities to help shippers adjust their scheduling in order to reflect changes in demand. The NOPR provides for the natural gas and electric industries to reach consensus on standards, including any modifications to the Commission’s proposed revisions, through the NAESB process within 180 days after the publication of the NOPR in the Federal Register. Public comments and comments on any consensus standards are due 240 days after publication of the NOPR in the Federal Register.
To view the NOPR, Docket No. RM14-2-000, click here.
Section 206 Investigations
FERC also initiated investigations under section 206 of the FPA into the day-ahead scheduling practices of RTOs and ISOs in order to ensure that these entities’ scheduling practices correlate with any revisions to the natural gas scheduling practices that may be ultimately adopted in a final rule stemming from the NOPR. According to FERC, the NOPR’s goal of better synchronized the gas and electric operating days will be of particular assistance to gas-fired generators in the organized electricity markets. As the system is currently structured, such generators tend to not know if they are going to be dispatched by the ISO/RTO until after the scheduling deadline for the applicable natural gas operating day. While the NOPR attempts to realign the deadlines in the natural gas industry to enable gas powered generators to more easily participate in the natural gas market, the FPA section 206 investigations were initiated “to ensure that the ISOs and RTOs implement reciprocal changes, if needed, to their posted day-ahead market and reliability unit commitment results to ensure that day-ahead and reliability schedules are known prior to the applicable natural gas nomination deadlines.” Within 90 days of the publication of the Final Rule in the NOPR docket, each ISO and RTO is required to make a filing that either proposes any necessary changes, or to show cause why such changes are not necessary.
To view the Order Investigating ISO and RTO Scheduling Practices and Establishing Paper Hearing Procedures, Docket Nos. EL14-22-000 through EL14-27-000, click here.
Show Cause Proceeding
In initiating its show cause proceeding under section 5 of the NGA, FERC explained that during technical conferences related to gas-electric coordination, it received comments indicating that parties would be interested in a venue where offers to release or purchase capacity could be posted. FERC’s current regulations already require that pipelines “provide notice of offers to release or purchase capacity” along with the terms and conditions of such offers on an internet website for a reasonable time. However, a sampling of natural gas pipeline tariffs and internet pages indicated that companies were not in compliance with these regulations. In response, FERC is now requiring that all interstate natural gas pipelines demonstrate full compliance with this requirement, or to revise their tariffs to provide for the posting of offers to purchase released pipeline capacity in compliance with the Commission’s regulations. All filings must be submitted to FERC by Monday, May 19, 2014.
To view the order to show cause, Docket No. RP14-442-000, click here.