Following FERC’s November 15 order that directed additional technical conferences on gas-electric coordination issues and released the Staff Report on Gas-Electric Coordination Technical Conferences (FERC Staff Report), the North American Electric Reliability Corporation (NERC) is expected to complete a study on the topic by year end. Based on that study, NERC could initiate a task force to explore possible revisions to reliability standards to address concerns related to gas-electric interdependency and fuel availability.
The FERC Staff Report summarizes five regional technical conferences that were held in August 2012 to gather input from a cross-section of stakeholders regarding gas-electric coordination. The Report discusses NERC’s participation at the conferences. NERC not only has been engaged in FERC’s efforts to address gas-electric coordination issues, but also has advanced its own efforts.
NERC’s focus on gas-electric coordination is not new. In 2004, NERC released Gas/Electric Interdependencies and Recommendations, penned by the Gas/Electricity Interdependency Task Force. The task force examined the relationships between gas-pipeline and electric-generation operations and planning and made recommendations to mitigate any resulting negative reliability impacts.
In December 2011, NERC released another report—2011 Special Reliability Assessment: A Primer of the Natural Gas and Electric Power Interdependency in the United States, which NERC characterized as “Phase I” of its effort to further study gas-electric coordination. The Phase I report offers a primer on the gas-electric interface, and concludes with high-level recommendations calling for high-performance natural gas storage facilities; increased transparency and information sharing; increased harmony among the traditional “gas day,” “electric day,” and “market day,” as well as contracting practices; and identification and mitigation of vulnerabilities.
NERC’s Phase I report also surveys progress towards NERC’s 2004 recommendations, which primarily focused on implementing monitoring and tracking systems to increase communication and coordination. “While substantial improvements have been made since 2004,” NERC explained, “the electric industry is projecting an unprecedented fuel-mix change, incorporating more gas-fired generation into its resource portfolio. It is important for NERC and electric industry stakeholders to ensure technically sound solutions are in place to address and minimize gas-electric interdependency issues.”
By the end of 2012, NERC expects to complete “Phase II,” which it characterized as an effort to leverage Phase I “as a platform for discussion with both industries.”
One expected Phase II recommendation is the creation of a task force to further identify potential revisions to NERC standards. In comments filed at the Commission, NERC noted its particular interest in “assuring that fuel availability is considered for resources that provide the most critical level of reliability services (i.e., operational reserves).”
FERC Staff’s Report indicates that future NERC efforts to revise reliability standards in this area could face some resistance. Some entities like ISO-NE and PJM have stated that they are addressing within their respective regions whether electric system performance is adversely impacted by fuel supply issues; others suggested approaches that did not mandate specific changes to resource procurement; and others raised concern over potential intrusion on traditional areas of state jurisdiction.
While NERC’s Phase II report should shed more light on NERC’s next steps, FERC detailed its next steps in its November 15 order. FERC directed Commission Staff to hold technical conferences on two topics—(1) information sharing and communications between natural gas and electric operators, and (2) differing natural gas and electric scheduling timelines and practices—both of which were topics highlighted in NERC’s Phase I recommendations.
Additionally, FERC directed RTOs and ISOs to appear before the Commission in May and October of next year to share their experiences across the various seasons and to “describe the progress [each] has made in refining existing practices to provide better coordination between the natural gas and electric industries and ensure adequate fuel supplies.” FERC also directed quarterly staff reports in 2013 and 2014.© 2013 Bracewell & Giuliani LLP