north american energy standards board

March 5, 2007Prepared by the North American Energy Standards Board

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North American Energy Standards North American Energy Standards BoardBoard

NAESB

Gas-Electric Interdependency Standards & Issues

for EUCI Conference on

“Managing Electric Utility and Natural Gas Interdependency”


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NAESB

Gas-Electric Interdependency

Standards & Issues

TIMELINE


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North American Energy Standards BoardNorth American Energy Standards Board Gas Electric Interdependency - Timeline Gas Electric Interdependency - Timeline

Timeline of EventsTimeline of Events

November 14, 2003: Letter from Chm. Wood asking NAESB November 14, 2003: Letter from Chm. Wood asking NAESB to develop interdependency standards – related to 2003 to develop interdependency standards – related to 2003 cold snap in New Englandcold snap in New England

Gas-Electric Coordination efforts resulted in two reportsGas-Electric Coordination efforts resulted in two reports Gas Electric Coordination Interim Status Report, filed 4-16-04, Gas Electric Coordination Interim Status Report, filed 4-16-04,

31 issues identified31 issues identified Gas Electric Coordination Final Report, filed 11-30-04, 31 Gas Electric Coordination Final Report, filed 11-30-04, 31

issues further definedissues further defined Outcome of Reports: Received 3 requests for standards Outcome of Reports: Received 3 requests for standards

developmentdevelopment R04016: Energy DayR04016: Energy Day R04020: Market TimelinesR04020: Market Timelines R04021: Pipeline-Generator CommunicationsR04021: Pipeline-Generator Communications


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Timeline of EventsTimeline of Events Request StatusRequest Status

All requests approved and found within the scope of NAESB All requests approved and found within the scope of NAESB by both NAESB and the Joint Interface Committee (in an MOU by both NAESB and the Joint Interface Committee (in an MOU with NERC and the ISO-RTO Council)with NERC and the ISO-RTO Council)

R04016 and R04021 were jointly assigned to wholesale gas R04016 and R04021 were jointly assigned to wholesale gas and wholesale electric groupsand wholesale electric groups

R04020 was assigned to wholesale electric group onlyR04020 was assigned to wholesale electric group only

Two pronged approach: Work began on R04021, and Two pronged approach: Work began on R04021, and Board Committee formed to determine other actionsBoard Committee formed to determine other actions

Results of approach -- Report filed with FERC on June 26, Results of approach -- Report filed with FERC on June 26, 2005 (Interim GEIC Report)2005 (Interim GEIC Report)

Requests R04016 and R04020 were withdrawnRequests R04016 and R04020 were withdrawn


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Timeline of EventsTimeline of Events February 24, 2006: 6 Interdependency Issues raised in Docket February 24, 2006: 6 Interdependency Issues raised in Docket

No. RM05-28-000 (Final GEIC Report)No. RM05-28-000 (Final GEIC Report)

June 22, 2006: A primer from Jimmy Glotfelty of ICF sponsored June 22, 2006: A primer from Jimmy Glotfelty of ICF sponsored by the Department of Energy supporting the GEIC reportby the Department of Energy supporting the GEIC report

July 30, 2006: A primer from Ken Costello of NRRI (NARUC) July 30, 2006: A primer from Ken Costello of NRRI (NARUC) supporting issues identified in the GEIC Reportsupporting issues identified in the GEIC Report

July 30, 2006: NAESB participated in a panel on gas-electric July 30, 2006: NAESB participated in a panel on gas-electric coordination at NARUC.coordination at NARUC.

October 25, 2006: NOPR issued on standards. Order on Inquiry October 25, 2006: NOPR issued on standards. Order on Inquiry to the ISOs and RTOs. Comments were due 1-15-07 and data to the ISOs and RTOs. Comments were due 1-15-07 and data from the ISOs and RTOs to be forwarded on 1-16-07. from the ISOs and RTOs to be forwarded on 1-16-07.

Topic of other industry meetingsTopic of other industry meetings


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Active FERC Dockets Related to NAESB WEQ Active FERC Dockets Related to NAESB WEQ StandardsStandards

Active Dockets Related to Gas-Electric Active Dockets Related to Gas-Electric Interdependency:Interdependency:

RM05-5-000: RM05-5-000: Order No. 676 issued on April 25, 2006 for Order No. 676 issued on April 25, 2006 for implementation by the industry on July 1, 2006implementation by the industry on July 1, 2006

RM05-28-000: RM05-28-000: First filing made in this docket on June First filing made in this docket on June

27, 2005 for27, 2005 for Gas-Electric Interdependency. Standards and Gas-Electric Interdependency. Standards and 6 issues identified. NOPR has been issued in Docket No. 6 issues identified. NOPR has been issued in Docket No. RM05-5-001 for the standards. RM05-5-001 for the standards.

RM05-5-001:RM05-5-001: NOPR issued October 19, 2006 regarding NOPR issued October 19, 2006 regarding communication standards – electric (R04021). Comments communication standards – electric (R04021). Comments due 12-18-06.due 12-18-06.

RM96-1-027:RM96-1-027: NOPR issued on October 25 regarding NOPR issued on October 25 regarding communication standards – gas (R04021).communication standards – gas (R04021).


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NAESB


Standards & Issues

June 2005 Report


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Gas Electric Interdependency – June 2005 ReportGas Electric Interdependency – June 2005 Report

Summary of Report Filed June 27, 2005 for RM05-28-Summary of Report Filed June 27, 2005 for RM05-28-000: 000:

Business practices were developed to address communications between pipelines and generators in three situations (R04021):

For generation facilities that have gas scheduled

This generation facilities that do not have gas scheduled but need it

For gas that is needed in extreme unanticipated demand

13 issues were identified related to gas-electric interdependency, and were categorized as to the type of issue raised –policy, business practices, reliability, regional or infrastructure related


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Communication Standards for Pipelines & Communication Standards for Pipelines & GeneratorsGenerators

Business practices were developed to address three Business practices were developed to address three situations: situations:

For generation facilities that have gas scheduledFor generation facilities that have gas scheduled

This generation facilities that do not have gas This generation facilities that do not have gas scheduled but need itscheduled but need it

For gas that is needed in extreme unanticipated For gas that is needed in extreme unanticipated demanddemand

The standards were filed with the FERC on June 26 in The standards were filed with the FERC on June 26 in Docket No. RM05-28-000.Docket No. RM05-28-000.


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Communication StandardsCommunication Standardsfor Pipelines & Generatorsfor Pipelines & Generators

Add the following NAESB WEQ and NAESB WGQ Add the following NAESB WEQ and NAESB WGQ Definitions: (WEQ) 011.0.1, 011.0.2, 011.0.3, (WGQ) 0.2.1, Definitions: (WEQ) 011.0.1, 011.0.2, 011.0.3, (WGQ) 0.2.1, 0.2.2, 0.2.30.2.2, 0.2.3

Add the following NAESB WEQ and NAESB WGQ Standards: Add the following NAESB WEQ and NAESB WGQ Standards: (WEQ) 011.1.1, 011.1.2, 011.1.3, 011.1.6, (WGQ) 0.3.11, (WEQ) 011.1.1, 011.1.2, 011.1.3, 011.1.6, (WGQ) 0.3.11, 0.3.12, 0.3.13, 0.3.150.3.12, 0.3.13, 0.3.15

Add the following NAESB WEQ Standards: 011.1.4, 011.1.5Add the following NAESB WEQ Standards: 011.1.4, 011.1.5

Add the following NAESB WGQ Standard: 0.3.14Add the following NAESB WGQ Standard: 0.3.14


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Gas- Electric Interdependency Issues – Basis & ConsiderationsGas- Electric Interdependency Issues – Basis & Considerations

Basis for Issues: Basis for Issues:

Lead time differencesLead time differences

Response time differencesResponse time differences

Reserve Margins versus Contractual CommitmentsReserve Margins versus Contractual Commitments

Utility models versus Market driven modelsUtility models versus Market driven models

Load curtailment prioritizationsLoad curtailment prioritizations

Other Considerations:Other Considerations: Differences in regulatory frameworks and complexitiesDifferences in regulatory frameworks and complexities Coordination Issues as related to Real-time versus Day Coordination Issues as related to Real-time versus Day

Ahead marketsAhead markets Regional differencesRegional differences


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Gas- Electric Interdependency Issues – CategoriesGas- Electric Interdependency Issues – Categories

Issue Categories: Issue Categories:

Policy directions from regulatory agencies, contractual Policy directions from regulatory agencies, contractual issuesissues

Standards development by NERCStandards development by NERC

Standards development by NAESBStandards development by NAESB

Regional issuesRegional issues

Infrastructure ConcernsInfrastructure Concerns


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Gas- Electric Interdependency Issues – CharacterizedGas- Electric Interdependency Issues – Characterized

13 Issues Identified fall into the following groupings: 13 Issues Identified fall into the following groupings:

Communications issues between pipelines and Communications issues between pipelines and generatorsgenerators

Risk assumptions in using interruptible transportationRisk assumptions in using interruptible transportation

Differences in timelines between marketsDifferences in timelines between markets

Need for regional or national solutionsNeed for regional or national solutions

Cost recovery and reserve capacityCost recovery and reserve capacity

Valuing and using short term capacityValuing and using short term capacity

Differences in curtailment policies in emergenciesDifferences in curtailment policies in emergencies


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Gas- Electric Interdependency Issues – Report ConclusionsGas- Electric Interdependency Issues – Report Conclusions

Conclusions Reached: Conclusions Reached:

If the issues are to be addressed, the majority of them If the issues are to be addressed, the majority of them require a level of policy discussion prior to determining if require a level of policy discussion prior to determining if standards are to be developed.standards are to be developed.

It is inherently difficult for parties to address these issues It is inherently difficult for parties to address these issues because of the difference in focus between the two because of the difference in focus between the two industries. industries.

For standards development, driving the development of For standards development, driving the development of business practices would be a qualitative cost-benefit business practices would be a qualitative cost-benefit analysis, with a focus on creation of standards that are less analysis, with a focus on creation of standards that are less intrusive to already adopted wide-spread business practices intrusive to already adopted wide-spread business practices and that recognize regional differences. and that recognize regional differences.


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NAESB


Standards & Issues

February 2006 Report


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Gas Electric Interdependency – February 2006 Gas Electric Interdependency – February 2006 ReportReport

Summary of Report Filed February 2006 for RM05-Summary of Report Filed February 2006 for RM05-28-000: 28-000:

6 issues were identified in the report – three focus primarily on gas market changes, and 3 focus primarily on electric market changes

All six issues have policy implications.

All could result in standards development if so directed by either the market participants or the regulators.

The report does not ask regulators to give policy direction, but it does note that it would be very difficult to garner industry consensus without either strong direction from the market participants or strong direction from policy makers.


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RM96-1-027 (RM05-28-000) NOPR: Gas IssuesRM96-1-027 (RM05-28-000) NOPR: Gas Issues

Issue 1: Consider the development of standards to support Capacity Release pricing on an index for pipelines that have the FERC authority to enter into negotiated rates and discount capacity on an index basis.

The Commission clarified, releasing shippers are free to offer the same type of pricing arrangements as pipelines - gas price indices, as long as, the rate paid by the replacement shipper does not exceed the maximum rate in the pipeline’s tariff, including rate formulas that produce varying rates during the term of an agreement, as discounted rates.

RM06-21and RM07-4; Requesting comments on the capacity release program and if changes in any policies would improve the efficiency of the natural gas market. Comments due March 12, 2007.


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RM96-1-027 (RM05-28-000) NOPR: Gas Issues RM96-1-027 (RM05-28-000) NOPR: Gas Issues continuedcontinued

Issue 2: Review the possibility of adding an additional intraday nomination cycle with bumping rights to provide more flexibility to shippers, including power generators, with firm transportation rights such that they can nominate for natural gas supporting their market clearing times.

“… making the third intra-day nomination non-bumping creates a fair balance between firm shippers, who will have had two opportunities to reschedule their gas, and interruptible shippers and will provide some necessary stability in the nomination system, so that shippers can be confident by mid-afternoon that they will receive their scheduled flows.”


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RM96-1-027 (RM05-28-000) NOPR: Gas Issues continuedRM96-1-027 (RM05-28-000) NOPR: Gas Issues continued

Issue 3: Review the ability of pipelines to shift gas for primary firm transportation within a pipeline path without having to re-offer as secondary firm transportation service.

In most cases, it would be reasonable to permit the reassignment since the shipper already has a transportation contract with primary points through the posted constraint point and has scheduled gas through that point so that reallocating gas to a different delivery point would not pose an operational problem.The only caveat would be if Shipper 1 seeks to re-designate a secondary delivery point (outside its path) that is also being requested by Shipper 2, and the delivery point is within the path of the Shipper 2. If both secondary nominations to that point cannot be accepted, Shipper 2, with a contract path through the secondary point, would have priority.


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RM05-5 (RM05-28-000) NOPR: Electric IssuesRM05-5 (RM05-28-000) NOPR: Electric Issues

Issue 4: Review and modify the requirements for organized electric markets so that the markets clear in sufficient time to nominate within the existing gas nomination timelines.

Issue 5: Consider the development of business practices for generators that offer into the day ahead market to have the appropriate commercial arrangements to fulfill the needed obligations.


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The Commission concurrently opened section 206 proceedings to examine the RTO and ISO scheduling processes during emergency conditions to ensure that the RTOs and ISOs have procedures in place during emergencies to permit better synchronization of their markets with the gas market and to ensure that generators making appropriate bids into the RTO and ISO markets are able to recover their prudently incurred costs. (Docket Nos. EL07-1, EL07-2, EL07-3, EL07-4, EL07-5, EL07-6)

January 16, 2007 filing deadline has been met

The ISOs and RTOs have responded. Cal ISO has asked for an extension. Several stakeholders have filed motions to intervene.


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Issue 6: Develop the appropriate supporting definitions for new business practices for the Wholesale Electric Quadrant, including but not limited to definitions for: alternate fuel capability, usable alternate fuel capability, firm transportation service, firm sales service, firm supply, and “must run” generator.

The Commission responded that the report is not clear as to what affect such definitions would have on the operation of the electric grid, or what business practices would be affected, choosing not to provide guidance on whether such definitions should be developed at this time. NAESB has since re-activated the “Seams” committee which will look again at the possibility of standards for energy definitions.

Some of the definitions may be addressed as part of the OATT NOPR Reform as parts of RM05-17 and RM05-25 address definitions


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8

Open Trading

Overlay of Electric and Gas Market Timelines

12am 12am12am12pm 12pm

CAISO

MISO

ISONE

PJM

NYISO

ICE Index Trading

NYMEX

ND Nom 1 ND Nom 2ID Nom 1

ID Nom 2

On Peak Product – Eastern IC

On Peak Product – Western IC

6am 6pm 6am 6pm

Gas Index Trading

Mountain Electric Firm Daily Transmission

Pacific Electric Firm Daily Transmission

Central Electric Firm Daily Transmission

Eastern Electric Firm Daily Transmission

Platts Index Trading

GasScheduling

OpenTrading

Organized(i.e. RTO)Markets

ElectricTransmissionMarkets

Day Ahead Operating Day

Start of SED

Transmission Days don’t

align

Market Days don’t align

Nomination Cycle is

disjointedNo Intraday Nomination

Benefit

Reserve & Schedule transmission service


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Next StepsNext Steps

WGQ 2007 Annual Plan has an item to pursue analysis of the nominations timeline and additions to it to support electric market clearing times – controversial as it increases the value of firm transportation.

Provisional item on the WEQ 2007 Annual Plan – respond to standards development needs as an outgrowth of the WGQ effort and the reports submitted to the FERC regarding the order on inquiry.

NAESB Board of Directors receives a report on these efforts at each Board meeting, and the WEQ and WGQ Executive Committees prepare updates at each of their quarterly meetings.


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North American Energy Standards Board North American Energy Standards Board

How to Contact NAESBHow to Contact NAESB


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How to Participate

Join the distribution lists on the NAESB Web Site : www.naesb.org

All meetings are open and accessible via telephone

All materials are posted on the NAESB web site

Your comments are welcome and will be posted on any NAESB standards issues

If you are not a member, but are interested in membership, please call the NAESB Office: 713-356-0060


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Web Site Information and ContactsWeb Site Information and Contacts

Web Site : www.naesb.org

Quadrant Procedures, Bylaws, Certificate for NAESB

Calendar of Meetings, Agendas, Work Papers, Comments

Board minutes, EC Minutes, How to order Transcripts

Standards and Related Work Products

Membership Information

Contact Information

Phone – 713-356-0060

Fax – 713-356-0067

Email – [email protected]

For further information on the organization, please contact Veronica Thomason (713-356-0060, [email protected], [email protected])


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How To Monitor Activities Monthly Update Calls: Monthly Update Calls:

http://www.naesb.org/monthly_update.asp

Review updated annual plans quarterly: Review updated annual plans quarterly: http://www.naesb.org/materials/gov.asp

Review Board minutes quarterly: http://Review Board minutes quarterly: http://www.naesb.org/weq/weq_bod.asp

Sign up for email distribution notices on Sign up for email distribution notices on subcommittees of interest: subcommittees of interest: http://www.naesb.org/listserv/mail/mail_register.cfm

Call NAESB office (713-356-0060, Call NAESB office (713-356-0060, [email protected])

north american energy standards board

Documents

standards developmentr04016

interdependency issues

wholesale gas

energy dayr04020

department of energy

final geic report

board committee

reportsummary of report