trending Market Intelligence /marketintelligence/en/news-insights/trending/cWtcqyGDvLhr6eh3XcL5cQ2 content esgSubNav
Log in to other products

Login to Market Intelligence Platform

 /


Looking for more?

Contact Us
In This List

FERC to decide if New England electric utilities can support pipelines

Blog

Essential Energy Insights - February 2021

Blog

Message in a (Word)Cloud

Six trends shaping the industries and sectors we cover in 2021

Six trends shaping the industries and sectors we cover in 2021


FERC to decide if New England electric utilities can support pipelines

FERCis about to make decisions that will help set the course on how New Englandgets its energy.

Thecommission must choose to support new natural gas pipelines, like 's AccessNortheast project, or not, says Spectra executive Richard Kruse. "Eitherthis concept works or it doesn't," he said

Thedecisions bring together many of the issues the commission has confronted in ayearslong effort to coordinatethe natural gas pipeline and electric power generation industries, especiallyin the U.S. Northeast. One proceeding involves a tariff request by SpectraEnergy's Algonquin GasTransmission LLC that would make it easier for electricdistribution companies, or EDCs, to be customers of Algonquin's proposed AccessNortheast project with EversourceEnergy and NationalGrid plc. The other proceeding is a broad to that kind of arrangementfiled by NextEra Energy ResourcesLLC and a group of generating subsidiaries of

FERCdecisions in both proceedings are expected to come by the end of August, beforethe suspended Algonquin tariff goes back into effect on Sept. 1 with theproposed changes but subject to refund.

SpectraEnergy has argued that the New England gas and electric industries needguidance from the commission. The company has maintained that more are essential toovercome gas transportation constraints that make New England's energyexpensive andunreliable. Therewill be a lot of paper filed over the next few weeks, Kruse said, but it allboils down to the issue of whether EDCs can act on behalf of their retailcustomers to support additional pipeline capacity. If FERC has any suggestionsfor the New England states pursuing programs to let EDCs support pipelines, Spectra Energytold the commission, now is the time to make them.

"Wehave been talking about New England's need for gas infrastructure for electricgeneration since 2004 — over a decade," said Kruse, ?Spectra Energy's vicepresident for regulatory affairs and FERC compliance officer."If this model is not something you [FERC] are willing to approve, thenwhat do we do?"

"Ithink that question is even more squarely put before the commission by thismost recent filing [by NextEra and Public Service], because they are basicallychallenging the fundamental concept of EDCs signing up for capacity,"Kruse said. "If they should not be signing up for it, then quite frankly Idon't know who will."

TheAccess Northeastproject, an expansion of the Algonquin gas transportation andstorage system, is designed to deliver up to 925,000 Dth/d of gas on peak days,mainly for use by New England power generators. It is expected to go intoservice in the fourth quarter of 2018, with incremental increases through theend of 2021. A Spectra Energy study calculated that Access Northeast can lower electricprices for New England customers by $1 billion annually and enhance electricreliability by delivering gas directly to a majority of generators in theregion.

Thedevelopers are in the midst of the prefiling process that precedes acertificate application at FERC. If things go as expected, Kruse said,Algonquin will file a formal application with FERC later this year.(PF16-1)

Generators, marketerslike things as they are

ManyNew England gas-fired generators choose not to buy the firm gas transportationcontracts that must be in place to build new pipeline projects because of costconsiderations. Instead, they rely on interruptible transportation or secondarytransportation capacity released by firm shippers, often gas local distributioncompanies, or LDCs. In peak periods of gas demand, especially in winter, thesegenerators cannot easily obtain transportation capacity, forcing them to paymore for gas supplies or to switch to other fuels.

FERCand the New England states have looked into market changes that would letgenerators have access to firm pipeline capacity, among other solutions, andhaving electric distribution companies, or EDCs, reserve capacity is onepossibility. The EDCs could pass the cost onto their electricity customers andrelease the capacity to certain generators when needed.

NextEraand the Public Service companies do not like the idea, saying generatorsoutside of such an arrangement would be placed at a disadvantage, especially asthe extra pipeline capacity available year-round would hold down electricityprices. In their broad complaint to FERC, they asked the commission to blockthe New England states from putting in place such a system. They asked FERC tomove quickly, saying Massachusetts could approve a system like this as early asOctober. (EL16-93)

Inthe Algonquin tariff proceeding before FERC, NextEra, electric power generatorsand pipeline shippers have argued against the EDCs treating certain generatorsas favored customers.

NextEra,submitting comments with ExelonCorp. after a technical conference on the Algonquin tariffproposal, asked FERC to reject it. The two companies called the proposal"premature," "discriminatory" and "neither necessarynor useful to the development of new natural gas transportation infrastructurein New England." They supported the message from the Electric Power supplyAssociation and the New England Power Generators Association, which told FERCthat the generators that are supposed to benefit from the proposal do not wantit.

Theshippers ConocoPhillipsCo. and CentricaPlc's Direct EnergyBusiness Marketing LLC said the Algonquin proposal would upset the market."Algonquin's proposal is misguided, unnecessary, unduly discriminatory,and unjust and unreasonable," they said. "The proposed tariffprovisions create an unwarranted, preferred carve-out for electric generatorsthat results in discrimination in price and possibly quality of service as toother market participants."

LNGimporter Repsol Energy NorthAmerica challenged a proposal that would encourage additional gaspipelines that could impact their business. Repsol said current market rules inNew England are working, allowing generators and other market players to getthe gas they need. The company asked FERC not to mess with them.

MassachusettsAttorney General Maura Healey has fought the Access Northeast project and otherpipeline projects at the state level, arguing generally that no new gas linesare needed in New England. She opposed the Algonquin tariff proposal as"premature" because state-regulated electric reliability programs"do not exist yet and may never exist;" as "discriminatory"because it would favor some merchant generators; and unnecessary for the AccessNortheast project, "which is expected by its owners to produce benefitsregardless of whether the proposed waiver is granted or denied."

AccessNortheast partner Eversource dismissed criticisms of the Algonquin tariffproposal as "self-serving, misleading," or else able to be resolved. "Thegenerator and marketer interests in delay and obstruction are clear, as many ofthem have benefited from the higher price volatility driven by inadequatenatural gas infrastructure in an increasingly gas-dependent electricitymarket," Eversource wrote.

LDCs,the firm gas transportation customers that have backed most pipeline projectsin the region, also supported the proposal. A group that included 's , 's ,Liberty Utilities (New EnglandNatural Gas Company) Corp. and others noted that New England hasnot been able to resolve its energy delivery issues for years, particularly itslimited access to low-cost gas from the Marcellus Shale and points west.ISO New England hasrecognized the needfor additional infrastructure to improve reliability, the gas utilities noted.

"TheAlgonquin proposal is the only concrete proposal that is attempting to solvethe underlying 'logjam' — generators' inability to contract for long-term firmcapacity while increasingly relying upon low-cost natural gas forgeneration," the LDCs said.

Inthe tariff proceeding, Algonquin is laying the groundwork for the AccessNortheast natural gas transportation project by asking FERC for tariffadjustments that would make it easier for electric distribution companies torelease their transportation capacity to power generators. Kruse said thechanges to the tariff would help the Access Northeast project, especially sincestates such as Connecticut have asked pipeline developers to at least attemptto secure federal approval for EDCs as customers, but the changes are not necessary.

Underthe proposed tariff language for Algonquin Gas Transmission, capacity releasesunder a state-regulated electric reliability program would be exempt frombidding requirements in Algonquin's FERC gas tariff in certain circumstances.Such an electric reliability program, as Algonquin and some states describe it,would be designed to open pipeline capacity for replacement shippers that couldprovide power generation to the wholesale electric market serving the EDC thatheld the capacity. The circumstances could be either a capacity release by anEDC to an asset manager to help meet the utility's obligations under thereliability program, or a release by an EDC, an agent or asset manager in whichthe replacement shipper must provide electricity to the market. All othercapacity releases by the EDC would be subject to bidding requirements.(RP16-618)