Electricity and natural gas market links

Wednesday, July 11, 2012

Concerns over the increasing interdependence of natural gas and electricity markets in the United States have prompted federal regulators to schedule a series of technical conferences on the subject for next month.

In recent years, natural gas has increased its share of the energy mix used to generate electricity.  Usage of coal, historically the dominant fuel used to generate electricity, is declining, while natural gas pricing is historically low.  This shift to increased reliance on natural gas is also driven in part by the growth of intermittent renewable energy resources like wind which may need natural gas to back them up when the wind isn't blowing.

At the same time, investigations into the blackouts and reliability problems like those affecting Texas and the Southwest in February of 2011 suggest that a lack of coordination between the electricity and gas industries may be partly responsible for the outages.

On February 3, 2012, Federal Energy Regulatory Commission Commissioner Philip Moeller issued a letter posing a series of questions concerning gas-electric interdependence.  His questions included what role the FERC should play in overseeing better coordination between the two industries, what regional differences might affect this coordination, and differences in how electricity and gas are traded in their respective markets.

In response to Commissioner Moeller's letter, a variety of stakeholders submitted comments.  Many commenters suggested that significant regional differences exist in both how markets operate and how their coordination could be improved.

As a result, the FERC has scheduled a series of regionally-oriented technical conferences for August:
  • Central (generally the areas controlled by Midwest Independent Transmission System Operator Inc. (MISO), Southwest Power Pool, Inc. (SPP) and Electric Reliability Council of Texas (ERCOT)), to be held August 6, 2012, in St. Louis, MO
  • Northeast (generally the area controlled by ISO New England, Inc.), to be held August 20, 2012, in Boston, MA
  • Southeast (generally the areas controlled by Southern Company, Duke and Progress Energy, TVA, as well as other areas south of PJM Interconnection, L.L.C. (PJM) and East of SPP and ERCOT), to be held August 23, 2012, at FERC headquarters in Washington, DC
  • West (generally the Western Interconnection), to be held August 28, 2012, in Portland, OR
  • Mid-Atlantic (generally the areas controlled by New York Independent System Operator Inc. (NYISO), PJM and related areas), to be held August 30, 2012, at FERC headquarters in Washington, DC
FERC anticipates that each conference will be organized as a roundtable discussion regarding the sharing of information and communications, scheduling, market structures and rules, and reliability concerns.  The Commission has encouraged those interested in attending a conference to register by July 19, 2012.

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