Harmonizing The Gas & Electric Industries
The natural gas and electric utility industries have worked together for years to help grow the economy. Utilities are the backbone of our economic growth and prosperity. The electricity sector continues to become more reliant on natural gas. In April 2012, natural gas accounted for the same percentage of total U.S. electricity generation as coal for the first time since the Energy Information Administration began collecting data in 1973. Along with the growing interdependency of the electric and natural gas sectors, concerns have increased about potentially disruptive incompatibilities between the two. These concerns must be addressed to maintain and increase the reliability and cost-effectiveness of natural gas and electricity supplies.
Chief among the concerns is the lack of synchronization between the two industries. For example, the natural gas day for securing supplies starts at 9 a.m. Central time, one day and runs to 8:59 a.m., Central time, the following day. Conversely, the power market operates on a real-time, calendar-day basis, based on the applicable time zone. The concern is that most gas supplies are not guaranteed before the electricity day markets have cleared, creating uncertainty in supply reliability, cost and availability.
In an effort to better understand the interdependency of the electric and natural gas industries, the Federal Energy Regulatory Commission (FERC) asked both industries in 2012 to provide information, particularly regarding the role the agency should play in coordinating the two markets. In response, the North American Energy Standards Board created a committee to identify and assess potential gas-electric harmonization issues and to make recommendations on standards development.
FERC held a series of five technical conferences around the country in late summer 2012, and AEP participated in two of them. We also participated in a technical conference in February 2013. Although our risk is minimal now, we will remain engaged in the dialogue.
In February 2013, FERC approved an interim information-sharing policy that allows the New England grid operator to share operational data from gas-fired power plants with pipeline operators to avoid gas shortages on cold days, when both electricity and heating demand is high. If effective, this may become a model for the rest of the nation as more power generators increase their use of cleaner-burning natural gas.