| March 19
March 19 New England has become dependent on
natural gas for more than half of its electric generation over
the past decade, creating severe challenges to reliable power
system operations, the region's power grid operator said
The primary problem is New England does not have enough
natural gas pipeline capacity to bring fuel to the region for
both home heating and power generation on the coldest winter
days, ISO New England, the region's power grid operator said in
Companies that procure natural gas for heating pay for and
receive firm, priority contracts with the pipelines for gas
delivery, but this can limit deliveries to some power plants,
which typically do not pay for firm service and purchase their
fuel using a 'just-in-time' delivery system.
The current design of the wholesale electricity market does
not provide adequate incentives for generators to provide power
when called on by the ISO during stressed conditions, in
particular for gas generators who have not made adequate and
reliable arrangements for fuel supply, the ISO said.
"Clearly, this is not a sustainable situation, and we are
working closely with our stakeholders to develop a set of
solutions," the ISO said.
The ISO issued the release on Tuesday as Gordon van Welie,
president and chief executive officer of the ISO, was due to
testify at a hearing of the U.S. House of Representatives Energy
and Commerce Subcommittee on Energy and Power on the growing use
of gas for power production.
Despite the challenges, the ISO said the switch to gas has
not been all bad.
The increase in gas usage has brought economic benefits to
New England consumers, including lower wholesale electric prices
and a significant reduction in pollutant emissions, the ISO
HOW TO FIX PROBLEM
As several natural gas companies, including Williams Cos Inc
, NiSource Inc and Spectra Energy Corp,
look to expand their pipelines in the U.S. Northeast, the ISO
has proposed changes to the power market to help fix the gas
The ISO in February filed with federal energy regulators for
permission to change the timing of the day-ahead energy market
so that it more closely aligns with the natural gas market
The ISO said this will give generators more time to secure
fuel from the gas market to meet their obligations in the
electricity market, and will provide system operators additional
time to call on longer lead time resources such as coal or oil
power plants, if needed.
The ISO is also considering changes to its Forward Capacity
Market, which pays generators to keep their plants available in
future years for reliability reasons, which will create stronger
incentives for flexible resources like natural gas generators.
The biggest power companies in New England include units of
National Grid Plc, Northeast Utilities, Iberdrola
SA, NextEra Energy Inc, Dominion Resources Inc
, Entergy Corp, Exelon Corp, NRG Energy Inc
and Public Service Enterprise Group Inc.