by sylviamunson

Fun with FERC Order 809 continued – or – “Continuous and Contiguous Scheduling”

We have an interesting challenge ahead of us. One of the take-aways of FERC Order 809 is the requirement for the North American Energy Standards Board (NAESB) to look at and consider ways to make natural gas pipeline scheduling faster and closer to real time. Electric generators have made it clear that they need more flexibility with scheduling as they move more electric generation to a natural gas dependency.

This is not a new idea. It has been tossed about more than once before Order 809. One of the very first principles written by NAESB in GISB Version 1.0 in the mid-1990’s was Principle 1.1.2 which states “There should be a standard for the nominations and confirmations process. Agreement notwithstanding, it is recognized that this is an interim step to continuous and contiguous scheduling.”    (Copyright North American Energy Standards Board, NAESB Version 3.0 published 2014)

NAESB quickly, in Version 1.0, created the standardized Nominations and Confirmations processes including a few touches on the scheduling process in that mix.  A great step was made when NAESB added the Intraday Cycles and now, via NAESB 3.0 and Order 809, there is an additional Intraday Cycle giving shippers a total of 5 nomination opportunities in the day-ahead and day-of scheduling process.

And that’s not all.

Some pipelines have already implemented multiple scheduling cycles throughout the day that are in addition to the NAESB cycles.  A few pipelines have gone so far as to create hourly cycles. But without a consistent solution, the ‘contiguous’ side of scheduling becomes difficult.

Not all pipelines have gone beyond the standard cycles. So, what do we do?  Are we ready for that ‘Continuous and Contiguous’ process that we considered so long ago?

I believe we are. I believe that it will require some serious paradigm-shift-type thinking to make it happen.

The actual excerpt from Order 809 is below, from the Commission request, and as noted in paragraph 107:

However, the use of computerized scheduling would appear to provide an opportunity for faster and more frequent scheduling of intraday nominations for those shippers and their confirming parties willing to commit to scheduling electronically. We request that gas and electric industries, through NAESB, explore the potential for faster, computerized scheduling when shippers and confirming parties all submit electronic nominations and confirmations, including a streamlined confirmation process if necessary. Providing such an option would enable those entities that need greater scheduling flexibility to have their requests processed expeditiously.

What are the opportunities here?

  • If we converted the nomination and confirmation processes to XML based transactions and generated the confirmation request straight from the requested nomination then we could have more immediate communication and create that contiguous chain.
  • If we kept our traditional ‘Timely’ Scheduling cycle, possibly even the ‘Evening’ cycle and then, after that, opened the process to a first come, first serve processing with a quick turnaround, then we could eliminate the interim cycles and provide that continuous service.
  • We would still need a no-bump cutoff where IT shippers could count on their gas to flow. Possibly at the time of the current cutoff already agreed to in NAESB.

These ideas require major technology investments. These are just a few ideas. I have others, but I’d like to hear from other people first.

The NAESB Board has voted to make this aspect of Order 809 a primary topic in 2016.  As an industry, we need problem solvers to step up and create straw man solutions before those NAESB meetings begin.  Let’s get the discussion started.

by sylviamunson

Fun with FERC Order 809 or “How to Put Two Shippers on One Contract” . . .

The Federal Energy Regulatory Commission (FERC) recently issued Order 809 for interstate pipelines. One of the components of the order was for pipelines to support the ability for a Firm transportation contract to have multiple shippers.  The good news is that the pipeline only has to support this ability IF shippers request the service.  The bad news is that the pipeline only has 60 days to implement the service once it is asked for.  This means that the pipeline has to be prepared to offer the service because I don’t know of many pipelines who can implement such a change in just 60 days.

So why on earth would you need two shippers in a contract?  I can imagine several scenarios where this could be advantageous.  For instance, if a shipper needs reliable firm service on an as-needed basis and can find another shipper, such as a marketer, to utilize the un-used firm.  The would give the first shipper the reliability that they need and give them an out for when that service is not needed without having to enter the Capacity Release race on a regular basis.  Another example may be where a shipper needs seasonal firm capacity but the pipeline doesn’t offer a program that meets their specific needs. In this case, the shipper could match up with another shipper that can handle the off-peak quantities and share the transportation obligation. There may even be credit advantages, though I may be stretching my imagination too far on that one.

So what does the FERC have to say about this?  In Order 809, there were very few specifics.  There were references to a number of pipelines already offering this capability and, via that reference, the FERC decided that the service requirement only applies to Firm transportation and implied that there would be an agent involved to manage the contractual relationship and pipeline interaction.

A pipeline could implement such that each shipper had nomination rights.  The pipeline could implement such that the agent is mandatory and the agent manages the different shippers.  In the example pipelines that I researched, it appeared that there was always an agent relationship and the agent was responsible for managing the transactions for the shippers. These pipelines implemented this service prior to Order 809.

Again, the FERC was silent on nominations, billing, quantity rights, and location rights in Order 809.  It did say that the financial responsibility was with both parties.  So, like Capacity Release, if the one party fails to perform, the second party is financially responsible.

If the pipeline implements this in the easiest way, with an agent, then the transaction datasets would be unaffected.  The only impact will be to be able to add two shippers and their separate terms onto one contract and to be able to post those separate terms in the Transactional Reporting requirements.

We have 75 days from the FERC issuance of Order 809 and then 60 days after a shipper issues a request for such a service.  The worst case scenario is that a pipeline would have to implement this on June 14th, 2015 – 75 days after Order 809 was issued. The best case is any 60 day period after June 14th.

Is this something where shippers can find value? Does it help producer services, electric generators or agents?  It will be interesting to see the filings for this requirement, in response to Order 809, and to see how many shippers utilize this offering.

by sylviamunson

Welcome

It seems like this first posting should explain why I’m writing a blog for Contents Under Pressure. I have worked in the natural gas industry for more than 30 years.  Out of that fabulous experience, I have just completed a book, titled “Contents Under Pressure – The Complete Guide to Natural Gas Transportation”. This is the book you have been waiting for and it will be available in early September.

But that’s not all.

In my work in the industry I get a lot of questions. Sometimes they make me dig deep into history and research to find the answer. Sometimes I know the answer off the top of my head.  And the fun questions make me look at the way I think about the business in a whole new way.

This blog is for those fun questions.

Here we will cover things that make you think (I hope) about the way you look at the business. It will cover super detailed explanations of really nit-picky issues that come up again and again. And we’ll will talk about what is going on in the industry that affects our business – market happenings, FERC rulings, and such that could impact or have already impacted our business.

I hope you enjoy it.  I love working in the natural gas industry because it is constantly changing through government rulings, market shifts and technology advances.  If you like change, natural gas is a great place to work.

Sign up to receive emails as they are posted.  Follow me! Pre-Order my book so that you’ll be ‘in the know’.  Provide comments and questions so that this can be as beneficial to you and your gas industry career as you need it to be.

Sylvia