Congress should require FERC, NERC to monitor gas pipeline capacity to ensure reliability, manufacturers say

Dive Brief:

Industrial Energy Consumers of America, a trade group for manufacturers, urged Congress on Friday to give the Federal Energy Regulatory Commission and the North American Electric Reliability Corp. responsibility for making sure there is enough interstate natural gas pipeline capacity to maintain the reliability of the natural gas and electricity systems during peak periods.
FERC should be required to address any reliability concerns by expediting pipeline permits and construction, potentially by asking for Presidential emergency powers, the IECA said in a Friday letter to Sens. Joe Manchin, D-W.Va., and John Barrasso, R-Wyo., chairman and ranking member of the Senate Committee on Energy and Natural Resources, and Reps. Frank Pallone, Jr., D-N.J., and Cathy McMorris Rodgers, R-Wash., chairman and ranking member of the House Energy and Commerce Committee.
FERC and NERC should delay nuclear and coal-fired power plant retirements if the shutdowns would lead to pipeline constraints, according to the IECA.

Dive Insight:

No federal agency monitors the gas pipeline system to ensure it can deliver fuel during high demand periods, or even which pipelines are operating at maximum capacity, according to the IECA.

“NERC cannot fulfill its mandate to ensure electric reliability unless there is adequate pipeline capacity for natural gas-fired generation, which is being used to displace coal-fired power generation units,” Paul Cicio, IECA president and CEO, said in the letter.

Some pipeline operators are preparing to curtail the use of their systems this winter, a move that will drive up costs, according to the IECA, which cited upcoming prices for Transcontinental Gas Pipe Line’s Zone 5.

For that zone, which includes South Carolina, North Carolina and Virginia, a January contract for Henry Hub gas will cost manufacturers about $9 per MMBtu, plus firm pipeline transportation costs of $15/MMBtu, the IECA said.

“This is a pipeline capacity scarcity premium that will only get worse unless there is more pipeline capacity,” the trade group said. “If Congress wants the manufacturing sector to grow, it must either always ensure that there is more pipeline capacity than demand or it needs to create a new program that sets aside pipeline capacity for manufacturing growth.”

The IECA contends that manufacturing companies cannot expand because pipeline capacity is unavailable, and in the winter they are forced to run at reduced levels or halt operations entirely.

“The FERC’s responsibility needs to shift from being a regulator of pipeline permits to having responsibility to ensure that the pipelines that are needed will get built to secure our nation’s reliability,” Cicio said.

The trade group urged Congress to require FERC and NERC to monitor nuclear and coal plant retirements, and any gas-fired power plants that replace them, to make sure there is enough pipeline capacity for the new generation.

“Give FERC/NERC the responsibility to coordinate with state agencies and, if necessary, require that coal fired, or nuclear power generation units remain operating until pipeline capacity is available for all ratepayers,” the IECA said.

The two agencies should also monitor interstate gas pipeline capacity to ensure reliability and identify pipelines and areas of the country that need increased capacity, the group said.

Pipeline companies should be required to submit information to FERC so the agency can assess the state of pipeline systems, according to the IECA.