Misalignment of Natural Gas and Electricity Days DISCUSSION PURPOSES ONLY WORK IN PROGRESS DRAFT 4

Transcription

1 Misalignment of Natural Gas and Electricity Days DISCUSSION PURPOSES ONLY WORK IN PROGRESS DRAFT 4 Purpose: The purpose of this paper is to describe the potential issue(s) related to: The operating days between the natural gas and electric industries are not aligned The timeframe for nominating natural gas transportation service is not synchronized with - the timeframe during which generators receive confirmation of their bids in the MISO dayahead market. Technical and fundamental facts related to the issue(s) Potential solutions Stakeholder points of view expressed on an issue This document is a living document and will be revised as necessary. The paper is intended to encompass descriptions of or links to any existing process, a desired end state when appropriate, current known challenges to reaching the desired end state, and when appropriate, identified ways and means to achieve the desired end state. This paper is not intended to advocate for any individual stakeholder s point of view nor the point of view of any group of stakeholders, special interest group or sector. Issue Description: The operating days for natural gas and electric industries are not aligned. In addition, there is a disconnect between the timeframe for pipeline nominations and the timeframe during which generators receive their bid confirmations in the MISO Day-Ahead market. Natural Gas nominations have to be submitted many hours before electric generator unit commitments are made. Time differences between the Gas Day and the Electric Day result in scheduled gas which straddles two electric days, which requires two days of gas nominations to cover one day of electric generation. This is an issue today, however with a limited number of MWs in the MISO footprint using natural gas as a fuel supply, it is a manageable issue at this time. When the composition of the generating fleet changes to a larger percentage of gas fired generation, the misalignment of the two industry s days become more important and it can have increased risk of financial harm for stakeholders. Even relatively slight changes in temperature and humidity conditions can cause a gas nomination that was right when made to end up causing an imbalance anyway. Gas Day is from 9 a.m. CT (Central Time) to 9:00 a.m. CT the next day Timely Cycle Nomination deadline is 11:30 a.m. CT (11:45 Electronic Data Interchange(EDI)) CT the day before the gas operating day Evening Cycle Nomination deadline is 6:00pm CT the day before the gas operating day Confirmed nominations begin to flow at 9:00am CT on the operating day Intraday Cycle 1 deadline is at 10:00am CT on the current gas day Misalignment of Natural Gas and Electric Days Page 1

2 Intraday Cycle 2 deadline is at 5:00 pm CT on the current gas day Electric Day is from 12:00am local time to 11:59 local time RTOs that have Day Ahead markets all have Day Ahead clearing times posted at or after 4 pm EPT the day before the operating day Gas-fired generators have insufficient time after notification of clearing to meet natural gas nomination deadlines Makes it difficult to accurately determine marginal costs for offers Makes it difficult to assure deliveries of sufficient fuel supply Supply interruption Exposure to real-time LMPs for replacement power Exposure to real-time NG prices for committed units LMPs do not always reflect the cost of fuel No bump rule: Some pipelines have no bump rules that mean a firm shipper who doesn t nominate to use its entire available capacity can effectively lose it if an interruptible shipper in the same nomination window requests it. Shippers that hold firm pipeline capacity has a right to use their full capacity for 24 hours if they nominate the full contract volume during Timely or Evening cycles. If the shipper nominates to use less than its full capacity during the Timely or Evening cycles then he can nominate the balance in Intraday Cycle 1, but he can only flow for 16 hours beginning at 5:00pm FERC policy states that a shipper is not allowed to use its firm capacity in the second intraday cycle if an interruptible shipper was awarded the capacity in a prior cycle. Issue paper Drafting Team: Lin Franks Chairman ENGCTF Lin.franks@aes.com JT Smith MISO Liaison ENGCTF jtsmith@misoenergy.org Eric Thoms MISO, Drafting Team Leader ethoms@misoenergy.org Karen McIlvoy Entergy kmcilvo@entergy.com Tessa Haagenson MISO thaagenson@misoenergy.org Ronald M. Mucci Oneok Ronald.Mucci@oneok.com Rachel H Gebhardt Ameren RGebhardt@ameren.com Mark Menis Kinder Morgan mark_menis@kindermorgan.com Joseph Pollard TransCanada, Coordination Joseph_Pollard@transcanada.com Lead for Natural Gas Industry Noailles, Liam D Xcel Energy NLLL01@xcelenergy.com Clausen, Brad Entergy bclause@entergy.com Kevin Vannoy MISO KVannoy@misoenergy.org Scope of Work for ENGCTF: Identify physical and fundamental challenges to better alignment of nomination cycles with market clearing Articulate specific pipeline services that might be developed to accommodate existing market clearing timeline Determine if market clearing can be moved up without large capital investment in software changes; how many hours forward can be accomplished efficiently Determine timeframe optimal for additional nomination cycles Determine additional fuel/pipeline services desired by generator operators Develop potential list of MISO specific changes that might be considered to mitigate potential financial harm to generation operators Misalignment of Natural Gas and Electric Days Page 2

3 Provide recommendations to Market SubCommittee for consideration and analysis Potential Related Issues for other Stakeholder Committees, Working Groups, or Task Forces Market Subcommittee Existing Processes Summary MISO Clearing Process Timeline Highlights o Generation Resource Offers and Load Serving Bids must be submitted by 11:00 EST on the day ahead electric operating day, also known as OD-1. o MISO clears the Energy and Operating Market for each hour of the next Operating Day between EST. o At 1500 EST each day the following outputs for the next operating day are received from the Day-Ahead Real-Time (DART) system: cleared supply cleared demand Locational Marginal Prices Market Clearing Prices The Day-Ahead Energy Market plans for next day operations, facilitates an efficient commitment of generation and calculate costs. o It is a forward market for energy and operating reserves offered and cleared simultaneously o Energy and operating reserves and hedge congestion for the operating day are bought o Costs are based on congestion arising from expected system conditions o Reflects participants expectations of next day market outcomes o Day-Ahead Market clearing is financially binding and settled separately from the Real-Time Market clearing Market clearing process results in: o An optimal set of unit commitment and hourly operating schedules for the next operating day based on bids and offers o A set of financially binding Day-Ahead Energy and Operating Reserve Market prices at which day-ahead cleared supply and demand schedules are settled o Pricing by physical location (Commercial Pricing Node or CPNode ) For Market Participants in MISO, participation in the Day-Ahead Market includes Energy Offers, Operating Reserve Offers, Demand Bids, Virtual Transactions, Financial Schedules and Physical Schedules Day-Ahead Market is the day before the operating day. This is often referred to in documentation as OD-1 or Operating Day minus 1. The Day-Ahead Market is the phase to plan for next day operations and calculate costs and reflects participants expectations of next day market outcomes: o Buy energy and operating reserves and hedge congestion for the operating day o Costs based on congestion from expected system conditions Misalignment of Natural Gas and Electric Days Page 3

4 o Day-Ahead Market clearing is financially binding and settled separately from the Real-Time Market clearing For more information, see the MISO Energy and Operating Reserve Markets Business Practice Manual (BPM-002), which can be found at the following web location: smanuals.aspx Natural Gas Pipeline Nomination Process There are more than 100 intra and interstate pipelines in the MISO footprint that coordinate nomination schedules with each other. Both on a transaction and aggregate basis at all interconnection points. There are currently four (4) standard nomination cycles for the gas industry with some pipelines offering more. Nomination schedules must be confirmed both upstream and downstream by interconnecting pipelines to be accepted Pipeline nomination schedules are path, pipeline and direction specific; the path from source to sink can include several pipeline systems across the US and Canada During the Nomination Cycles there are steps in the process which require participation by producers, end-users; Local Distribution Companies (LDC) to get gas scheduled. This adds another layer of complexity to the process of gas scheduling. Pipelines with storage, supply, and direct generator connections are positioned best to offer more nomination cycles The gas industry is on a national or continental scale; not localized as with an RTO Currently the standard industry nomination cycles take 4-5 hours to complete Most of pipeline tariffs support making line pack swing available to traditional Firm Transportation Service (FTS) shippers. Line pack is a finite amount and is fully utilized and accounted for daily, especially peak days. There is a differentiation between (i) additional nomination cycles, (ii) non-ratable service, (iii) compressed gas day service and (iv) no-notice service Natural Gas Buying and Selling Process Timing associated with the buying and selling of gas (weekdays, weekends intra day). Most gas is traded in the morning hours on week days around 8-10 am central time. Majority of weekend business is normally handled on Friday. However, some trading does occur on weekends and holidays. Pipelines are not a significant part of these negotiations and processes. Potential Enhancements and Benefits of the Enhancements Advance MISO day ahead unit commitment / clearing process to closer match gas nominating cycle o If so, by how many hours and/or by what time? (i) Addition of pipeline nomination cycles o Dispatches flow based on a 24 hour day and needs supply flowing at a rate that will fulfill the 24 hour nomination. Assumes capacity available to support the higher flow rate, (i.e. 24 hrs worth of gas taken over 12 hr period need capacity equal to twice the nomination.) Misalignment of Natural Gas and Electric Days Page 4

5 (ii) A non-ratable service could be available o Supported by 24 hour ratable supply and flexing line pack up and down as long as FTS capacity is available to transport the instantaneous rate i.e. 24 hours worth of gas taken over 1 hour would need line pack capacity to store 23/24s of the nominated volume and then capacity available equal to 24 times the nomination to delivery it during the 1 hour period (iii) Compressed gas day service o Can be dispatched with a start and stop time (possibly hourly) and need instantaneous supply to exactly match instantaneous delivery during the shortened dispatch cycle (iv) Offer firm no-notice service allowing firm shippers to receive gas deliveries on demand up to firm entitlement without scheduling and balancing penalties o No notice service is a flexible form of a compressed gas day service supported by reserved FTS capacity FERC requirement for conformance of gas and electric day/time zone Challenges to desired enhancements identified National scope of natural gas industry makes it impractical to change nomination process timing o an alignment of scheduling, additional nomination cycles or compressed gas days do not create capacity on a constrained or fully scheduled pipeline (i) Addition of pipeline nomination cycles o As nomination cycles are added, all market participants from supply (or storage) to market players will need to be available to confirm (pipelines are just the middle man) All participants would need to physically implement on the same schedule. o Realign start of gas day may not be necessary with addition of scheduling cycles. (ii) A non-ratable service would require a study of the hydraulic lead / lag of adding non-ratable deliveries associated with ratable supply possibly 1,000 miles away and likely result in a lowering of available capacity to support the nontraditional, non-ratable power plant flows. (iii) Compressed gas day service requires available capacity to flow the nominated rate, possibly tying up this capacity for the entire gas day (iv) Firm no-notice service would only be available when supported by instantaneous adjustment to geographically close supply & storage matching market delivery changes No bump rule is critical to some market participants o Some industrial firm shippers favor the no bump rule on grounds that without it fewer shippers would use interruptible transportation, leading to lower utilization rates for pipeline capacity, resulting in higher fixed costs allocated to firm shippers. o There needs to be differentiation between no bump for Interruptible Transportation Service (ITS) transport and no bump for secondary FTS transport, they are two different products with different market players ITS transporter either gets it or doesn t and pays accordingly FTS secondary shipper is paying an agreed to rate and traditionally expects access to underutilized capacity If clearing is moved ahead, members may need to modify personnel assigned to specific shifts Load forecasts tend to be less accurate to further away from real time. Misalignment of Natural Gas and Electric Days Page 5

6 Potential solutions to mitigate identified challenges Conclusions and Recommendations Next Steps Misalignment of Natural Gas and Electric Days Page 6