Dive Brief:

• Federal regulators are convening a technical conference to consider waiving some capacity release requirements that would allow electric utilities to purchase gas capacity on the secondary market, hopefully boosting fuel when demand spikes in colder months, RTO Insider reports. 
• Algonquin Gas Transmission petitioned the Federal Energy Regulatory Commission (FERC) in February for a waiver to allow prearranged releases of firm transportation capacity contracted by electric distribution companies, directly or indirectly to electric generators serving the regional power grid.
• Algonquin said that in constrained markets, competitive generators may not be able to acquire interruptible or released capacity, or wind up purchasing gas at higher spot prices. 

Dive Insight:

New England continues to struggle with tight gas markets, with power producers wary of procuring year-round capacity for generation that is not always needed. For example, Kinder Morgan last week tossed out plans to develop a major pipeline through the Northeast, citing hesitance from generators to commit to purchasing the resource. And last week, New York Gov. Andrew Cuomo (D) and his administration denied water permits for the contentious Constitution Pipeline, Politico New York reports.

Seeking to address the problem, Algonquin petitioned FERC to loosen some rules that would allow utilities greater access to the fuel they need.

"The reliance of natural gas-fired generators on interruptible pipeline services or the secondary market rather than year-round firm interstate pipeline capacity can be attributed to challenges presented following the restructuring of the electric markets," the petition explained. 

Because generation uses an economic dispatch system where units with lower marginal cost are dispatched first, gas-fired generators may not always clear the market. 

"Accordingly, natural gas-fired generators in competitive markets may not have the economic incentives to pay for year-round firm interstate pipeline capacity when they will not be dispatched for periods during any year," Algonquin said in its February petition. "In constrained natural gas markets like in New England, competitive generators may not be able to acquire interruptible or released capacity or must purchase commodity at higher spot prices."

Changes to Algonquin's tariff, the petition said, would allow daily, weekly, monthly, seasonal or longer releases of capacity, obtained by electric distribution companies through state-regulated electric reliability programs, for use by electric generators.

RTO Insider reports generators have protested the petition, saying it could "distort" secondary market for natural gas and sink electricity prices. 

In the 2013-2014 winter, Algonquin told FERC that on the coldest days, only about 3,100 MW of generation ran on natural gas, representing just 19% of New England’s natural gas-fired generation fleet. Although 6,000 MW of that 16,000 MW of gas generation can also run on backup fuel oil, "there is still a significant gap in fuel available for generation."

And that gap, Algonquin said, "will continue to grow as the region increases its reliance on natural gas due to non-gas generation retirements and natural gas-fired generation additions."