FERC Filings
Comments of EPSA on Natural Gas Interchangeability Standards
Filing
Natural Gas Interchangeability
Docket No. PL04-3-000
The Electric Power Supply Association (EPSA) appreciates the Commission initiating a dialogue on natural gas interchangeability standards. The dialogue is timely, given the dependence future natural gas supply will have on liquefied natural gas (LNG), and EPSA looks forward to working with the Commission and industry participants in addressing these important issues. Putting in place clear gas quality standards now, will lay out the criteria needed to provide for adequate natural gas supply going forward.
EPSA members are significant users of natural gas, and quality is a critical aspect of a generator’s operations, directly impacting its competitiveness. Natural gas costs represent approximately 90 percent of the marginal cost of power production for gas-fired generation. As such, the development of new supply sources, such as LNG, is important in moderating these costs. These new supply sources also will bring operational challenges for generators, given the relatively narrow range of variability in gas quality that modern gas turbines can handle.
However, for many years, interstate natural gas pipelines have included gas quality specifications in their tariffs, with the primary purpose of stating which gas was acceptable to transport. These specifications have served the industry well. Historically, most pipelines included a hydrocarbon content element in their gas quality specifications, but this generally was limited to specifying a minimum Btu per cubic foot of gas. A few pipelines include a maximum Btu per cubic foot in the gas quality specifications. In today’s market, where LNG imports may include higher Btus in regasified products, FERC needs to provide for gas quality specifications on a regional basis that takes into account the use of LNG in that market to protect consumers, the environment and help maintain electric reliability.
The price generators pay for their fuel is critical to the financial viability of their plant operations, and gives them an avid interest in maintaining adequate gas supply. Electricity generators recognize that natural gas producers and pipelines need flexibility to maintain adequate market supply and to keep prices low. When gas gets to shippers, however, clear gas quality standards better enable generators to evaluate the differences between price and quality. Gas specifications in pipeline tariffs best facilitate this evaluation process. Therefore, EPSA supports the Commission’s recent efforts to encourage pipelines to maintain clear gas quality standards in their tariffs. The Commission’s push to have clearly defined, just and reasonable standards in pipeline tariffs promotes assurance for shippers about the quality of their gas supply.
The interchangeability technical conference outlined several gas quality measures such as the Wobbe index that are used in several countries. These indices often can include several measures beyond just interchangeability, such as heating value, density and burner tip performance. EPSA looks forward to working with the industry to develop standards that are flexible enough to preserve regional flexibility and supply options, while maintaining generating equipment efficiency.
The following outlines additional concerns competitive generators have about gas quality:
• Many pipeline tariffs today have rigorous standards that rid the gas supply of hydrocarbons that could condense into free liquids, which could harm generating equipment. Clear dew-point standards are essential to limit potential air emission problems associated with liquefiables. Standards must address condensation of liquids as well as heating value so that generators can protect their assets.
• Daily operation of the gas systems may result in step changes in gas quality, including Btu content, as LNG is introduced to the system, for example. The differing characteristics of pipeline systems will require a regional analysis so that flexible solutions can be reached. The solutions should allow for parties to resolve responsibilities for the costs involved.
• Generators must have a clear understanding of the quality of the gas they purchase to ensure that existing environmental requirements are maintained. This lets them know in advance if the plant’s emissions will violate environmental standards. To the extent, violation of environmental standards could prevent a generator from operating, thus gas quality issues have the potential to affect electric reliability.
• The gas specifications that are acceptable for a particular gas turbine are specified in the manufacturer’s warranty, often derived from the manufacturer’s analysis of the pipeline’s historical gas quality. Consequently, specified clear standards will eliminate confusion about turbine damage liability.