NAESB Standards Request R04016

1
NAESB Standards Request R04016

• Summary of
• Strawman Proposal of The New Jersey Companies
• January 24-25, 2005

2
Introduction

• R04016 joint sponsors seek development of a
  standard energy day for both the gas and electric
  industries set on a midnight to midnight central
  time model.
• Intent is to facilitate the coordination of
  scheduling between electric generation and
  natural gas deliveries.

3
Recommended Principles ofThe New Jersey Companies

• Maintain status quo for the North American
  natural gas and regional electric days.
• Pursue enhanced communication standards under
  NAESB standard development R04021.
• Develop an electric business practice standard to
  ensure electric industry prices can accurately
  reflect natural gas pricing.

4
Electric Market Considerations

• Existing Electric Day accommodates
• Regional differences
• Peak and Off-Peak product definitions
• Arbitrage
• New England ISO analysis of 2004 Cold Snap
  recommends better coordination of gas and
  electric operations and markets.
• Provides no support for a standard energy day

5
Electric Market Considerations cont.

• Starting and ending points of Electric Day and
  Gas Day are essentially irrelevant to the
  functioning of the industries.
• Focus instead on when, relative to the gas
  nomination deadline, a generator is notified that
  it has been selected in the day ahead market.

6
Electric Market Considerations cont.

• The disconnect in regional electric closing times
  is intentional, encourages arbitrage, and aids
  market efficiency.
• ISONE Market Monitor determined that energy
  markets worked efficiently to allocate natural
  gas during the 2004 Cold Snap.

7
Electric Market Considerations cont.

• Ensure that wholesale electricity prices can
  reflect the price of gas at all relevant times.
• Using R04021, formalize timely communications
  among
• Natural gas suppliers
• Pipeline system operators
• Electric generators
• Electric transmission system operators

8
Natural Gas Market Considerations

• Current Gas Day model has served the gas industry
  admirably for years.
• NAESB should focus on matters better lending
  themselves to standardization.
• Retain what works well absent a compelling case
  for change.

9
Nat. Gas Market Considerations cont.

• Stakeholders have made good-faith commitments
  that might now be stranded in favor of costly,
  uncalled-for restructuring.
• Increased personnel and operating costs incurred
  with no commensurate benefits.
• Cost allocations have not been addressed.
• Generators should acquire a portfolio of gas
  services to support their needs.
• The current model simply works!

10
Nat. Gas Market Considerations cont.

• An energy day starting outside of normal business
  hours would prevent normal daytime personnel from
  fully using pipeline flexibility, and would also
  contribute to increased system imbalances.
• Start of any Gas Day must follow at least 3 hours
  of a normal business day

11
Nat. Gas Market Considerations cont.

• Forcing industries as different as gas and
  electric to operate on timelines that fail to
  recognize their operational differences could
  create system stresses and inefficiencies that
  could harm reliability.
• Market liquidity could be harmed through energy
  day consequences on
• Capacity release
• Electric and gas trading

12
Summary

• The New Jersey Companies support the coordination
  of the gas and electric industries whenever
  possible.
• Creating a uniform energy day does not appear to
  be a goal consistent with the unique requirements
  of the electric or gas industries.
• Recommend adoption of the following three
  principles

13
Recommended Principles ofThe New Jersey Companies

• Maintain status quo for the North American
  natural gas and regional electric days.
• Pursue enhanced communication standards under
  NAESB standard development R04021.
• Develop an electric business practice standard to
  ensure electric industry prices can accurately
  reflect natural gas pricing.