Natural Gas & Electricity Market Coordination Issues

The increasing role of natural gas in the region PJM serves has raised concerns about the effect on power grid reliability if the fuel is not available for generating plants. The 2014 cold weather events shed light on this concern. The January 6-8, 2014, Polar Vortex brought prolonged, deep cold to the entire PJM footprint and surrounding regions. PJM set a new wintertime peak demand record of 141,846 megawatts the evening of Jan. 7, 2014, while dealing with higher than normal generation outages. During the peak demand hour, 22 percent of generation capacity – including coal, gas and nuclear – was out of service.

The generation forced outage rate was two to three times higher than what is normally expected. Equipment issues associated with both coal and natural gas units caused the greatest proportion of forced outages. Winter demand for natural gas for heating can potentially interrupt gas deliveries to generators, as was seen in winter 2014. Natural gas interruptions constituted approximately 25 percent of the total outages.

There are two main types of gas delivery services:

Firm vs. Interreuptible Transportation Customers

Firm Transportation guarantees gas delivery throughout the year that allows generators to meet power obligations any given day. Through changes in the capacity market, generators now recover firm transportation costs in PJM markets.

Interruptible Transportation provides the most risk of non-delivery. There is no guarantee that capacity (the volume available in a gas pipeline or storage facility) will be available. When pipeline capacity is tight, such as during the extreme cold weather conditions in 2014, generators with interruptible contracts may have their service interrupted.

Scheduling Coordination

PJM and other grid operators are working with the gas industry and regulators to find ways to address concerns about gas/electric scheduling coordination and inter-industry communication.

PJM coordinates with interstate gas pipelines and generation owners to ensure the reliability of the power grid. This coordination is challenged by the misalignment of the gas and electric system operating days.

The operating day differences create other inefficiencies by forcing generators to purchase gas for two gas operating days in order to meet their commitments of one electric day.

One major change that has enhanced gas/electric coordination is moving the PJM day-ahead award timing from 4 p.m. to 1:30 p.m. The timing allows for gas-fired generators to know their commitment by 1:30 p.m., which gives them until 2 p.m. to acquire their gas supply and meet the new 2 p.m. interstate pipeline intraday nomination deadline.