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eliminates a power transmission constraint that is located in a region midway along a gas transmission system, the rates associated with pipeline delivery may not fully recover the costs of delivery. This issue needs to be addressed.
4. Gas Transmission System Design
Natural gas transmission pipeline systems historically were designed to supply gas to consumers at fairly constant rates. This was because, for the primary customers (i.e., the residential buyer), utilization of the gas supply was at a constant rate and varied mainly as ambient temperature changes occurred. In many cases, the very nature of the power generation requires frequent and fairly rapid changes in gas flow from the transmission system. Use of gas pipeline capacity to eliminate power capacity constraints would subject the pipeline to load requirements and variability for which they were not originally designed.
Generally, pipelines historically have felt that the variability in load created a high element of risk to the gas system operation, and thus made their operating tariff parameters fairly rigid. This rigidity, however, limits the ability of the gas transmission system operator to sell services to the developer of generation and hinders the ability of the generator to bid into a fairly fluid power market. Natural gas transmission companies now are starting to offer more flexible services, including a few that now offer firm hourly transportation services.
5. Regulatory Obligations To Ensure Equality of Services
Natural gas pipeline regulations are designed and intended to ensure equality of the system's services to all its existing and potential users, even though the needs of the users are not necessarily the same. This can hinder the use of gas transmission capacity to reduce capacity constraints on power transmission systems.
Designing services to meet the specific needs of certain customers can lead in many cases to questions regarding the alteration of gas transmission rates in order to ensure that the costs associated with the operation of the system equate, and are allocated comparably, to the services being provided. Regulatory and rate proceedings at FERC can be time consuming and expensive, but this hurdle can be overcome. It may, however, require synchronization of the regulatory frameworks and drivers between the power and natural gas industries.
-R.H. and D.S.
The establishment of open transmission access and the increased development of power generation by independent developers has created a situation where the physical location of generation facilities does not always align with the load requirements of the power market. Power generation development by independent investors has centered for the most part on the investors' commercial view of the market integrated with the current intersections of gas pipeline and electric transmission facilities, and not on the overall efficient and effective operation of the power system transmission capabilities. This commercial view of independent power producers (IPPs), which may be skewed due to immature markets or market design flaws, contributes to congestion. Additionally, congestion drives volatility in commodity prices, which provides power traders the opportunity to profit when power is most required by consumers.
The map in Figure 1 identifies major points of transmission constraints