March 2014

Natural Gas Supply Into The Northeast Is Limited


On six occasions since the first of this year, and for a total of sixteen days, Con Edison and National Grid have required their Interruptible Customers to stop burning natural gas as temperatures dropped below twenty degrees.  Both Utilities took similar steps last winter, but none of these events drew any press coverage to speak of.  A few days after each curtailment, as the weather moderated and temperatures warmed the Utilities notified their Interruptible Customers that they could begin to burn gas again.

This has been common practice over the years and Utilities do this because they know the limitations of their distribution systems and the limitations of the interstate transmission lines that bring the fuel to the region to feed their systems.  But as conversions to gas for space heating and electric generation have increased, the frequency of the interruptions appears to be increasing as well revealing a weakness in the Natural Gas supply line.  As the weather gets colder, higher volumes of Gas are consumed for space heating and electric power generation.  The general rule of thumb over the years has been 20 degree outside temperature and below is the point where they max out their ability to supply all of their customers.  So to address this supply limitation, the Utilities’ have created a “Class” of customer, with the ability to “Change Over” to an alternate fuel (usually fuel oil), that the Utilities can “Shut-Off” when needed and divert their available Natural Gas to other customers.  The trade-off here is that the Utilities offer to sell these “Interruptible Customers” Natural Gas at a discounted rate, during relatively warmer outdoor temperature conditions, if the customer agrees to stop burning Gas when notified by the Utility to do so.  These Interruptible customers are usually larger volume commercial accounts like: apartment buildings, hospitals and schools; and most commercial industrial burner manufacturers offer an “Automatic Temperature Changeover” option that includes an outdoor sensor, specifically designed for this type of Interruptible application.

This may sound like a reasonable business model, but it points out two very serious shortcomings that the Utilities don’t like to talk about.  The first is the fact that the Natural Gas infrastructure is already limited and cannot reliably supply all customers if the temperature falls below 20 degrees for any extended period of time.  The second fact is that the Utilities “NEED” these “Interruptible Customers” and without them they simply cannot reliably supply all their customers during cold weather periods.  Since the most common alternate fuel consumed by these Interruptibles when told to stop burning Gas is Fuel Oil, the Utility is in effect transferring the burden of their limited ability to supply their customers to the Heating Oil Market, and at a time when Oilheat too is experiencing higher than normal demand from its own customer base.  Often times this causes the price of fuel oil to spike, and may even strain the entire Oilheat supply chain.  So Oilheating Customers can see higher prices during these events driven mainly by the additional demand created by the need to supply Interruptible Gas Customers at a time of already high demand for fuel oil.  I would suggest to you that this is unfair to Retailers and especially unfair to loyal Oilheat customers and shouldn’t be allowed by Utility Regulators.

With the plentiful supply of natural gas here in the United States, others have pointed out this limited ability to move that Gas to where it is needed during periods of high consumption.  ISO New England’s CEO Gordon van Welie testified before a U.S. House of Representatives subcommittee last March saying that “the status quo is unsustainable.”  AEC reported on this in a March 20, 2013 E-Alert entitled “Grid Chief Warns of Future NE Power Problems”.  van Welie also noted that during the February Blizzard and resultant wide spread power outages a month earlier “…6,000 megawatts of electricity, about a fifth of the region’s total capacity, wasn’t available, in part because gas generators couldn’t find fuel [Gas]”.

Another ISO New England spokesperson, Marcia Blomberg said the organization was in the midst of a major study to determine if the region’s power grid has become too reliant on natural gas.  AEC reported on this in a July 17, 2013 E-Alert entitled “New England’s Love Affair With Natural Gas Cools”.  In that same story, van Welie was quoted as telling the U.S. Senate Energy and Natural Resources Committee that “we are very close to the edge of reliability in very poor weather circumstances”.

Numerous other closely related subjects have been highlighted by AEC thru its weekly e-Alert blasts including: the planned shutdown of the Vermont Yankee nuclear power plant; warnings of limited gas supplies into New England by at least two Municipal Electric operators; the potential for electric rate volatility and increased costs and the planned shutdown of other coal fired generators.  All of these articles are achieved on the AEC website americanenergycoalition.com.  I would again urge you to visit the AEC website and Get The Facts.  Then, armed with the facts, talk with your customers, neighbors, relatives and especially your elected officials and public policy makers and urge them to act responsibly.  Our industry depends upon it.  Not only are we losing customers to gas conversions, but when it gets cold, Oilheat is asked to bail out the very competitor that is taking our customers thru gas conversions.  Instead of states advocating pipeline expansions and conversions from oil to gas, maybe the states should be placing a moratorium on any more gas conversions until the utilities get their act together and secure sufficient supply lines for their existing customer base.

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