Sharing with the SACE team. I hope the NCUC asks you to address the large load conference in October. It makes total sense. Just like the gas CC fleet doesn’t really operate 100% 24/7, and yet utilities are locking up expensive firm transportation on new pipeline expansions as if they do.
Shelly, can you provide any specific references for this? It would be useful for a project of mine. I think most gas power plants buy from the spot market rather than lock up firm transport, but I know some do. The incentives get very strange when they get a share of their capacity release sales.
Generators in ISOs don’t buy firm because it’s too expensive, but in the Southeast, Duke, Dominion, and Georgia Power (through Southern Company Services) are the anchor shippers with FT for multiple major pipeline expansions (Transco’s Southeast Supply Enhancement, EQT’s MVP Southgate, Kinder Morgan/Southern Company/Elba Express’s South System Expansion 4, Kinder Morgan/Tennessee Gas Pipeline’s Mississippi Crossing). These huge projects are backed by FT contracts from various mixtures of these utilities. The actual cost is kept confidential but is passed directly to utility customers in rate cases as fixed O&M in rate case proceedings. It’s a classic moral hazard.
Thanks. That makes sense. My colleauges and I have built a model of the national gas pipeline network, and the majority of it appears to be significantly overbuilt. So, we're trying to understand why this could occur. Gas LDCs can have excess demand for long-term contracts stemming from incentives tied to capacity release sales (gas procurement incentive mechanisms). It appears that regulated electricity generators in the South likely have similar incentives -- all costs of the FT contracts are passed on to customers. Still, they retain a share of capacity release sales.
Sharing with the SACE team. I hope the NCUC asks you to address the large load conference in October. It makes total sense. Just like the gas CC fleet doesn’t really operate 100% 24/7, and yet utilities are locking up expensive firm transportation on new pipeline expansions as if they do.
Are they? Would be surprised if they could get the cost recovery in most areas
In the Southeast? They totally get it. The commissions are telling them to, so they won’t deny recovery.
Shelly, can you provide any specific references for this? It would be useful for a project of mine. I think most gas power plants buy from the spot market rather than lock up firm transport, but I know some do. The incentives get very strange when they get a share of their capacity release sales.
Generators in ISOs don’t buy firm because it’s too expensive, but in the Southeast, Duke, Dominion, and Georgia Power (through Southern Company Services) are the anchor shippers with FT for multiple major pipeline expansions (Transco’s Southeast Supply Enhancement, EQT’s MVP Southgate, Kinder Morgan/Southern Company/Elba Express’s South System Expansion 4, Kinder Morgan/Tennessee Gas Pipeline’s Mississippi Crossing). These huge projects are backed by FT contracts from various mixtures of these utilities. The actual cost is kept confidential but is passed directly to utility customers in rate cases as fixed O&M in rate case proceedings. It’s a classic moral hazard.
Thanks. That makes sense. My colleauges and I have built a model of the national gas pipeline network, and the majority of it appears to be significantly overbuilt. So, we're trying to understand why this could occur. Gas LDCs can have excess demand for long-term contracts stemming from incentives tied to capacity release sales (gas procurement incentive mechanisms). It appears that regulated electricity generators in the South likely have similar incentives -- all costs of the FT contracts are passed on to customers. Still, they retain a share of capacity release sales.