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Utility Bill Spikes Caused by Lack of Electric, Gas Coordination, Experts Say

U.S. Power Grid Vulnerable to Attack: Congressional Research Service

Natural Gas and Oil Market Update

EIA - Weekly Natural Gas Storage Report

NYMEX Natural Gas Week-to-Week Price Change

Natural Gas Futures - Five Year Price


NOAA 6 to 10 Day Outlook
Color indicates the probability of forecasted temperatures being above or below a historical average for the period.


Utility Bill Spikes Caused by Lack of Electric, Gas Coordination, Experts Say

Chicago Tribune | July 10, 2014

Experts assure regulators that utilities are prepared for this coming winter.

High price spikes in utility bills during this winter’s polar vortex were caused by a lack of coordination between natural gas pipelines and electric grid operators, policy experts told regulators Wednesday, while assuring them that utilities are prepared for this coming winter.

The Federal Energy Regulatory Commission is asking natural gas pipelines to coordinate efforts with electric grid operators to avoid another winter of spiking utility bills, a FERC representative told the Illinois Commerce Commission on Wednesday.

This past winter, power plants competed with home heating companies for pipeline space to move fuel, driving up prices for utility customers.

“This past winter it was really cold…When you have that kind of unusual extreme weather, it’s going to tax the system, it’s going to increase demand for the resources the systems relied on to operate reliably and it's going to increase prices. That’s unfortunately how markets work,” said Ed Murrell, deputy director, division of economic and technical analysis, at the Office of Energy Policy and Innovation at the Federal Energy Regulatory Commission.

Among the options under consideration: A commitment by electric generators to store natural gas at onsite facilities. But generators said that would be costly and if those plants aren’t used, unnecessary. Better scheduling could help, industry officials said, because some power plant operators were purchasing gas they didn’t need.

“From a cost perspective, it was fairly astounding,” said Andy Ott, executive vice president of markets for the PJM Interconnection, which is the electric grid operator that serves the area that includes Chicago.

The issue, industry experts told regulators, is that during extreme weather, electricity generators which operate only for a few hours each year were asked to switch on by electric grid operators but didn’t have “firm” fuel supplies on hand. That demand drove up prices as gas pipelines had difficulty meeting increased demand.

In response, FERC is working to better align the schedules of pipeline operators and electric grid operators. With extreme weather growing more frequent and more electricity generating power plants using natural gas as a fuel – competing for natural gas with home heating utilities – future winters will only get worse if communication issues aren’t remedied, industry officials said at the hearing.

“Historically, we have not needed to know at the control center level exactly what’s happening on natural gas pipelines,” said Joseph Gardner, responsible for forward markets and operational processes for the electric grid operator that serves the Midwest region. “We don’t even necessarily know which pipeline is connected to which plant.”

But some pipeline operators expressed concerns about the costs associated with reprogramming automated systems to work earlier in the day and about safety issues that could come out of performing maintenance tasks during hours without sunlight.

Some industry experts said more pipeline capacity is needed to move gas to where it is needed. More capacity is being built but not in time for this heating season.

“Timeline adjustments will not create additional pipeline capacity,” said Tim Sherwood, vice president of gas supply operations for Nicor Gas. “The pipe doesn’t shrink and swell with the load throughout the day. We have to put the pipe in place to serve it.”

Murrell at FERC said natural gas pipelines that were once lightly used during the summer season are now in constant demand.

“Pipelines are reaching capacity,” he said. “They are now putting demands on pipelines that rise to a level of filling those pipelines up during the summer.”


U.S. Power Grid Vulnerable to Attack: Congressional Research Service

Bloomberg | July 10, 2014

A coordinated and simultaneous attack on the nation's electricity grid could have “crippling” effects including widespread extended blackouts and “serious economic and social consequences,” according to a federal report on the physical security of high-voltage transformer substations.

The Congressional Research Service report said Congress “may” want to consider several issues related to oversight of grid security, including the adequacy of current protections in place, and whether voluntary, company-specific security measures are appropriate.

“Despite their great size and internal complexity [high voltage] transformers can be readily disabled or destroyed,” the independent Congressional Research Service said in a report issued last month that quoted a Mitsubishi Electric Power Products Inc. official as saying such a task would be “surprisingly simple.”

The report comes as the security of the nation's electricity grid is under new scrutiny following a high-profile, sniper-style attack in April 2013 on a Pacific Gas & Electric Co. substation near San Jose, Calif. In that incident, high-voltage transformers at the 500-kilovolt substation in Metcalf, Calif., were shot with .30 caliber rounds, “causing them to leak cooling oil, overheat, and become inoperative,” CRS said.

Since then PG&E has announced that it would be investing approximately $100 million over three years to improve substation security, including measures such as new perimeter barriers, shielding for certain equipment, more cameras and clearing vegetation, the report said.

In addition, the Federal Energy Regulatory Commission in March ordered the U.S. power industry to come up with reliability standards to protect the grid from attacks.

High-voltage transformers are especially vulnerable to attack, because they “serve as vital nodes” carrying bulk volumes of electricity, the CRS report said. Moreover, they are often custom-made at a cost of millions of dollars, and the time it takes to manufacture them can be as long as a year or more, the report said.

Because of this, keeping “large inventories of spare [high voltage] transformers solely as emergency replacements is prohibitively costly,” the CRS said.

Natural Gas and Oil Market Update

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Natural Gas Prices Turn Lower After EIA Data

Market Watch | July 10, 2014

Natural Gas futures on Thursday turned lower after the U.S. Energy Information Administration reported that supplies of natural gas climbed 93 billion cubic feet for the week ended July 4. Analysts surveyed by Platts forecast an increase of between 90 billion cubic feet and 94 billion cubic feet. Total stocks now stand at 2.022 trillion cubic feet, down 653 billion cubic feet from a year ago and 769 billion cubic feet below the five-year average, the government said. August natural gas NGQ14 -1.03% was at $4.14 per million British thermal units, down 3 cents, or 0.7%. It was trading at $4.18 before the data.


arrow upWTI Crude Heads for Record-Long Slump as Supplies Expand

Bloomberg | July 10, 2014

West Texas Intermediate crude headed for a record-long slump as government data showed an expansion in supplies where the oil is stored, and demand for gasoline weakened. Brent, Europe’s benchmark, was little changed in London. Futures declined as much as 0.7 percent in New York. A lower closing price would be the 10th in a row, marking the longest retreat since the contracts began trading in 1983, New York Mercantile Exchange data show.

WTI for August delivery dropped as much as 74 cents to $101.55 a barrel in electronic trading on the New York Mercantile Exchange and was at $101.96 at 12:49 p.m. London time. The contract slid $1.11 to $102.29 yesterday, the lowest close since May 16. The volume of all futures traded was about 20 percent above the 100-day average for the time of day.

Crude inventories at Cushing, Oklahoma, the delivery point for WTI and the biggest U.S. oil-storage hub, climbed by 447,000 barrels to 20.9 million. Supplies nationwide dropped by 2.4 million barrels to 382.6 million.

EIA - Weekly Natural Gas Storage Report

EIA - Weekly Natural Gas Storage Report


Working gas in storage was 2,022 Bcf as of Friday, July 4, 2014, according to EIA estimates. This represents a net increase of 93 Bcf from the previous week. Stocks were 653 Bcf less than last year at this time and 769 Bcf below the 5-year average of 2,791 Bcf. In the East Region, stocks were 359 Bcf below the 5-year average following net injections of 56 Bcf. Stocks in the Producing Region were 320 Bcf below the 5-year average of 1,018 Bcf after a net injection of 23 Bcf. Stocks in the West Region were 91 Bcf below the 5-year average after a net addition of 14 Bcf. At 2,022 Bcf, total working gas is below the 5-year historical range.

NYMEX Natural Gas Week-to-Week Price Change NYMEX Natural Gas Week-to-Week Price Change

Natural Gas Futures - Five Year Price ($ per mmBtu)

NYMEX Natural Gas Week-to-Week Price Change - Five Yearly Snapshot
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