NOTICES
Guidelines on Maintaining Safety and Reliability; Doc. No. L-00990144
[29 Pa.B. 5792] Commissioners Present: John M. Quain, Chairperson; Robert K. Bloom, Vice Chairperson; Nora Mead Brownell; Aaron Wilson, Jr.
Public Meeting held
October 15, 1999
Corrected Order By the Commission:
This interim order sets forth the procedures the Commission intends to follow in executing its responsibilities under the Natural Gas Choice and Competition Act, as Codified in 66 Pa.C.S. § 2203(1):
(1) The Commission shall enforce standards as necessary to ensure continuation of the safety and reliability of the natural gas supply and distribution service to all retail customers. In adopting the standards the Commission shall consider the absence of any applicable industry standards and practices or adopt standards in conformity with industry standards and practices meeting the standards of this chapter. The application of such standards shall be in such a manner that incorporates the operational requirements of the different natural gas distribution companies.And also Codified in 66 Pa.C.S. § 2203(12):
(12) The Commission shall make its determinations pursuant to this chapter and shall adopt such orders or regulations as necessary and appropriate to ensure that natural gas suppliers meet their supply and reliability obligations, including but not limited to, establishing penalties for failure to deliver natural gas and revoking licenses. Any affected entity may at any time petition the Commission to amend or rescind any such order or regulation issued or promulgated under this chapter.Commission staff established a Collaborative Working Group as the appropriate vehicle to proceed with the implementation of Section 2203(1) and (12) of the Customer Choice Legislation. On July 7, 1999, Commission staff convened the first meeting of the Gas Safety and Reliability Working Group to address safety and reliability issues presented by the implementation of the Natural Gas Choice and Competition Act, 66 Pa.C.S. § 2201 et seq.
At the initial meeting of the working group, Commission Staff identified statutory directives that applied to the working group, framed a tentative list of issues that should be addressed by the working group, and established a date for the submission of informal comments. A second meeting of the working group was held on August 11, 1999, and a schedule for the further work of the group was established.
The group agreed that the Act, at Section 2203(1), recognizes the different operational characteristics of Natural Gas Distribution Companies and that this allows certain issues to be addressed in tariffs. Regulations or policies containing detailed uniform rules for all companies may be inappropriate and unworkable. Commission staff urged the parties to identify those common issues which could be addressed in Safety and Reliability Guidelines.
The Office of the Consumer Advocate, the Office of Trial Staff, the Pennsylvania Gas Association, Texas Eastern Transmission Corporation, CNG Retail Services Corporation and TXU Energy Services (filed jointly with Statoil Energy) submitted informal comments on August 18, 1999.
The Working Group designated selected members to draft suggested safety and reliability guidelines and this draft was delivered to the full group and considered at the meeting on September 21, 1999.
After a review of the suggested interim safety and reliability guidelines, we agree that they appropriately address those issues that can be determined to be generic guidelines applicable to all NGDC systems in Pennsylvania and are consistent with the reliability provisions of the Act. We believe that the proposed guidelines are appropriate to ensure that safety and reliability are maintained, while recognizing that the details of these requirements need to be further developed in each NGDC's restructuring proceeding. We also believe that these requirements fairly balance the obligations of NGDCs, NGSs and end-users in the process of ensuring system reliability.
The guidelines address a number of matters that are critical to reliability, including (1) delivery standards for natural gas suppliers, (2) the definition, use and verification of ''comparable capacity'' for supplying firm service, (3) the distinctions between firm and interruptible service, (4) the roles of the supplier of last resort and the NGDC's role as system operator, (5) requirements to ensure that sufficient firm capacity remains committed to NGDC firm service customers, (6) appropriate guidelines for the establishment of penalties, (7) critical day procedures [necessary to maintain system safety and reliability], (8) the establishment of communication protocols on all matters which may affect system reliability, and (9) the establishment of Operational and Capacity Councils to meet the requirements of Section 2204(f) of the Natural Gas Choice and Competition Act. On all of these issues, the guidelines provide a strong framework for addressing these issues in more detail in the context of each utility's tariff and operational procedures.
Turning now to a related matter, in the Commission's Order of August 27, 1999 at Docket No. M-00991249F003, pertaining to Guidelines or Maintaining Customer Services at the Same Level of Quality, we indicated that the Safety and Reliability Working Group should also address the development of Natural Gas Emergency Plans and draft Natural Gas Curtailment Regulations which could result in changes to the Commission's regulations at 52 Pa. Code §§ 59.63--59.64 and 52 Pa. Code §§ 69.21--69.27. We will therefore, open a separate rulemaking to address these issues through a collaborative process which should include the Law Bureau, the Bureau of Conservation, Economics and Energy Planning and the Safety and Reliability Working Group.
Therefore, It Is Ordered:
1. That a copy of the Order and Attachment A, entitled Interim Safety and Reliability Guidelines, shall be forwarded to the Pennsylvania Bulletin for publication.
2. That a proposed rulemaking docket shall be opened to incorporate these guidelines into the Commission's regulations at 52 Pa. Code Chapter 69, relating to policy statements.
JAMES J. MCNULTY,
Secretary
Attachment A
Interim Safety and Reliability Guidelines § 1. Delivery Standards for Natural Gas Suppliers.
(a) Natural Gas Suppliers (NGSs) are obligated to deliver natural gas supplies under the terms of service specified in Natural Gas Distribution Company (NGDC) tariffs. Failure to deliver natural gas supplies in accordance with the tariffs may subject NGSs to penalties under procedures specified in such tariffs, and/or revocation of licenses. 66 Pa.C.S. § 2203(12). NGSs may serve customers with different quality of service requirements, as permitted under the Act and applicable NGDC tariffs.
(b) NGSs shall utilize firm capacity sufficient to meet the requirements of their firm service customers except to the extent otherwise provided in each NGDC's reliability plan. Service to any essential human needs retail gas customer lacking installed and operable alternative fuel capability and any residential retail gas customer must be firm service.
(c) NGSs shall warrant to the NGDC that they have sufficient firm capacity to meet the requirements of § 1(b), and shall describe the characteristics of any firm capacity to the NGDC. The NGDC shall take commercially reasonable steps to attempt to verify that the firm capacity contract rights exist. The failure or inability of an NGDC to verify the existence of such contract rights using commercially reasonable steps shall not relieve an NGS from any liability for failing to deliver gas, or subject the NGDC to any liability resulting from the NGS's failure to deliver.
(d) Natural gas service to interruptible gas service customers shall be interrupted, pursuant to the terms and conditions of the NGDC's tariff, if the safety and reliability of firm service would be impeded by the interruptible customer's continued use of natural gas.
§ 2. Service Obligations of the Supplier of Last Resort.
(a) The Supplier of Last Resort (SOLR) is the NGDC or an NGS, which has been designated by the Commission under Section 2207 of the Act to provide SOLR service. Each of the following services will be provided by an SOLR:
(1) natural gas supply services to those customers who have not chosen an alternative NGS or who choose to be serviced by their SOLR;
(2) natural gas supply services to those customers who are refused supply service from an NGS; or
(3) natural gas supply services to those customers whose NGS has failed to deliver its requirements.
(b) No customer shall have more than one SOLR designated for any of the services in subsection (a).
(c) A SOLR under subsection (a)(3) shall provide sufficient supplies as to quantity, quality, pressure and location to meet the operational reliability requirements of the NGDC's System including, but not limited to, a failure of one or more NGSs to:
(1) supply natural gas to their retail gas customers in conformance with their contractual obligations to such customers; or
(2) satisfy applicable reliability standards and obligations.
§ 3. Obligations of the System Operator.
An NGDC shall, in addition to performing any other roles such as selling natural gas, function as the system operator in ensuring that its distribution system is designed, constructed, managed, and operated so as to safely and reliably receive and deliver natural gas throughout its facilities to customers connected to them.
An NGDC, in performing its responsibilities as a system operator, shall retain or acquire gas supply assets as required to perform its system operator functions in a manner which permits it to operate its system in a safe and reliable manner. The identity of the Gas Supply Assets utilized by the NGDC to perform its system operator function shall be reviewed by the Commission annually in the NGDC's Section 1307(f) proceeding as part of the NGDC's reliability plan.
§ 4. Ensuring Sufficient Firm Capacity Availability.
(a) NGSs Using Firm Gas Supply Contracts with Pennsylvania Producers or Storage or Transportation Capacity Contracts Acquired Through Assignment or Release by NGDCs or Acquired as the Result of the Nonrenewal of a Storage or Transportation Capacity Contract Previously Held by the NGDC.
The NGS must offer the SOLR, or the successor NGS, a right of first refusal to utilize such contracts at the NGS's contract cost as long as needed to serve retail gas customers being relinquished by the NGS.
(b) NGSs Using Storage or Transportation Capacity Contracts Acquired in a Manner Other than Through Assignment, Release or Nonrenewal by the NGDC.
The NGS must provide the SOLR a right of first refusal to use such capacity at contract cost in the event that the NGS failed to give the SOLR and the NGDC sufficient notice or if there is insufficient alternative capacity available to serve the market being relinquished by the NGS. The SOLR shall retain the right to use such capacity at cost until the SOLR, through reasonable and diligent efforts, is able to acquire replacement capacity sufficient to serve the customers being relinquished by the NGS. The NGDC or the SOLR must acquire such replacement capacity in a manner consistent with the Commission's least cost fuel procurement policy.
§ 5. Penalties.
Nonperformance penalties should be established at levels sufficiently high to deter NGSs from failing to comply with their delivery obligations. Such penalties should be independent of and in addition to the costs incurred by the NGDC, or, in the alternative, the supplier of last resort, for replacement gas supplies, including pipeline penalties. NGDCs may take into consideration the operational costs and other liabilities NGDCs may be exposed to by virtue of an NGS's failure to deliver in establishing penalties. Failure of an NGS to honor delivery obligations may lead to disqualification from NGDC programs, suspension or revocation of the NGSs license. Such disqualification, suspension or revocation shall not relieve the NGS of its obligations to pay all penalties and any and all costs incurred by the NGDC as a result of the NGS's failure to deliver.
§ 6. Critical Period Procedures.
(a) A Critical Period exists when the NGDC declares an Operational Flow Order (OFO). A Critical Period implies the need for heightened awareness and attention by all parties. OFOs are issued in order to alleviate stress, or potential stress, to the NGDC system that threatens safety and/or reliability. OFOs are an action of last resort, are never issued lightly, are only issued for safety and/or reliability reasons. OFOs are distinct from, and do not preclude, other types of flow orders which an NGDC may issue to satisfy other obligations of the NGDC or the SOLR under the Public Utility Code or Commission regulations, such as the obligation to fulfill the least cost fuel procurement requirements of Section 1318 of the Public Utility Code.
(b) The NGDC should describe in detail, in its tariff, the actions it will take in advance of, and during a Critical Period. At a minimum those actions should include:
(1) exercises wherein Critical Period communications between, and the required responses of, the parties can be tested;
(2) a protocol for issuing and communicating system alerts that announce actual or pending events that, if unchecked, may result in a Critical Period, and call for voluntary actions or responses from NGSs and customers;
(3) a protocol for issuing and communicating OFOs. The protocol should address how and when the OFOs will be announced, and provide for disseminating periodic status reports during the period an OFO is in effect. OFOs should state the actions required and the reasons for such actions, be as localized as possible and be applied in a nondiscriminatory manner.
§ 7. Communications Protocols.
Communications Protocols are tools by which NGDCs, NGSs, and other parties, define and describe the type, form and frequency of communications necessary to successfully fulfill customer requirements in an operating environment of increased retail choice. Effective and consistent communications are critical in order to reduce errors, and provide all entities with the information necessary to properly fulfill their respective responsibilities, both in normal and emergency circumstances.
A Communications Protocol should include at minimum, in addition to the specific requirements in § 6(b)(2) and § 6(b)(3), the following:
(a) A detailing of contact data for both NGDC and NGS personnel responsible for the various aspects of customer contact, gas deliveries and distribution, including mechanisms for ensuring that such data is kept current for all parties;
(b) The specification that regular meetings will be held, with joint agenda development responsibilities, including the potential scheduling of operational conference calls;
(c) Communications, to the extent not otherwise set forth in the NGDC's tariff, associated with the NGDC's procedures for customer enrollment, billing arrangements, daily or monthly delivery quantity determination, nominations (monthly, daily, intra-day, and weekend), balancing options, reconciliation or true-ups, cash-outs, and electronic data exchange requirements;
(d) Procedures utilized by NGDCs to inform NGSs of changes to NGS delivered supplies and/or customer demand required to assure system reliability, both daily and seasonal, and to avoid pipeline penalties.
§ 8. Operational and Capacity Councils.
Each NGDC shall create an Operational and Capacity Council for parties referred to in Section 2204(f) of the Act to discuss and attempt to resolve operational and capacity issues related to customer choice, including the reliability effects of those operational and capacity issues related to customer choice and the ongoing implementation of these guidelines. The intent of these Councils is to explore the possibility of building consensus among council participants relating to operational, capacity, and operational and capacity-related safety and reliability issues in a fair and nondiscriminatory manner.
Each NGDC's Operational and Capacity Council should, at a minimum, establish, in consultation with council participants, (1) a regular meeting schedule and (2) an agenda for each meeting.
The final determination of operational and reliability issues resides with the NGDC, subject to Commission review.
The fact that statements were made, or positions were taken and/or were not considered or accepted, in Operational and Capacity Council meetings shall not be considered, or entered into evidence, in any formal proceeding before the Public Utility Commission relating to any matter addressed in such Council meetings.
Definitions
''Design day conditions.'' The extreme weather conditions that an NGDC uses to project customer requirements.
''Essential Human Needs Retail Gas Customer.'' Customers consuming gas service in buildings where persons normally dwell including, but not limited to, apartment houses, dormitories, hotels, hospitals and nursing homes, as well as the use of natural gas by sewage plants. (52 Pa. Code § 69.22)
''Firm capacity.'' Assigned capacity or comparable capacity that can be called upon to serve customer requirements on a reliable basis even under design day conditions
''Gas supply assets.'' Includes all sources and components associated with the acquisition and delivery of natural gas.
''Interruptible gas service.'' Indicates that natural gas service may be interrupted consistent with the terms and conditions of the NGDC tariff.
''Interstate capacity.'' Services provided by a FERC-regulated entity, including, but not limited to, pipeline transportation, storage, peaking, balancing, and no-notice services.
''Operational Flow Order.'' An order issued by an NGDC to protect the safe and reliable operation of its gas system, either by restricting service or requiring affirmative action by shippers.
''Reliability Plan.'' A Reliability Plan provided for in Section 1317(c) of the Public Utility Code, 66 Pa.C.S. § 1317(c).
''Residential Retail Gas Customer.'' As defined in the tariff of each NGDC.
JAMES J. MCNULTY,
Secretary
[Pa.B. Doc. No. 99-1903. Filed for public inspection November 5, 1999, 9:00 a.m.]
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