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[As global climate change converges with Peak Oil and Gas, weather is becoming more extreme, less predictable, and harder to cope with. The same forces that grant us a pleasantly unseasonable weekend in January may produce an unusually severe blizzard in the same month (or at a point in the spring when blizzards are, well, unseasonable). We just might get through this winter without a natural gas crunch, but it’s unlikely that our luck will hold for even two or three winters more. Focusing on the Northeast U.S. and a recent table-top exercise designed to test that region’s readiness, Michael Kane investigates the prospects for a serious cold weather crisis there. He takes us through the merits and limitations of such contingency planning, in which public authorities struggle to protect public health while private companies make the rules. –JAH] Winter Fuel Shortages New England Fuel Crisis Exercise Free Market Style Rationing? Cold Weather Event Day By Michael Kane © Copyright 2006, From The Wilderness Publications, www.fromthewilderness.com. All Rights Reserved. This story may NOT be posted on any Internet web site without express written permission. Contact admin@copvcia.com. May be circulated, distributed or transmitted for non-profit purposes only. January 10, 2006 1100 PST (FTW): W ill there be serious fuel shortages this winter? It depends on the weather. Months after the hurricanes, some twenty percent of the natural gas production in the Gulf of Mexico remains shut in.1 While the press keeps silent about the condition of these inactive pipelines, planners in the New England region are preparing for the very real possibility of near-term fuel shortages.2 The Independent System Operator New England Inc. (ISO-NE) conducted a table-top exercise (or “war game”)3 on November 29th in which emergency procedures dealing with extreme winter cold and fuel shortages were simulated at the Winter Operations Coordination Workshop. In mid-November of 2005 FTW began contacting local authorities across New England. We asked for official statements on the possibility of winter fuel shortages. Were there any plans for rationing? Every state and locality contacted in the Northeast said no. What they all do have in place are increased conservation and efficiency efforts and economic assistance for those who can’t afford to stay warm this winter. The poor will suffer the most, as there is simply not enough assistance for those in need. Rolling blackouts are the closest we will get to rationing in North America this winter, because they will not impact the financial markets the way a true rationing plan might. Staying warm through the winter should be viewed as a human right. Natural gas shortages are making that commodity more expensive. In a deregulated market, the gas will be sold to the highest bidder, not guaranteed to the public at large. During the most critical winter months, surging natural gas prices will force competition between electric utilities and gas-fired home heating. The major planned “market enhancements” that will address this problem won’t be ready in time for this winter.4 Rationing is the antithesis of what we are about to see, as pointed out by Mike Ruppert in “THE END of the GRID.” New England Fuel Crisis Exercise Independent System Operator of New England (ISO-NE) has command and control over the regional electric grid. On November 29, 2005, ISO-NE ran an unprecedented table-top exercise simulating a fuel crisis where three factors were considered: weather conditions, power plant availability, and high voltage line availability. Over 100 people were brought together from government, emergency management, the gas industry, communications, and other relevant fields to understand the risk North America is facing this winter. To the consternation of the Wall Street Journal and other publications,the exercise was closed to both the press and the public. Ken McDonnell, Press Secretary at ISO-NE, called the exercise a “huge success” and said there are no plans for another such exercise to be conducted this winter. “ISO-NE is confident in its ability to respond to any situation” that might eventuate this winter, said McDonnell, adding that “the chances of rolling blackouts are slim.” ISO-NE has the legal authority to implement rolling blackouts. McDonnell’s written summary of the event is both reassuring and ominous, leaving little doubt that the problem is real while demonstrating a will to prepare for it: Springfield, MA -- Nov. 29, 2005 -- In the first-of-its-kind regional conference, ISO New England stakeholders – including officials from state and federal regulatory agencies, reliability councils, emergency management agencies, the natural-gas sector, and local control centers and neighboring control areas – 100 in all – joined ISO New England operations and planning specialists in a Winter Operations Coordination Workshop. Participants gained a fuller appreciation of the possible cold-weather operating constraints facing New England and its bulk power system this winter and reviewed the triggers used by the ISO to signal the need for emergency actions. Then, based on real-world operating scenarios, the representatives rehearsed the communication and coordination procedures they would need to employ to ensure a safe and reliable supply of electricity under extreme cold-weather conditions this winter. The goal was to provide an open and honest exchange of information at all levels and across all entities of the regional energy sector. But without more information, the rigor of the exercise and the meaning of its results will remain unknown outside the circle of invited attendees. This reporter requested documentation on what set of assumptions were used in the exercise and how they played out, but as of this writing ISO-NE has not provided it. Cold Weather Event Day In January of 2004 the New England region came dangerously close to running short on natural gas. Since then ISO-NE has added procedures for what it calls a “Cold Weather Event.” A “Cold Weather Watch,” followed by a “Cold Weather Warning,” will likely precede the calling of a Cold Weather Event. 5 Independent System Operators across the continent closely follow both short-term and long-term weather forecasts, but New England is in a unique situation. The region is at the end of the natural gas supply line. Hurricane damage in the Gulf of Mexico is a big worry since 25% of New England’s peak-day natural gas comes from Gulf sources.6 While some of their power plants have the capacity to switch to oil for electricity production, the vast majority can only operate on natural gas. If we see severe cold this winter, demand will surge and a natural gas shortfall could lead to a nightmare scenario for the region. A Cold Weather Event is declared before 11 am two days prior to the event day. Modifications have been made to tariff methodology to ensure fuel providers can meet their requirements. ISO-NE has been modifying their protocols and procedures to prepare for what might happen this winter. The table-top exercise mentioned above tested the procedures that have now been implemented. On the day of the exercise (November 29, 2005) ISO-NE promulgated its “Winter 2005/06 Action Plan” which develops four major areas of endeavor:7 Communicating the need to reduce energy consumption around the clock. Encouraging the utilization of dual-fuel generating capability. Expanding demand-side management programs in New England in order to help maintain needed Operating Reserves. Developing Emergency Energy procedures and Market Rules to complement the cold weather procedures set forth in Appendix H to Market Rule 1. All this is intended to avoid rolling blackouts and/or voltage reductions. As demand for natural gas starts to outstrip supply, those power plants that have dual-fuel capacity will be called upon to switch from natural gas to oil. Plants can already do this as a response to rising gas prices, but they face considerable red tape; burning that additional oil requires environmental waivers. Long-term ecology will have to be sacrificed to short-term public health – if the gas isn’t available, the oil will burn. Procedures have been put in place to fast-track the waiver approval process this winter. Industrial customerswho have agreed in advance to have their natural gas supply interruptedwould be the first curtailments made if necessary. Six governors in the New England area would televise an urgent call for energy conservation across their states. Worst Case Scenario Cold weather will be easier to cope with if it doesn’t hit the whole country at once. That way, resources can be shifted to the neediest areas. But a nationwide cold snap would cause a large number of dual-use power plants to suddenly start burning more oil for electricity production. That could cause a shortage of available oil, impacting oil-heated homes. When natural gas prices exceed $20 per MMBTU, providers who already have gas in storage will be strongly motivated to sell their gas to the highest bidder. Thanks to deregulation, they will be at liberty to capitalize oncrisis by liquidating what should be a public trust. Rolling blackouts can mitigate scarcity, but the question is whether enough fuel can be spared on the electricity side to save lives on the heating side. TV and radio news outlets will issue urgent instructions for superintendents, tenants, and homeowners in buildings heated with natural gas to drain their water systems lest their pipes freeze. While such drainage is usually a fairly simple operation, not everybody knows how to do it. Some residents will suffer burst pipes; others will overpay for the services of opportunists; still others will successfully protect their plumbing with their own efforts or with honest help. On the other side of the crisis, the resumption of gas services presents the problem of relighting millions of pilot lights – a potentially dangerous task, since the timing and ventilation have to be right. And if scarcity deepens, gas service may not resume for a long time. Even a short period of no heat could leave New York City’s 123 year-old steam powered heating system in ruins as pipes freeze. Former Director of Central Intelligence James Woolsey was quoted as saying New York could resemble “a frozen New Orleans.”8 What New York had to Say Ken Klapp, Press Secretary for the New York Independent System Operator (NYISO), says New York has a much better fuel mix than New England. Over 35% of New York’s power plants have dual fuel capacity. NYISO officials attended the ISO-NE conference and exercise, but the organization feels there is minimal concern for their region this winter and rolling blackouts are not likely. Gary Brown, VP of External Affairs at NYISO, told this reporter that the New York Gas Group, comprised of the gas companies that serve New York, has performed contingency analysis for the possibility of emergency restrictions that may be implemented if a shortage of natural gas affects the New York area. The New York Gas Group is part of the Northeast Gas Association. In a report published on December 20, 2005, they state that gas supplies “should” be adequate for this season. But the same report indicates that as of December 19, the Gulf Coast still had 2 Bcf/d of production offline . That represents 4% of the average U.S. daily production.9 Domestic gas production hadbeen stretched to the limits well before the hurricanes. The Northeast Power Coordinating Council (NEPCC) published a report on November 18, 2005, where they concluded harsh winter conditions could cause Ontario, New England, Quebec and the Maritime Areas to implement operating procedures designed to mitigate resource shortages. They did not consider New York to be at risk for this winter.10 But the nightmare scenario that might start in New England would send as yet unknowable shockwaves across North America. It is still unclear what natural gas shortfalls from the Gulf will be at any given point this winter. The position of these Northeast organizations is based in part on assumptions that may or may not play out as they hope. Finally! Signs of Life After our investigation began, two mainstream news reports added weight to our concerns. The Christian Science Monitor published, “If winter is bitter, brace for a natural-gas crunch.” This was the first time a mainstream publication published a partial admission of the looming natural gas crisis. The report included a map showing that the Northeast is far more likely to be impacted by a tight supply of natural gas than any other region in the country. Then US News and World Report published “The Big Chill,” where the proverbial cat was let out of the bag. Finally a news organization aside from FTW was warning about an imminent natural gas crunch. Dianne Munns, president of the National Association of Regulatory Utility Commissioners, was quoted as saying, “We pray for warm weather. We have a prayer chain going.” Matthew Simmons, President of Simmons and Company International, said as much over 18 months ago in an interview with FTW. With or without prayer, a rationing plan is the only way to ensure that everyone stays warm in an energy crisis. But no one seems to have authority to implement such a plan in a deregulated energy market. It’s now legal for utilities to start privatizing,which will place every aspect of the energy industry into corporate hands. Rationing is impossible without basic legal regulation. But instead we are seeing the privatization of warmth just as we are seeing the privatization of potable water – two natural resources that are critical to sustain life. Recently, members of the Senate Committee on Foreign Relations indicated that American consumers and producers are unlikely to change their ways, unless forced to do so by real hardship: “There has to be a big crisis,” said Senator Chuck Hagel on November 16, 2005.11 It may be frightening for us all as we consider the necessary sacrifices, but FTW is convinced the alternative to conservation is nothing short of disaster. We’ve said it too many times to count, but it can never be reiterated enough – POWERDOWN is the only solution. 1 Minerals Management Service Press Release, December 29, 2005, Media Contact Gary Strasburg http://www.mms.gov/ooc/press/2005/press1229.htm. THE OUTLOOK FOR NATURAL GAS IN THE NORTHEAST FOR THE 2005-2006 WINTER HEATING SEASON, Northeast Gas Association, December 20, 2005 Update, http://www.northeastgas.org/pdf/winter_outlook_05.pdf. 2 Among the Northeast Region states on which our report focuses, Pennsylvania seems to have the least to worry about. Press Secretary Jennifer Kocher said 45% of Pennsylvania’s electricity production comes from coal, 20% from nuclear energy, and 20% from natural gas. The remaining 15% derives from various renewable sources, mainly hydro. Coal makes up a very high percentage of the fuel mix throughout the country, but a very small percentage in the Northeast. 3 In an extensive phone interview with this reporter, ISO-NE Press Secretary Ken McDonnell referred to the November 29th simulation as a “table-top exercise, a war game.” McDonnell said he was familiar with our publication (FTW). 4 ISO New England’s Winter 2005/2006 Assessment & Action Plan “Preparing for Cold Weather Reliability,” October 6, 2005, http://www.iso-ne.com/pubs/pubcomm/pres_spchs/2005/winter_assessment.ppt. 5 ISO New England’s FAQ page – What Defines a Cold Weather Event? http://www.iso-ne.com/support/faq/wntr/index.html#faq3. 6 Ibid, footnote #2 http://www.iso-ne.com/pubs/pubcomm/pres_spchs/2005/winter_assessment.ppt. 7 ISO New England Inc. and New England Power Pool, Docket No. ER06-____-000; Interim Amendments to Market Rule 1 for Winter 2005/2006, October 28, 2005 http://www.iso-ne.com/regulatory/ferc/filings/2005/oct/ er06-___winter_project_filing2_10-28-05.pdf. 8 Marianne Lavelle, “The Big Chill: A winter fuel crisis of high prices and shortages could darken homes and factories,” US News and World Report, December 19, 2005 http://www.usnews.com/usnews/biztech/articles/051219/19energy.htm. 9 Ibid, footnote #1 http://www.northeastgas.org/pdf/winter_outlook_05.pdf. 10 Northeast Power Coordinating Council Reliability Assessment for Winter 2005–2006, November, 2005 https://www.npcc.org/publicFiles/documents/seasonal/currentYear/ CO12_NPCC_Reliability_Assessment_2005-06W_FINAL.pdf. 11 Michael Kane, “THERE HAS TO BE A BIG CRISIS,” FTW, December 5, 2005, http://www.fromthewilderness.com/free/ww3/120505_big_crisis.shtml.
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