[Senate Hearing 112-7]
[From the U.S. Government Publishing Office]
S. Hrg. 112-7
NATURAL GAS SERVICE OUTAGES IN NEW MEXICO
=======================================================================
HEARING
before the
COMMITTEE ON
ENERGY AND NATURAL RESOURCES
UNITED STATES SENATE
ONE HUNDRED TWELFTH CONGRESS
FIRST SESSION
TO
RECEIVE TESTIMONY REGARDING RECENT NATURAL GAS SERVICE DISRUPTIONS IN
NEW MEXICO AND THE RELIABILITY OF REGIONAL ENERGY INFRASTRUCTURE
__________
ALBUQUERQUE, NM, FEBRUARY 21, 2011
Printed for the use of the
Committee on Energy and Natural Resources
----------
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Washington, DC 20402-0001
COMMITTEE ON ENERGY AND NATURAL RESOURCES
JEFF BINGAMAN, New Mexico, Chairman
RON WYDEN, Oregon LISA MURKOWSKI, Alaska
TIM JOHNSON, South Dakota RICHARD BURR, North Carolina
MARY L. LANDRIEU, Louisiana JOHN BARRASSO, Wyoming
MARIA CANTWELL, Washington JAMES E. RISCH, Idaho
BERNARD SANDERS, Vermont MIKE LEE, Utah
DEBBIE STABENOW, Michigan RAND PAUL, Kentucky
MARK UDALL, Colorado DANIEL COATS, Indiana
JEANNE SHAHEEN, New Hampshire ROB PORTMAN, Ohio
AL FRANKEN, Minnesota JOHN HOEVEN, North Dakota
JOE MANCHIN, III, West Virginia BOB CORKER, Tennessee
CHRISTOPHER A. COONS, Delaware
Robert M. Simon, Staff Director
Sam E. Fowler, Chief Counsel
McKie Campbell, Republican Staff Director
Karen K. Billups, Republican Chief Counsel
C O N T E N T S
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STATEMENTS
Page
Bingaman, Hon. Jeff, U.S. Senator From New Mexico................ 1
Cauley, Gerry, President and Chief Executive Officer, North
American Electric Reliability Corporation...................... 43
Corman, Shelley A., Senior Vice President, Commercial &
Regulatory Transwestern Pipeline Company, LLC, Houston, TX..... 31
Dasheno, Hon. Walter, Governor, Pueblo of Santa Clara, NM........ 9
Dumas, John, Director of Wholesale Market Operations, Electric
Reliability Council of Texas, Taylor, TX....................... 39
Fuhlendorf, Steve, Chief Executive Officer, Taos County Chamber
of Commerce.................................................... 20
Heinrich, Hon. Martin, U.S. Representatives From New Mexico...... 4
Lucero, Hon. Alice, Mayor of Espanola, Espanola, NM.............. 14
Lujan, Hon. Ben Ray, U.S. Representative From New Mexico......... 5
McClelland, Joseph, Director, Office of Electric Reliability,
Federal Energy Regulatory Commission........................... 48
Parker, Janice, Vice President, Customer Service, El Paso Western
Pipeline Group, Colorado Spring, CO............................ 34
Schreiber, George A., Jr., President and Chief Executive Officer,
Continental Energy Systems, LLC and Member of the Board of
Directors of its Subsidiary, New Mexico Gas Company, Troy, MI.. 25
Stevens, David W., Chief Executive Officer, El Paso Electric
Company........................................................ 64
Torres, Hon. Jack, Mayor of Bernalillo, Bernalillo, NM........... 16
Udall, Hon. Tom, U.S. Senator From New Mexico.................... 2
APPENDIX
Responses to additional questions................................ 69
NATURAL GAS SERVICE OUTAGES IN
NEW MEXICO
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MONDAY, FEBRUARY 21, 2011
U.S. Senate,
Committee on Energy and Natural Resources,
Albuquerque, NM.
The committee met, pursuant to notice, at 10 a.m. in the
Vincent E. Griego Chambers, Albuquerque/Bernalillo County
Government Center, Concourse Level B, One Civic Plaza, 400
Marquette NW, Albuquerque, New Mexico, Hon. Jeff Bingaman,
chairman, presiding.
OPENING STATEMENT OF HON. JEFF BINGAMAN, U.S.
SENATOR FROM NEW MEXICO
The Chairman. Why don't we start the hearing?
Thank you all very much. This is a hearing of the Senate
Energy and Natural Resources Committee that we're having in
Albuquerque today.
The hearing is devoted to gathering information regarding
the natural gas service outages that befell much of New Mexico
earlier this month. These outages caused severe hardship for
many New Mexico families and businesses. I'd note that we're
not far removed from the event that we're talking about which
occurred about 2 and a half weeks ago.
Therefore this hearing is not intended or expected to
definitely identify the cause or causes of the outage. In fact
the events of early February will be examined by a variety of
agencies and authorities. These inquiries and analyses will
extend across state boundaries and will approach the events
from different angles. It's my hope that the record that we
create here today will contribute to those efforts and will
highlight the questions and issues that need to be addressed.
In addition to our problems in New Mexico there does appear
to be a regional character to the events that occurred in early
February. Multiple state and Federal authorities are examining
service disruptions across Texas and much of the Southwest.
With that in mind I'd just like to highlight a few important
things.
First, our energy infrastructure and energy markets are
highly interconnected. That should be obvious, I'm sure, to all
of us. Ensuring the reliability and efficient functioning of
that infrastructure is a regional and a national
responsibility.
Second, in use utility consumers rely greatly on these
energy systems. Ultimately it's these customers who bear the
heaviest burden and pay the heaviest costs of long lasting
service disruptions. That's certainly what happened in this
case. That's often lost in discussions on national energy
policy that we have in Washington. I hope that we can keep a
focus on that.
Third, our energy infrastructure plays a critical role in
supporting our national defense facilities. Preserving and
enhancing the security of that infrastructure and ensuring its
reliability needs to be among our highest priorities. We need
to ensure that in the future both natural gas and electricity
will be reliably available to families and businesses who
depend upon them throughout the state.
With that let me particularly thank Senator Udall for being
here with me today and Representative Heinrich and
Representative Lujan for being here to give us their views on
this important set of issues. Let me call on Senator Udall for
any comments he would like to make before calling on
Congressman Heinrich and Congressman Lujan.
STATEMENT OF HON. TOM UDALL, U.S. SENATOR
FROM NEW MEXICO
Senator Udall. Thank you. Thank you very much, Senator
Bingaman. Thank you for allowing me to participate in this
hearing and be involved. I think it's very important that you
have done this so quickly and that you have organized this in a
way to have panels that I think are really going to get to the
bottom of many of the issues that are circulating out there.
This is also the first time since I've been in public with
Senator Bingaman since he announced that he wasn't going to run
again. I just want to say that he has given incredible public
service to New Mexico, dedicated and committed public service.
He's a remarkable mentor and friend of mine and colleague.
Senator Bingaman, I know that you were never one to want to be
hauled out as they say in Washington from the Senate feet
first. So you----
The Chairman. Thank you. Thank you very much.
Senator Udall. So I just----
[Applause.]
The Chairman. I'll have plenty of chance to kick me around
some more, contrary to what Richard Nixon says.
[Laughter.]
The Chairman. But thank you at any rate.
Senator Udall. Thank you. I was going to say that he is
going to be here for 2 years and we're going to be working side
by side protecting New Mexico. Let's give him another round of
applause. I just think for your remarkable service to New
Mexico.
[Applause.]
Senator Udall. Over 28,000 people lost natural gas home
heating across our state. These outages range from Silver City
to Alamogordo to Bernalillo, Placitas, Espanola, Dixon, Taos,
Questa, and Red River. This happened at a time of record cold
temperatures in New Mexico from near zero in the south to 30
below in the north. People lost service early morning Thursday,
February 3rd and many were not restored until late Tuesday,
February 8th in the coldest northern areas of our State, 5
nights and 6 days without heat.
First New Mexico Gas Company needs to improve their
emergency planning, communication and service restoration. The
response was unacceptable and New Mexicans deserve better
public safety.
We received dozens of calls and emails about burst pipes,
loss of water, very cold nights, lost business and wages and
disabled people at risk.
After the event my staff and I toured affected areas with
local residents and officials along with FEMA, who was
evaluating Federal assistance.
We heard from first responders like Aletha Trajheo in Taos,
who heads up the Incident Command Center and who informed me
that New Mexicans would have been better prepared with more
warning time and more information.
Governor Lovato of Ohkay Owingeh Pueblo reported that New
Mexico Gas did not work well with them to locate rural pueblo
residences.
First responders in Taos, Red River and Questa also
reported that the gas company underestimated the time it would
take to re-light rural residences rather than 10 minutes it
would be 30 minutes or as Governor Lovato said in some of the
more difficult residences it could be an hour or more.
Second, we need to improve our interstate gas reliability
in the southwest. While New Mexico Gas Company should have done
better here at home the root cause was across the border. Our
testimony here today states that rolling blackouts in Texas
caused critical natural gas supply infrastructure in the
Permian Basin to fail.
According to the Texas grid operator power generators in
Texas failed to provide their committed generation when it was
needed the most. Rolling blackouts then resulted without
consideration for the impact on gas infrastructure and the
impact that would have on New Mexicans. Texas states that its
electricity market is intrastate and thus they are exempt from
many Federal electricity regulations such as those that require
interconnections with other states. This may have been their
Achilles heel during this severe winter storm.
Recent reports from Texas show that over 100 power plants
went down during the crisis. There are serious questions about
whether proper maintenance and winterizations procedures were
followed. Unlike New Mexico where electricity rates are
regulated, Texas is a deregulated market that allows
electricity trading and market pricing.
In 2003, Texas issued a $210 million fine for manipulating
the market during a winter storm which was reduced to $15
million in a settlement. Just prior to the event in New Mexico,
Texas increased the maximum allowable price for power from
$2,250 per megawatt an hour to $3,000 an hour. One public
interest group in Texas, Public Citizen, estimates that
electricity trading may have made $385 million during this
incident.
No man is an island. No state except Hawaii is either.
Texas and New Mexico need to work together to improve regional
reliability. With that, Senator Bingaman, I'm finished with my
opening statement. Thank you.
The Chairman. Thank you very much for your good statement
there.
We're in Congressman Heinrich's district here. We welcome
him. Why don't you go right ahead.
I know you've been involved in this issue as has
Congressman Lujan since the crisis first began. Be anxious to
hear your perspective on it.
STATEMENT OF HON. MARTIN HEINRICH, U.S.
REPRESENTATIVE FROM NEW MEXICO
Mr. Heinrich. Thank you, Senator Bingaman and Senator
Udall, thanks for having us here. It feels like old times to be
back in this chamber.
I want to thank you first and foremost for the opportunity
to testify before the Senate Energy and Natural Resources Field
Committee Hearing today.
I think today's hearing provides us an opportunity to both
zero in on what happened during New Mexico's recent gas outage
crisis but much more importantly to get to some of those
answers so that we make sure this never happens again.
I certainly start by thanking the many New Mexicans who
responded to the outage with concern for their neighbors across
the State. In one illustration of that effort more than 50
Albuquerque police officers were dispatched in an emergency
response team to northern New Mexico to join the National
Guard. I spent the day on the phone with the Public Regulation
Commission and also with many of the large scale energy users
in the central part of the State urging them to take all steps
possible to reduce their use.
Like many others across New Mexico my wife and I cut our
own use. We spent about 2 days on wood heat at home to reduce
the overall demand on our system. Like many others in this
room, I would guess, we had the broken pipes to show for it.
Our experience pales in comparison to what my constituents
in places like Placitas and Bernalillo went through not to
mention what Congressman Lujan's constituents went through.
It's most likely that the crisis was not the result of one
breakdown. We know that.
That being said, there are those who have more to answer
than others. Today we need to hear those answers about
emergency plans, about steps taken in the face of the storm,
the magnitude that we underwent 2 weeks ago. Those answers are
critical not for the sake of pointing fingers or assigning
blame, but as I said before to make sure that we never
experience this kind of disruption again.
The gas outage in New Mexico revealed some key holes in our
State's energy reliability, our interstate utility system and
the very interruptible nature of our system. We've been told
that the problem originated in a disrupted supply from Texas.
That those systems also failed because of the extraordinarily
cold weather. But that absence of reliability necessitates an
examination of the contracts between our utility and their
suppliers.
New Mexicans deserve answers about their compressor
controls, their reliability and what backup systems exist.
Those are significant infrastructure inadequacies. New Mexicans
across this State deserve answers.
There also remains a lack of clarity concerning the
contingency plans that were set in motion. When a crisis of
this magnitude happens immediate steps should be taken rather
than postponing those steps for the first critical 24 hours. As
an entity Albuquerque public schools, for example, is much more
difficult to close down in the middle of the day than the
evening before or the early morning before school starts in our
city. Our constituents deserve information about those
contingency plans and when and how they will be activated.
Many New Mexicans are recovering from burst pipes and other
consequences incurred from a loss of heat in some cases, as you
said, up to 6 days and 5 nights of sub freezing temperatures.
Numerous businesses were forced to shutter their doors for the
same amount of time. They along with every other New Mexican
has every right to have questions answered about corrective
measures to eliminate service disruptions due to future weather
related emergencies.
New Mexicans deserve to know what early warning signs,
contingency measures, decisionmaking processes and emergency
communication plans are going to be implemented to prevent this
kind of crisis from ever happening again. We deserve to know
what back up storage capabilities exist and what strategies
there are to keep New Mexico's operating system independent of
the failure of suppliers in other States. Those constituents
who underwent the harshest consequences of this crisis deserve
answers about why the procedures took 6 grueling days to
restore heat to their homes.
Crises like this can be devastating. But they also reveal
something more powerful in our New Mexico communities. In this
instance it was in the collected effort of so many to come to
the rescue with shelters, to work toward gas restoration and to
turn down their thermostats so that others could stay warm.
That concern for one another unites us as New Mexicans. I have
no doubt that we will maintain that spirit as we work together
toward the steps necessary to, as I said before, make sure this
never happens again.
Thank you.
The Chairman. Thank you very much for your excellent
statement.
Congressman Lujan, thank you for being here and thank you
for your leadership on this issue since the crisis began.
Go right ahead.
STATEMENT OF HON. BEN RAY LUJAN, U.S. REPRESENTATIVE
FROM NEW MEXICO
Mr. Lujan. Mr. Chairman, thank you and Senator Udall, thank
you for allowing us to be here.
Chairman Bingaman for your leadership and hard work on
behalf of New Mexico, our State and Nation are better for your
service and we thank you very much, not only for holding this
important hearing to determine what caused catastrophic natural
gas outages throughout New Mexico leaving our communities
without heat, families vulnerable during record low
temperatures.
I want to thank all of those who came together as a
community to do their part to help New Mexico endure this
crisis whether it was volunteering at shelters, checking on an
elderly neighbor to make sure that they had everything they
needed to get through the night or turning down the thermostat
to conserve gas.
I want to thank all of those at our national laboratories
for their help as well for modeling, reducing their energy
consumption, to providing support to those that needed to get
back to their homes to get their heat on. The tremendous
efforts I saw firsthand, efforts by so many in the community
during this challenging time are a testament to the resiliency
of the people of New Mexico. Many of these homes and businesses
are in my northern New Mexico district, mainly those that were
last to be turned on.
This hearing is an important first step to ask the tough
questions that will allow us to identify and fix problems that
led to the outages so that New Mexicans never have to face this
again. At a time when many regions of the country were
experiencing freezing temperatures the increased demand for
natural gas in New Mexico and the additional strain on the
system in Texas should not have come to a surprise to anyone.
We need to know why natural gas was cutoff to entire
regions of New Mexico.
To what extent these problems were caused by a shortage of
supply verses failed or compromised distribution
infrastructure.
How decisions were made to distribute or cutoff natural gas
available in the pipeline or storage facilities to customers in
New Mexico, Texas, Arizona and California.
How are winners and losers determined?
One item mentioned by a local news outlet and I quote, One
interesting fact presented was not questioned. The decision to
shut the auto-e valve made was made before the company
contacted public service company of New Mexico to request that
the Cobisa Power Plant, south of Rio Bravo, be switched to oil.
We needed to get blocks of 10,000 dekatherms shut off quickly.
The gas company said the auto-e valve supplies 20,000
dekatherms and services the northern communities of Espanola,
Taos, Questa, Angel Fire and Red River. He said the Cobisa
demand is 17 to 20,000 dekatherms. The Cobisa Plant produces
electricity exported to California.
Why was there not better communication and coordination
both in and out of New Mexico? Decisions were made to cutoff
entire communities putting families at risk. It seems clear
that decisions made by Texas utility entities did impact New
Mexicans.
What can be done to ensure that backup power is available
at natural gas compression stations or to include compression
stations that are critical to natural gas deliverability to New
Mexico and other western States as essential before electricity
interruption?
Were necessary actions and communications taken by the
utilities responsible for deliverability of electricity and
natural gas to prevent cutting off natural gas to families and
entire communities?
Early in the crisis I sent a letter to the Federal Energy
Regulatory Commission requesting review of the natural gas
outage. I am pleased that FERC is beginning its inquiry. I look
forward to their findings.
Furthermore, it's my hope that this hearing sheds light on
what went into the decision to shut off natural gas to these
vulnerable communities in New Mexico, many in areas where the
coldest temperatures were felt including options evaluated
before they were shut off. I am concerned that the New Mexico
Gas Company did not have a sufficient plan in place to
communicate with impacted communities including tribes, small
businesses, government entities, but especially families. This
event reminds us of the interdependence throughout our
infrastructure system and the need to identify the vulnerable
communities that face a similar threat.
During this ordeal I had constituents talk to me in tears.
Worried about how they would make it through the night and how
long they would be without heat and water. They were scared.
I heard from an elderly man who got sick from enduring
night after night in the cold because he was told the only way
heat would be turned on was if someone was home. Now he has
additional medical costs. Other seniors had to stretch their
social security checks to purchase electric heaters. Now face
skyrocketing electric bills that they will receive in the near
future, an infrastructure that's been compromised.
While I appreciate the hearing today on the causes of the
gas outage, I want to take a moment to remind our constituents
that my office is here to offer any support we can and help
them navigate the process of obtaining available resources as
they work to fix broken pipes, make costly repairs and pick up
the pieces in the aftermath of the crisis.
Again Chairman Bingaman, a sincere thank you for bringing
this field hearing to New Mexico to get answers for so many
here in New Mexico. Thank you.
The Chairman. Thank you very much for your excellent
statement as well.
Of course, we also invited Congressman Pearce to be here if
he was able. He was not able to be here, but he had another
scheduling commitment. But he asked if a statement by him could
be put in the record. Of course we will do that following the
statements that Congressman Heinrich and Congressman Lujan have
just given.
[The prepared statement of Mr. Pearce follows:]
Prepared Statement of Hon. Stevan Pierce, U.S. Representative
From New Mexico
Chairman Bingaman, thank you for holding this hearing to ask the
important questions of natural gas operators. I ask that my statement
be submitted into the official record. Like you, I hope to determine
just where the system broke down and what operational actions our
natural gas providers must take to avoid another system-wide breakdown
in the future.
Early this month, New Mexico was transformed by snow and sub-
freezing temperatures. Exceptionally low temperatures and lack of wind
stopped wind turbines from generating energy, resulting in rolling
blackouts on the Texas power grid. Across state lines, subzero
temperatures froze gas wellheads. This, combined with increasing demand
for natural gas, lowered pressure in transmission pipes. The pre-packed
transmission lines were no match for the cumulative effects of subzero
temperatures, idle turbines and rolling blackouts in Texas, frozen
wellheads, increased demand, and low pressure in the natural gas
pipeline system.
Now, the studies have begun, and investigations have started. It
could be years before official decisions are handed down, but the New
Mexicans who lived through the shortage firsthand demand solutions. Now
is the time to ask tough questions and find thoughtful answers that can
lead to the strategic changes needed to avoid this sort of crisis in
the future.
I am pleased that those New Mexico communities hit the hardest by
the cold are represented here today, as well as the natural gas
providers and their regulators. I use the term ``regulator,'' loosely,
as the bulk of the Texas wind corridor operates largely ``off-grid.''
Furthermore, the delivery system to New Mexico is so closely
intertwined with the Texas market that a blackout in Texas, as we
learned this month, has staggering results in Southern New Mexico. If
there is one thing I hope you take away from this hearing, it is that
we need more planning and better communication between Texas, New
Mexico and the other states that are dependent on the Texas delivery
system.
I have heard the term ``perfect storm'' used to describe what we in
New Mexico experienced. A once-in-50-year storm knocked out 82 power
plants in Texas. Freezing temperatures suspended equipment and shut
down gas compression stations, reducing pressure in the pipelines. Like
a blocked artery, the movement of natural gas slowed to a dribble. At
the same time, the freezing weather increased demand. With the
Southwest's abundant supply of natural gas blocked, we faced an
unprecedented shortage. Supply could have remained steady-we had the
natural gas, but the pressure was missing.
I acknowledge the quick actions taken by the major natural gas
providers who prepared and targeted resources to combat the approaching
weather. In a briefing from the New Mexico Gas Company (NMGC), they
believed that ``its system was fully capable of meeting the increased
demand. However, it could not have anticipated that gas delivery from
Texas would be significantly reduced and gas production in the San Juan
and Permian basins would be so severely impacted.'' NMGC was tracking
the weather, and made several significant preparations for this
extraordinary storm. The front-end preparations had been made. But on
the back-end, NMGC was crippled by powerless gas processing plants and
frozen wellheads, all owned by other entities.
While we cannot control the weather, there must be certainty when
it comes to preparation and response. Adequate planning and
communication by gas service providers and the Texas power delivery
players will enable us to prevent system-wide lockdown of the natural
gas transmission chain. While we do not know when, it is inevitable
that New Mexico will face another episode of freezing weather. Today,
let us prepare for tomorrow's storm. To find solutions, we must ask
questions, and I look forward to hearing from the panel on the
following:
To the gas service providers, electric companies, processing
plants, and wellhead operators:
My constituents have described their living conditions
during the outage as ``third-world.'' How will they be
compensated for their losses and expenses? What steps have you
taken to repair damage to homes and businesses?
I note that a ``compensation fund'' has been established.
Have all providers contributed? If not, why? What is the
process for one to receive compensation? What measures are in
place to ensure that New Mexican's are compensated fairly and
quickly?
How are you preparing for the next 50-year-storm so that
natural gas is delivered to the people of New Mexico during
freezing and sub-zero temperatures?
What new preparations have you already implemented?
To the regulators:
How should this experience change energy policy moving
forward? How should this storm change the way we react to
outages in the future?
The Texas power grid is heavily reliant on alternative
energy. Would the same disruption in service have occurred if
that state's energy system was less reliant on alternative wind
power as opposed to clean coal, nuclear or other forms of
traditional electricity generation?
Why did the Texas energy corridor implement a rolling
blackout plan in place of strategic power grid controls that
would not have severed natural gas delivery? What alternatives
are available in place of the traditional ``rolling blackout''
approach? What are the obstacles that prevent this from being
in place?
The Chairman. So thank you both very much for being here.
Let me also acknowledge that Jason Marks from the Public
Regulation Commission is in the audience. We very much
appreciate his being here today. He has a very important role
in trying to get to the bottom of this and putting in place
policies to avoid this in the future. We want to acknowledge
that.
We have 10 witnesses today. We've broken it into Panel One
and Panel Two. Why don't we have the folks in Panel One come
forward right now.
That's the Honorable Walter Dasheno, who is the Governor of
Pueblo of Santa Clara.
The Honorable Alice Lucero, who is the Mayor of Espanola.
The Honorable Jack Torres, who is Mayor of Bernalillo.
Mr. Steve Fuhlendorf, who is the Chief Executive Officer
with the Taos County Chamber of Commerce.
We have all of these individuals to speak to the issues as
they experienced this problem in their own communities and
thoughts they have about what needs to be done to avoid this in
the future and to deal with the aftermath.
Why don't we start with Governor Dasheno, who is here not
only representing, as I understand it, the Pueblo of Santa
Clara, but also the Pueblos in northern New Mexico? Is that
correct?
Mr. Dasheno. Yes, Senator, that's correct.
The Chairman. Alright. Why don't you go ahead first and
then after that I'll call on the others on the panel.
STATEMENT OF HON. WALTER DASHENO, GOVERNOR, PUEBLO OF SANTA
CLARA, NM
Mr. Dasheno. First of all, thank you very much, Senator
Bingaman for this opportunity to present our testimony.
Senator Udall, Congressman Heinrich and Congressman Lujan,
thank you for this opportunity to come before all of you to
address our concerns that we have this morning.
Thank you Senator Bingaman for the opportunity to testify
before you on the natural gas outage that occurred here in New
Mexico earlier this month during a period of some of the
coldest weather in our State's recent history.
Additionally I also wish to thank Senator Udall,
Congressman Lujan and Congressman Heinrich for their support
and presence at this hearing today.
My comments are directed to the magnitude of this calamity,
the wide variety of measures implemented by Santa Clara to deal
with it and our suggestions going forward.
The Pueblo of Santa Clara is a federally recognized Indian
tribe situated in northern New Mexico where much of the gas
outage occurred. The outage affected my pueblo beginning on
Thursday, February 3rd and ended with the restoration of
natural gases to the homes of tribal members in the Lamacita
area on Monday evening, February 7th. There are 600 pueblo
member households and over 12,000 non-member households in what
we refer to as the exterior boundaries of the Santa Clara
reservation. Which reservations run from the northern area of
Fierro to the western area of La Loma in Espanola, the southern
area to San Ildefonso Pueblo and La Mesilla and the eastern
boundary run into areas of San Brio, San Pedro, Santa Cruz and
Riverside, New Mexico.
It is our understanding that the outage was caused by the
loss of power at a compressor located in Texas which was
followed by decisions made by the New Mexico Gas Company to cut
service on some, but not all, natural gas transmission lines in
the State. As a result the decisions made by the New Mexico Gas
Company the burden of the cutoff was shifted to and borne by
people less able to bear the cost of it, tribes and the poor
communities throughout the State. In northern New Mexico our
Pueblo and the Pueblos of Taos, Ohkay Owingeh and San Ildefonso
and many communities located from San Ildefonso in north of
Questa and to the south the communities of Bernalillo, parts of
Santa Anna and Zuni were cutoff while Santa Fe, Los Alamos,
Albuquerque and Rio Rancho were not cutoff.
We were informed of the outage during a tribal council
meeting. But the council was not made aware of its true impact
at that time. We found out later that the outage was not--only
be resolved within 8 hours.
We immediately took steps to address the problems caused by
the outage, but were unable to entirely insulate the community,
its residents or our businesses from the consequences of the
outage. The consequences for our people and other residents of
the area were severe. Many families were completely without
heat in their homes and were unable to cook on their gas fired
stoves.
Many homes, businesses and offices had water lines freeze
and burst.
Businesses including the Pueblo of Santa Clara hotel, Santa
Clarion hotel and casino in other areas experienced significant
interruptions that caused substantial financial losses.
Governmental offices including but all of the most
essential of the Pueblo offices had to shut down causing a
major interruption of vitally needed services to our people
because of the complexities of re-pressurizing the natural gas
lines. Moreover it took several days to restore service.
Santa Clara has had more than its share of experiences with
emergency situations having sustained major losses in the Oso
complex fire in 1998 and the disastrous zero ground fire in
2000. For that reason we have developed protocols for emergency
preparedness that we think serve as well in this instance. I
would like to summarize the measures that we were able to put
into place as soon as we had word of the gas outage and some of
which continued right up through February the tenth.
We immediately turned our Youth/Senior Citizen center into
an emergency shelter for our people who needed assistance. The
center was staffed 24 hours a day with approximately 30 to 50
Pueblo employees. We served 3 hot meals a day at the Senior
Citizen center serving 150 to 200 persons at each meal.
Our community health representative worked around the clock
conducting daily visits and sometimes several visits per day to
approximately 300 of our elders and handicap members who were
unable to come to the senior center and took meals to many of
these persons.
We provided blankets to those who needed them. We were able
to obtain shipments of electric heaters totaling at least 300
from Las Vegas and Albuquerque, New Mexico and as far away as
Phoenix, Arizona that we distributed to persons to lacked other
heating resources.
For those who had wood stoves and fireplaces the tribe
distributed approximately 210 cords of firewood.
We brought in 3 contract plumbers who were employed full
time for a week to go house to house addressing individual
plumbing and heating problems.
Throughout the crisis we maintained a fully staffed
emergency operation center that was in constant communication
with all of our various tribal agencies engaging emergency
services.
Our tribal police department brought in 3 additional
officers and kept the full force on overtime to help handle the
situation.
As a result of these efforts we believe that the impact of
the Santa Clara members, although severe, was considerably less
than it could have been. We are proud of the way in which our
staff rose to the occasion and those that were in need of
assistance. But this effort was very costly and came at a time
when the Pueblo has been undergoing some major financial
stress. We are still trying to determine the full cost
undertaken while we currently estimate that we spent more than
$100,000 on the services that I have described and there are
some items of damage such as cracked pumps on our fire engines,
the cost of which have not yet been determined.
Additionally the Santa Clara Development Corporation, a
wholly owned economic development entity has estimated that it
incurred added cost and lost revenue in its various entities
including the Santa Clara hotel, the Big Rock Casino, the Puye
Travel Center and others of approximately $265,000. That
results in net loss to the Pueblo in itself of that amount. As
that amount comes off to the corporation's bottom line and thus
directly reduces the revenues that would otherwise be paid to
the Pueblo.
We at Santa Clara very much want to be a part of the
process to develop preparedness on the part of our communities
so that if the unthinkable should occur, the lifeboats are in
place and sufficient to save all those affected. We think we
have much to offer that process. I'm sure there is much we
could learn as well that would improve our own response.
We specifically propose the following suggestions.
One, preventative measures need to be in place so that this
disaster never happens again. Auxiliary power supplies ought to
be required at all compressor stations. The New Mexico Gas
Company should be required to devise pipeline interconnections
to provide backup supply while pressure fails in a segmented
system.
Two, poor communities should not bear the full brunt of any
cutoff. The New Mexico Gas Company made the decision on its own
as to which areas would get cutoff when pressure began to fall
in the system. They should not have such direct discretion.
B, there ought to be some agreed on plan perhaps approved
by the New Mexico Public Regulation Commission as to how much
decisions are made and how to notify affected users in a timely
manner and including advance notice to governmental and social
service agencies. The plan, moreover, ought to take into
account the relative disabilities of different areas to bear
the cost and the burden of gas cutoff.
Three, improve the efficiency of procedures for bringing
areas that have been cutoff back into service. In tribal
communities including and involving tribal governments could
improve communication.
B, technicians apparently went from house to house in some
arbitrary numerical sequence rather than simply going door to
door which would have been quite faster. There should be some
public discussion and approved protocol in place for gas
service restoration.
Four, Congressional funds to assist Pueblo and other people
and business damage by the outage. Many people suffered serious
damage by way of broken pipes, interrupted business and others
that should be compensated. The New Mexico Gas Company is
providing $1 million but that may be insufficient to cover all
of them at this point. Congress can provide funds to assist
such people and businesses.
Five, Federal grants to tribes and other entities to
research alternative energy sources. This would be a good
occasion to institute a program of moderate sized grants to
find alternative energy sources in order to reduce impacts of
any future outage.
Senator Bingaman, we hope that this type of incident will
never be repeated. While it is too early to say with any
assurance, we suspect that pending inquiries may well show that
this incident could have been avoided had appropriate
preventative measures been in place. We look forward to Federal
support to implement any such preventative measures.
Thank you on behalf of the Pueblos of Santa Clara, Ohkay
Owingeh, San Ildefonso and Taos Pueblo, Santa Anna and Zia
Pueblo.
Thank you for this opportunity to present our views.
[Native American language spoken.]
[The prepared statement of Mr. Dasheno follows:]
Prepared Statement of Hon. Walter Dasheno, Governor, Pueblo
of Santa Clara, NM
Thank you Senator Bingaman, for the opportunity to testify before
you on the natural gas outage that occurred here in New Mexico earlier
this month, during a period of some of the coldest weather in our
state's recent history. Additionally, I also wish to thank Senator
Udall, Congressman Lujan and Congressman Heinrich for their support and
presence at this hearing today.
My comments are directed to the magnitude of this calamity, the
wide variety of measures implemented by Santa Clara Pueblo to deal with
it, and our suggestions going forward.
The Pueblo of Santa Clara is a federally recognized Indian tribe
situated in Northern New Mexico, where much of the gas outage occurred.
The outage affected my Pueblo beginning on Thursday, February 3rd and
ending, with the restoration of natural gas to the homes of Tribal
Members in the La Mesilla area, on Monday evening. February 7th. There
are 600 Pueblo-member households and over 12,000 non-member households
in what we refer as the exterior boundaries of the Santa Clara
Reservation, which boundaries run from the northern area of Fairview to
the western area of the La Loma and Espanola, the southern area to San
Ildefonso Pueblo and La Mesilla, and the eastern boundary running in
the areas of Sombrillo, San Pedro, Santa Cruz, and Riverside. New
Mexico.
It is our understanding that the outage was caused by the loss of
power at a compressor located in Texas, which was followed by decisions
made by the New Mexico Gas Company (``NMGC'') to cut service on some.
but not all, natural gas transmission lines in the state. As the result
of the decisions made by NMGC. the burden of the cut-off was shifted to
and borne by people least able to bear the costs of it--tribes and
poorer communities throughout the state. In northern New Mexico. our
Pueblo, and the Pueblos of Taos, Ohkay Owingeh, and San Ildefonso. and
many communities located from San Ildefonso north to Questa and to the
south the communities of Bernalillo, parts of Santa Ana and Zia were
cut off, while Santa Fe and Los Alamos, Albuquerque. and Rio Rancho
were not cut-off.
We were informed of the outage during a Tribal Council meeting, but
the Council was not made aware of its true impact at that time. We
found out later that the outage would not be resolved within eight
hours. We immediately took steps to address the problems caused by the
outage. but were unable to entirely insulate the community, its
residents, or our businesses from the consequences of the outage.
The consequences for our people and other residents of this area
were severe. Many families were completely without heat in their homes
and were unable to cook on their gas-fired stoves. Many homes.
businesses and offices had water lines freeze and burst. Businesses.
including our Pueblo's Santa Clara Hotel and Casino and hotel,
experienced significant interruptions that caused substantial financial
losses. Governmental offices, including all but the most essential of
the Pueblos offices, had to shut down. causing a major interruption of
vitally needed services to our people. Because of the complexities of
re-pressurizing the natural gas lines, moreover, it took several days
to restore service.
Santa Clara has had more than its share of experiences with
emergency situations, having sustained major losses in the Oso Complex
Fire in 1998, and the disastrous Cerro Grande Fire in 2000. and for
that reason we have developed protocols for emergency preparedness
that, we think, served us well in this instance. I would like to
summarize the measures that we were able to put into place as soon as
we had word of the gas outage, and some of which continued right up
through February 10th:
We immediately turned our new senior center into an
emergency shelter for people who needed assistance, and the
center was staffed 24 hours/day by approximately 30 to 50
tribal employees.
We served three hot meals a day at the senior center,
serving 150-200 persons at each meal.
Our Community Health Representatives worked around the
clock, conducting daily visits (and sometime several visits per
day) to approximately 300 of our elders and handicapped members
who were unable to come to the senior center, and took meals to
many of those persons.
We provided blankets to those who needed them, and we were
able to obtain shipments of electric heaters, totaling at least
300 in all, from Las Vegas and Albuquerque, New Mexico. and as
far away as Phoenix. Arizona. that we distributed to persons
who lacked other heat sources.
For those who had wood stoves and fireplaces, the tribe
distributed approximately 210 cords of firewood.
We brought in 3 contract plumbers, who were employed full-
time for a week, to go house to house, addressing individual
plumbing and heating problems.
Throughout the crisis, we maintained a fully staffed
emergency operations center that was in constant communication
with all of our various tribal agencies engaged in emergency
services.
Our tribal police department brought in three additional
officers and kept the full force on overtime, to help handle
the situation.
As a result of these efforts, we believe that the impact of the
outage on Santa Clara members, although severe, was considerably less
than it could have been, and we are very proud of the way in which our
staff rose to the occasion and helped those in need of assistance.
But this effort was very costly, and came at a time when the Pueblo
has been undergoing some major financial stress. We are still trying to
determine the full cost of the undertaking. but we currently estimate
that we spent more than $100.000 on the services I have described. And
there are some items of damage, such as a cracked pump on one of our
fire engines, the cost of which has not yet been determined.
Additionally, Santa Clara Development Corporation. our wholly owned
economic development entity, has estimated that it incurred added costs
and lost revenues in its various entities, including the Santa (Ivan
Hotel, the Big Rock Casino, the Puye Travel Center and others, of
approximately $265,000. That results in a net loss to the Pueblo itself
of that amount. as that amount comes off of the corporation's bottom
line, and thus directly reduces the revenues that would otherwise be
paid to the Pueblo.
We at Santa Clara very much want to be a part of a process to
develop preparedness on the part of all of our communities, so that if
the unthinkable should occur. the lifeboats are in place and sufficient
to save all who arc affected. We think we have much to offer that
process. and I am sure there is much we could learn as well. that would
improve our own response.
We specifically propose the following suggestions:
1. Preventive measures need to be in place so that this
disaster never happens again.
a. Auxiliary power supplies ought to be required at
all compressor stations.
b. NMGC should be required to devise pipeline
interconnections to provide hack-up supply when
pressure fails in a seument of the system.
2. Poor communities should not bear the brunt of a cut-off.
a. NMGC made decisions on its on as to which areas
would get cut off, when pressure began to fall in the
system. They should not have such discretion.
b. There ought to be some agreed-on plan, perhaps
approved by the New Mexico Public Regulation
Commission, as to how such decisions are made, and how
to notify affected users in a timely manner, and
including advance notice to governmental and social
service agencies. The plan moreover ought to take into
account the relative abilities of different areas to
hear the cost and the burden of gas cut-offs.
3. Improve the efficiency of procedures fur bringing areas
that have been cut off back into service.
a. In tribal communities, involving tribal
governments could improve communication.
b. Technicians apparently went to houses in some
arbitrary numerical sequence, rather than simply going
door to door. which would have been faster.
c. There should he a publicly discussed and approved
protocol in place for gas service restoration.
4. Congressional funds to assist people and businesses
damaged by the outage.
a. Many people suffered serious damage, by way of
broken pipes. interrupted businesses. and others. that
should be compensated. NMGC=s $1 million fund may be
insufficient to cover them all.
b. Can Congress provide funds to assist such people
and businesses?
5. Federal grants to tribes and other entities to research
alternative energy sources.
a. This would he a good occasion to institute a
program of modest-sized grants to fund alternatives
energy sources in order to reduce the impacts of any
future outage.
We hope that this type of incident will never he repeated. and
while it is too early to say with any assurance, we suspect that
pending inquiries may well show that this incident could have been
avoided, had appropriate preventive measures been in place. We look
forward to federal support to implement any such preventive measures.
Thank you for the opportunity to present our views.
The Chairman. Governor, thank you very much for your
statement, your excellent statement there. We appreciate it.
Before we ask any questions of any of the panel let me call on
the other panel members for any statement they have.
Mayor Lucero, why don't you go ahead next?
STATEMENT OF HON. ALICE LUCERO, MAYOR OF ESPANOLA, ESPANOLA, NM
Ms. Lucero. Senator Bingaman, Senator Udall, Congressmen
Lujan and Heinrich, thank you for allowing me to testify before
you today on behalf of the people of the Espanola Valley.
On the morning of Thursday, February third, we were
notified by New Mexico Gas that natural gas was going to be
shut down to our city for a period of between 2 hours to 2
days. By the time we were informed valves supplying natural gas
to our area had already been shut off. Two hours later
approximately 11,000 households and businesses within the
Espanola Valley were without service for 5 days, some up to 7
days, others still who experienced damages were without service
for a longer period.
This took place during an Arctic storm when temperatures
dropped below zero. In the village of Questa temperatures
dipped to 28 degrees below zero. New Mexico Gas made a decision
to shut off the valve that serviced northern cities, towns,
counties and pueblos. These are some of the coldest communities
in the State, communities that pay large amounts to New Mexico
Gas to heat their homes each winter.
The city of Espanola had an immediate staff meeting to
engage an emergency preparedness plan. We took preventive
measures to prepare our facilities and coordinated with the Red
Cross to establish an emergency shelter. With the cooperation
of Rio Arriba County we established an emergency operation
center.
The Red Cross and the National Guard manned the shelter
while the Espanola public schools, several businesses and
restaurants provided food and water. We housed 10 to 21 persons
each night. People who could not cook at home came to eat at
the shelter. We also fed volunteers, police and fire personnel.
Additionally some meals were taken to homes where there were
elderly that could not come out.
The governing body declared an emergency so that we could
procure materials needed to prepare our facilities. We ensured
that our water wells and waste water treatment plant continued
to operate. The costs thus far incurred by the city were
approximately $45,000 plus over $16,000 in overtime pay.
Due to the slow economy revenues have been declining.
Businesses shut down from 5 to 7 days will have an adverse
impact on our gross receipts revenue. Additionally there were
hundreds of employees of these businesses who were unable to
work thus experiencing a loss of income to support their
families.
Many of our residents are elderly and poor. Some wouldn't
leave their homes. They huddled in their beds with electric
blankets, if they could afford them. Others were cared for by
family members.
Electric heaters were used non-stop which will cause an
increase in electric utility bills. Many are on fixed incomes
and cannot afford the repairs that need to be made to their
homes due to damages. Some of our elderly became ill. One
suffered frostbite on her toes. Some of the poor who had to
seek medical help do not have health insurance and cannot
afford the medical bills that they incurred.
We had several fires within the Espanola Valley. One
individual is now homeless. Other families have been displaced.
These are poor people who in many cases do not have home
insurance and cannot afford the cost of repairs.
We learned that New Mexico Gas did not have an effective
emergency preparedness plan. They had problems communication
with the affected areas. We were not given adequate notice of
the loss of service. The question as to why these communities
in the north were selected has not been satisfactorily
answered. The complexity of rural areas did not seem to be
considered.
Respectfully we request that you require energy
distributors such as New Mexico Gas to implement effective
plans to provide for these types of emergencies. New Mexico Gas
failed us. They need to be held accountable and pay for
damages. We look to you to establish policies that require them
to prevent this type of crisis in the future.
Last year because of funding provided by the American
Recovery and Reinvestment Act the city of Espanola was able to
retrofit city hall with a geothermal energy system to provide
heat and air conditioning. This facility was the only facility
in the entire Espanola Valley that had heat during this crisis.
Thank you for providing these funds that made it possible for
us to take advantage of an alternative energy source.
We urge you to invest in alternative sources of energy.
We ask that you fund programs to retrofit facilities with
geothermal or solar energy that is abundant in our area.
Grants should be made available to low income families, the
elderly and the disabled for the purpose of converting their
systems to an alternative energy source.
Alternative energy sources in facilities and homes will
free Americans from being solely dependent on natural gas.
In closing I want to express our appreciation to you,
Senator Bingaman for holding this hearing in New Mexico and for
listening to us, allowing us to inform you how this affected
each of our communities. Thank you.
The Chairman. Thank you very much for your statement.
Mayor Torres, why don't you go right ahead?
STATEMENT OF HON. JACK TORRES, MAYOR OF BERNALILLO, BERNALILLO,
NM
Mr. Torres. Thank you, Senator.
Chairman Bingaman, Senator Udall, Congressman Heinrich,
Congressman Lujan, I also appreciate the opportunity to be
before you and testify. Probably the greatest challenge I have
right now is taking the 4 or 5 days that we went through and
trying to condense a report or testimony into 5 minutes. But
I'll do my best to highlight
Again I want to thank you for this opportunity and just
state that we still need your help. The crisis really isn't
over for any of our communities. I'll start with Thursday,
February third and really focus on the communication issues or
problems that the Town of Bernalillo had from the onset with
New Mexico Gas Company.
We received a call approximately 8:15 essentially notifying
us that the gas to the community was shut off. Again, there was
no prior notification. It was essentially you have no gas.
At that point we got no explanation of the cause. No
estimate of restoration times nor a contact person or phone
number that we could get in touch with with our questions as
this process unfolded. Again essentially what we heard was,
your natural gas has been shut off to your community.
Our frustration began with a lack of communication.
Who were we to speak to?
Who could we ask questions of?
Could we get any sort of clarification?
I have to publicly thank Mayor Berry of the city of
Albuquerque who I called in a bit of panic saying do you have
someone that I might be able to speak to. Thankfully he was
able to get me a phone number because up until that point all
we got was voice mail. We needed someone to speak to. We needed
some answers.
As with everyone else we were stunned, especially in
retrospect at the lack of any apparent emergency response plan
from New Mexico Gas Company. Just to reiterate, we were told
gas was shut off and that was basically it at the beginning. We
were left to fend for ourselves.
The critical questions that we have and still have is why
was there no advance warning to municipalities or to the State
of New Mexico?
Why weren't there established clear lines of communication?
Why wasn't there any plan for dealing with the response?
Again as we were left to fend for ourselves we went to work
quickly. We established our emergency command center utilizing
Town of Bernalillo staff. Put together everything we needed to
begin addressing the emergency. We had coordination with the
Sandoval County emergency command, support of the Red Cross,
New Mexico National Guard.
I also want to thank the delegation for their calls of
concern and offer of support because we weren't getting that
from New Mexico Gas to be candid. I also want to commend the
Town of Bernalillo staff for their professional efficient
response and actions taken to address the issue locally. We
were on our own. We did what we needed to do.
We mobilized all of our staff to first deal with the most
vulnerable citizens in our community and make sure that they
were taken care of and weren't at too much risk. As in probably
most communities, most of our seniors chose to stay in their
homes. They didn't want to leave their homes. But we did
everything we could to make sure they were safe and not at too
much risk.
Again we coordinated services with the Sandoval Senior
Program, our police and fire department and workers from every
single one of our departments assisted. We also had to handle
hundreds of phone inquiries because people didn't know what was
going on. They didn't know what to expect. We did our best to
try to put them at ease and give them whatever limited
information that we had available to us.
The positive side in our communities, as I think in each of
our communities, were the people stepping forward. We had
private citizens that came to city hall and said, How can I
help?'' We put them to work.
We had neighboring communities such as Sandoval County, New
Mexico National Guard, the city of Albuquerque and Mayor Berry
who stepped up and offered their support as well. Local
businesses went out of their way to donate or offer any help
that they could. Again, we heard calls of support from all of
you.
I also want to commend Governor Martinez for actually
calling me back. I didn't expect that to happen. But I called
her office looking for support, looking for action. I say that
I didn't expect her to call me back.
The Senator is smiling at me. I don't mean that facetiously
I just assume with everything she must be dealing with that we
might be a little bit low on her priority list. But she
actually called back, offered support and assistance. I
appreciate that.
Secretary of Homeland Security Michael Duvall also
contacted me and kept in communication throughout the crisis.
We appreciate that support. He set up a meeting for myself with
the Governor at 7:15 that first day, Thursday evening. Actually
unawares to me a VP from New Mexico Gas Company attended as
well.
Throughout the day all we had heard was that it was a
complex issue because we wanted to know why we were chosen. We
even heard that it was a matter of simple physics. It was our
location on the transmission line. At that meeting about 7:30
for the first time we heard from New Mexico Gas Company the
words that our community was chosen to be shut off.
Our interaction with New Mexico Gas Company. Day one
essentially the issue was our gas service was off. Through the
day we were told that it was simply a matter of our location on
the transmission line until the end of the day, as I noted. We
had our communications established through the assistance of
Mayor Berry. However my frustration increased through the day
and through this process because information, answers to our
questions remained vague. The answers to the questions
constantly changed. Frankly I felt like I was in a war zone and
had to insist, demand or beg for any sort of response for my
community.
I really feel that was understandable at the onset, but the
pattern of pure communication has just continued up until this
point. Just a quick example, when we were talking about the re-
light process which was underestimated in our community. I was
told personally that there were 400 to 500 technicians. About
an hour later I was told that that number would be 25
technicians. When I questioned the first response, I was told I
had misunderstood what was told to me.
At that point I was angry, disappointed, frustrated and
again, felt like I was in a war zone and had to negotiate and
do everything I possibly could to protect my community.
Eventually was told we'd have about 100 technicians. I think
the actual number ended up being about 80.
The town offered staff to assist with the re-light, not to
re-light pilots or turn on meters, but to act as guides because
Bernalillo is an old community that's not in a simple grid or a
logical grid. There's a lot of dead ends. There's a lot of
roads where you wouldn't expect roads. But we were told that
that was not necessary and were turned down.
The process took longer than anticipated. Most of the
community was eventually restored by Sunday, late PM. Many
homes were missed through the process for some reason. Again,
we simply feel that our offer was turned down and could have
helped the process go much smoother.
We have no confidence in New Mexico Gas Company partially
due to the shut off, but more so due to the poor communication
which has worsened throughout the crisis. We could not get
reliable information. Frankly, worse than the lack of reliable
information has been what I think is a stunning attitude toward
my community.
Initially I naively believed that I could accept what I was
told as truth and repeatedly answered changed. Again, I felt
like I had to question every response and fight for every
concession I could for my community so Bernalillo would not
continuously be overlooked, set as a low priority or repeatedly
abused. I was talked down to by their staff, chastised and even
verbally berated.
I felt their attitude toward the Town of Bernalillo was
condescending and aggressive at times. I felt as if I was seen
as overbearing and a burden to them. Our town was stepped on by
New Mexico Gas Company. I strongly believe that if I had not
done my job as Mayor that we would have fared even worse.
I am hopeful that this Committee can help us get to the
truth and get complete answers. At one point the CEO from New
Mexico Gas agreed to a meeting with my town council to address
our unanswered questions. Shortly after that I was told by
their council that there would be no public meeting, no meeting
with my council.
We were offered a compromise meeting which included a
number of mayors. We were allowed one guest, no public, no
press. That was at their insistence contrary to our desire to
have a public meeting to address issues openly and with people
hearing all the answers.
Questions that we have, have had for some time, that remain
are why was our community chosen and what were the other
options that were available? For instance, who else could have
been chosen and would have that made more sense?
When and if the next crisis arises will we be chosen again?
We have asked that question but not received a satisfactory
answer and hope that you can help us with that.
We've asked and still not received details on their claims
process perhaps that will come in a few minutes. Our offer to
house one of their staff or more of their staff at our city
hall to help people has been declined. Several communities, as
we've been told recently, were chosen to save the balance of
the system, the balance of the State. It seems that there
should be some recompense to those communities that were
chosen.
We've heard about individual suffering, the same thing in
my community, financial burdens. People trying to buy whatever
they could to keep their homes safe, to keep themselves safe,
frozen pipes. Businesses that were forced to close in my
community, primarily small businesses, no receipts for those
days they were closed, staff sent home with no pay and again
the lower gross receipts to our community.
Bernalillo public school suffered significant damage. The
most recent estimate I heard is in the hundreds of thousands of
dollars. Town of Bernalillo had staff overtime, additional
expenditures, loss of gross receipts and actually we were
fortunate there were only a few fires that were quickly
extinguished.
I'm also worried and in a cynical way about what my next
gas bill will look like. Will I be paying and my constituents
paying and our constituents paying for the gas that was purged
from the lines? I would have never believed to ask that
question before this crisis, but I have to ask it today.
I'll close by repeating some of the words of the CEO of the
parent company of New Mexico Gas, who at our meeting last week
stated, ``There was no gas shortage.'' I almost died when I
heard those words. I suppose technically that's accurate. But I
really feel that that's symbolic of what we've heard from the
gas company. I think it's a manipulation of language and a
technical interpretation of the facts. I would ask him if he
would go through each of our communities and tell each of the
people impacted that there was no gas shortage.
I began by stating that we still need your help. We
certainly do. I hope that I've provided a glimpse of what our
community has gone through and continues to go through. I
certainly offer the Town of Bernalillo support in any way that
we can so we can get clear, complete and honest answers to all
these issues that remain.
Thank you, sir.
The Chairman. Thank you for your excellent statement.
Our final witness in this panel is Mr. Steve Fuhlendorf,
who is the Chief Executive Officer with Taos County Chamber of
Commerce. Steve, why don't you go ahead?
STATEMENT OF STEVE FUHLENDORF, CHIEF EXECUTIVE OFFICER, TAOS
COUNTY CHAMBER OF COMMERCE
Mr. Fuhlendorf. Thank you, Senator Bingaman and Senator
Udall, Congressman Heinrich, Congressman Udall--Congressman
Lujan, thank you all for having us here and to talk to the
Energy and Natural Resources Committee.
I'm going to provide a little bit of a different
perspective on the gas outage as I'm representing the business
community in Taos County. We, just to set the stage a little
bit for the situation that arose a couple of weeks ago.
First of all Taos is about twice the national average on
entrepreneurial businesses. I think this is certainly to be
applauded on our business community. However it also puts a lot
of businesses in a vulnerable position. They've been put in a
vulnerable position over the last couple of years because
according to economic reports that we produce on a quarterly
basis through the Taos County Chamber of Commerce.
The recession actually started in Taos County in 2007. So
the recession started earlier as defined by 2 consecutive
quarters of downward numbers in economic development. What this
has put us in a position is that these entrepreneurial
businesses have essentially gone through their resources.
Mom and Pop owned this store. They hire someone to run the
store for them. As the economy started to slide, their
resources started to slide along with it including their
savings. It put them in a position where then they had to let
go of that person that was running the store for them. Mom and
Pop ended up back behind the counter again. So, it puts them in
a vulnerable position for anything that impacts them
negatively.
What we experienced a couple of weeks ago was that we had a
good snowstorm which in Taos County is always reason to
celebrate because that means the ski resorts are going to be
busy. The restaurants are going to be busy. The lodging
establishments are going to be busy.
Unfortunately we ended up in a situation on Thursday coming
into a weekend which would generally be very busy for all of
the businesses concerned where restaurants which principally
cook with gas had to close. Lodging establishments which
principally either heat or have restaurants that cook with gas,
hot water was non-existent. Not only did they lose customers
over that period of time because people were canceling their
reservations. The people that were already there were leaving
their establishments.
The repercussions from this could be fairly long term.
Because as we know people get an idea in their head and it
tends to stick with them. So they are actually feeling lost
reservations now in the lodging community even a couple of
weeks afterwards just because of the negative publicity that
occurred during this event.
Basically 6 days of lost business impacted our community in
many ways. Although we do have economic reports that we've put
out we have not been able to gather the exact numbers of how
this affected our community overall economically. We will
continue to gather those. As soon as we have them we will
certainly forward them on to you.
[The prepared statement of Mr. Fuhlendorf follows:]
Prepared Statement of Steve Fuhlendorf, Chief Executive Officer, Taos
County Chamber of Commerce
Taos has twice the national average of entrepreneurial
enterprises.
Mom & pop once had someone else minding the store. With the
economic downturn, they have depleted their resources and are
now running the store themselves.
Landlords are lowering rent to keep their tenants businesses
from folding.
The four year average growth rate is 3.1%. The third and fourth
quarters of 2005 and second quarter of 2006 all experienced double
digit growth rates. 2007 suffered four consecutive quarters of negative
growth. When adjusted for inflation by applying the Consumer Price
Index (Urban) fourteen of the past sixteen quarters experienced a
negative growth rate. A negative percentage change over the same time
in the previous year for two consecutive quarters defines a
``recession''.
We began to see an upturn in the Taos economy in the third
and fourth quarters of 2010, but with resources gone it takes
time to recuperate from loses incurred since 2007.
Six days of lost business with these factors can and will be
devastating to some businesses. Lodgers experienced
cancellations and early departures. Restaurants were closed so
no revenues. Retail businesses had to close due to the cold.
Plus these business owners and their employees were told to
stay home so they would be there when New Mexico Gas Company
came to relight.
Many business owners had business interruption insurance.
What they are finding out now is the gas outage is not
necessarily covered by that insurance.
--One restaurant owner was closed for five days. That is revenue
that can not be recuperated.
--Another restaurant owner was planning an event to assist a
charitable organization, but had to cancel because of lost
revenue.
--A bed and breakfast owner is available 24/7/365, but was empty
because he had no heat or hot water in his rooms.
--A retail fabric store had pipes burst in the apartment above his
business soaking merchandise and the floors, but could not
dry the products or the carpet, because there was no heat.
Mr. Fuhlendorf. But anecdotally I think we can get some
idea of what the actual impact was. I'm going to give you a
couple of examples of business owners that I talked to and the
repercussions from this event on them.
A restaurant owner that I talked to had said he lost in the
neighborhood of $20,000 over the period of those 6 days that
his business had to be closed. He has business interruption
insurance. So this is something that I had assumed that would
cover an event such as this.
Quite frankly I was counting on that for many of our
businesses that they would have that. Many of them do.
Unfortunately what he found out was when he submitted his claim
to the insurance company they told him that a gas outage was
not covered under his business interruption insurance. So he
had to go other means to recuperate the losses that he
received.
Another restaurant, the owner said that he lost
approximately $25,000 during the period of time that he had to
be closed. But the ripple from that--and he was going to--next
week have a charitable event for one of our non-profit
organizations in Taos. He decided to cancel that because he had
experienced such losses during this period. So the ripple
extends to the non-profit organizations also in Taos because
they rely on the businesses to support them.
One of our bed and breakfast inns said that they lost
approximately $6,000 during that period. Now that may not seem
like a huge amount in the big scheme of things but when you
look at a bed and breakfast inn that has eight rooms, that's a
big chunk of their income. So it's very unfortunate that they
had to experience that because it's definitely a hardship on
them.
One of the things that I think we are very aware of is that
the communications were somewhat lacking during this period.
The Town of Taos, the public relations offices there, Kathy
Connelly was forwarding information. Then I was taking that
information and forwarding to our business community.
What we were told through the entire weekend was stay home.
Wait for the gas company to show up. They're going to turn you
back on.
What that happened was that businesses felt like they had
to be close to stay home so that they could have heat at home.
They had to send their employees home. They had to be home to
get their gas turned back on.
Finally on Monday, the Mayor of Taos, Mayor Cordova, made
what I think is a bold move. He said if you have the resources,
turn on your own. Light your own pilot light. Turn on your own
gas because we're not sure when New Mexico Gas Company is going
to be able to turn you back on. So most people did that.
Consequently a lot of people were back on by Monday.
But obviously we do have substantial ripples from this
event. As I stated earlier it is a business community that was
already severely weakened by the economy. This was a burden
that many businesses are not going to be able to overcome. So I
thank you for allowing me to make my testimony this morning.
The Chairman. Thank you very much. Thank all of you for
your testimony. Let me just make a comment.
Obviously the human toll and the hardship that was
experienced by families and communities was enormous. Then
you've done a good job of describing that in your individual
communities. I sort of heard 3 main themes from what I heard
here.
No prior notification or inadequate notification that this
was happening.
Inadequate communication throughout the period of this
crisis.
Third, a lack of inadequate emergency response plan.
Obviously there's still a lot of questions many of you
alluded to about the claims process and what can be expected in
that regard. The extent of the economic impact is still being
determined as I understand it. Not only the economic impact on
businesses as you were describing, Steve, but also the economic
impact on families that experience--these are all very serious
issues that we need to address at of course, our next panel is
able I think, to address some of these. That's the reason we
ask them here today. I do not think I'll try to question each
of you again at this point about these problems. But let me
call on Senator Udall to ask any questions that he would have
of this panel before----
Senator Udall. I just thought it might be helpful for Mayor
Torres. I think you used the term, you said, the crisis is
still not over. If you would could you elaborate on that a
little bit? I think you did in your testimony but do you have
the same kinds of things going on that Steve talked about in
terms of your business people. You didn't mention small
business----
Mr. Torres [continuing]. Furnaces that now need to be fixed
because of the loss of gas, broken pipes that need to be fixed
and people on fixed incomes trying to decide how they're going
to come up with the money to do that. We have the same
situation with businesses that were impacted. One popular
restaurant estimated the three and a half days they were closed
they lost receipts anywhere from $6 to $13,000 per day. That
doesn't include sending their staffs home and the loss of the
paychecks there, so absolutely.
The other thing that I think that we're still waiting to
hear, I believe that the crisis continues because when the next
perfect storm should hit and we know that it will eventually.
Are we going to be the convenient communities that are chosen
again to save the system? So I think that's a question that
remains in my community and in all the meetings I just haven't
been able to hear anything that I can take back to say we'll be
spared the next time.
We've got so many economic factors that we're trying to
deal with, even at the municipal level. All of us are dealing
with that loss of revenue and increased cost that we're going
to have to figure out how we're going to cover municipalities
as well.
Senator Udall. Thank you very much.
I had the opportunity of going up to northern New Mexico as
the gas was starting to get on and meet with some of the mayors
in Taos that had come in for the meeting with first responders.
I was struck by the pulling together of the community. I think
several of you described this.
I mean the way we really got through this was that people
stepping forward. People offering that were better off to be
able to go out and do things, the kind of thing that you talked
about in terms of re-lighting. We had the Governor bring the
National Guard in to help with some of that.
It really seemed to me the thing that kind of pulled it all
together and got us through this was the volunteer effort with
the emphasis on the people, the more vulnerable people.
Governor Dasheno, you mentioned disabled people in your pueblo
that needed help. Once again I think as I've seen these crises
whether it's a forest fire, a flood or whatever it is. It's
that wonderful spirit of New Mexicans kind of pulling together
to help out that I think really, really made a difference. I
thank all of you being key leaders in your area for what you
have done in that respect.
Thank you, Senator Bingaman. I don't have any further
questions.
The Chairman. Thank you all very much for being here and
your testimony. We will try to follow up and we'll try to get
answers to many of the questions that you raised. That's the
purpose of this hearing and purpose of the various
investigations going on. Why don't we dismiss this panel, take
a very short break and invite the second panel to come forward
and we will startup again in 5 or 10 minutes, and hear from the
second panel.
[Recessed.]
[Reconvened.]
The Chairman. Our County Commission Chairperson is Maggie
Hart Stebbins. She is here. We appreciate her being here and
also the willingness of the county and the city to allow us to
use these facilities for this hearing.
County Commissioner Art De La Cruz is also here. We
appreciate him being here very much. So thanks to all of them.
I'll go ahead and introduce all 6 of our panel members. I
guess, I think there's supposed to be 6. We've got 5 of them
that I see. So we'll introduce them all and then hear from them
in this order, I guess.
First would be George Schreiber, who's President and CEO of
Continental Energy Systems. George, thank you very much for
being here.
Miss Shelley Corman, who is Senior Vice President with
Transwestern Pipeline in Houston, Texas. Thank you for being
here.
Miss Janice Parker, who is Vice President of Customer
Service with El Paso Western Pipeline Group out of Colorado
Springs, Colorado. Thank you very much for being here.
Mr. John Dumas, who is, I believe, still going to be here,
is the Director of Wholesale Market Operations with ERCOT, the
Electric Reliability Council of Texas. We appreciate him being
here today.
Mr. Gerry Cauley is the President and Chief Executive
Officer with NERC, the North American Electric Reliability
Corporation in Washington, DC. Thank you for being here.
Mr. Joseph McClelland, who is the Director of the Office of
Electric Reliability with FERC, the Federal Energy Regulatory
Commission in Washington, DC. Thank you very much for being
here.
Why don't we just have you proceed in that order? Starting
from my right and going all the way to the left. Each of you
take 5 minutes or so and give us your, the main points we need
to understand.
The full statements that you have prepared for this hearing
will be made part of the record. Then following all of your
statements, Senator Udall and I will have some questions of
you.
George Schreiber, go right ahead.
STATEMENT OF GEORGE A. SCHREIBER, JR., PRESIDENT AND CHIEF
EXECUTIVE OFFICER, CONTINENTAL ENERGY SYSTEMS, LLC, AND MEMBER
OF THE BOARD OF DIRECTORS OF ITS SUBSIDIARY, NEW MEXICO GAS
COMPANY, TROY, MI
Mr. Schreiber. Thank you, Mr. Chairman. Senator Udall,
Congressman Heinrich, Congressman Lujan, thank you very much
for the opportunity to present this statement this morning.
So people are not confused I just want to explain that
while I am with Continental Energy Systems, I am a member of
the Board of Directors of New Mexico Gas. I'm here with 10 of
my colleagues from New Mexico Gas. I'm very much involved with
the company on a day to day basis not only from an operations
point of view, but also because Albuquerque is my hometown.
As we have heard in earlier panels, the disruption of
service to our customers caused hardships, inconvenience and
expense. A lot of we also heard was about our communications
plan, our emergency response plan and we fully agree that we
could have done things better. OK?
We have changes that are currently underway. We are
participating and look forward to a full review of all of these
various factors by the Public Utility Commission. I believe
that we'll be filing testimony in that proceeding on March
17th. We look forward to the involvement in those regulatory
proceedings.
These interruptions would not have happened if upstream
sources of natural gas had met their commitments. Customers
depend on a reliable natural gas delivery network. The fact
that New Mexico Gas was required to curtail to its customers
was and is unacceptable. As an industry we need to work with
regulators and policymakers to ensure that this does not happen
again.
It is clear that we have a problem with the reliability of
the regional energy infrastructure. This is an issue of
national importance. We must address it immediately.
This statement basically summarizes my pre-filed testimony
which goes into this situation in much more detail. We plan our
business operations and manage our gas deliveries to meet the
demand for natural gas by our customers including having enough
gas on peak usage days. As I said, this is an interdependent
network. It is essential that there be reliable, available,
sufficient amounts of electricity to move natural gas from well
head production to gathering, to processing, to interstate
transmission pipelines and finally to New Mexico Gas Company's
500,000 residential, commercial and industrial customers.
We learned that regional infrastructure cannot get the job
done at least under the combination of conditions that the
industry faced 3 weeks ago. As the loss of electric service in
Texas and the effects of weather on gas production and delivery
systems, we were forced to interrupt service to 28,707 of our
customers in order to save the entire New Mexico Gas delivery
system. Had we lost the entire system, the re-lighting process
would be continuing today.
Let's step back for a moment to Monday, January 31, 2011.
Our Operations Control Center was monitoring a storm which the
National Weather Service called a ``winter storm of historic
proportions.'' They were not kidding. The extremely low
temperatures brought to New Mexico by this storm had been
experienced on only 2 other occasions over the last 100 years.
We started preparing for this storm early in anticipation
of a significant increase in the use of natural gas by our
customers. For February 1st, 2nd and 3rd, New Mexico Gas pre-
purchased and scheduled for delivery additional quantities of
natural gas in excess of forecasted amounts by 36 percent, 55
percent and 62 percent, respectively. In other words we
purchased significantly more gas than our forecasting models
predicted we would need believing that the usage would spike
during the storm.
As the storm approached we were highly confident we could
manage things well so that natural gas would reach our
customers as they needed to heat their homes and businesses.
The problem was that these additional supplies of natural gas
were never delivered. Never before in the history of New Mexico
Gas or its predecessors have scheduled deliveries of natural
gas not been delivered on this scale. At the same time our
system demand was nearly doubled the average peak day demand
over the last 10 years.
Our customers didn't get the gas they needed because
electric service disruptions in Texas prevented sufficient
production to meet the demand for natural gas. Gas fields
experienced the effects of frigid weather. 28,707 of our
customers were without natural gas for up to 6 days, in very
cold temperatures, a completely unacceptable situation.
When the gas need of our customers did not arrive we took
steps necessary to save our system by curtailing service in
several areas of the State. I will add that we are currently
analyzing exactly how our system operates and looking for ways
where we can isolate segments of our system better than we
currently have. That process is going on and we will be making
changes in that--in the way we operate our business as well.
But we did do our level best to restore service to our
customers. But furnace and appliance re-lights are man power
intensive, time consuming undertakings, especially in rural
areas of New Mexico. Neither our customers nor New Mexico Gas
should ever have to go through that service restoration process
again.
This discussion then brings me to the reason that we are
all here today. On a policy level there are questions that need
to be addressed.
First that comes to mind, should critical areas such as gas
producing basins be exempt from rolling blackouts because of
their importance to the safety and well being of citizens?
Should critical facilities, including processing plants be
required to have back up generation, electric generation?
Do all well head and gathering systems have the proper
dehydration equipment in place to keep freezing from occurring
at the well head?
What is the best approach to ensure that segments of the
industry, critical to the natural gas infrastructure, achieve
an enhanced level of reliability?
An improved approach to the critical interdependence of the
electric grid and natural gas industry needs to be developed.
Quite frankly it is outrageous that the electric supply system
and regional natural gas infrastructure problem would cause
28,707 of my customers to lose natural gas service when record
low temperatures hit the region.
Thank you again, Mr. Chairman, Senator Udall, for allowing
me to make this statement.
[The prepared statement of Mr. Schreiber follows:]
Prepared Statement of George A. Schreiber, Jr., President and Chief
Executive Officer, Continental Energy Systems, LLC, and Member of the
Board of Directors of its Subsidiary, New Mexico Gas Company
Mr. Chairman, Senator Udall, Members of the Committee, and
Congressmen Heinrich and Lujan:
Thank you for the opportunity to address the Committee today about
the recent natural gas service disruptions in New Mexico, and more
broadly the reliability of our regional energy infrastructure, in light
of the events during the week of January 31, 2011, during which
twentyeight thousand, seven hundred and seven (28,707) customers of New
Mexico Gas Company (NMGC) in communities throughout the state lost gas
service. In my testimony, I will first discuss the storm, the gas
supply shortages in the interstate pipelines and the gas service
curtailment and System Emergencies initiated and declared by on
February 1st, 2nd and 3rd 2011.
I will first discuss NMGC's pre-curtailment planning, curtailment
decision making, and the performance of our distribution system. In the
middle section of my testimony, I will address the recovery effort. By
that, I mean the steps taken to restore service to our customers once
our distribution system stabilized. I will also share some lessons
learned and actions NMGC will take in the coming months to better serve
our customers should New Mexico face an event of this magnitude again.
Finally, my testimony will address matters beyond our control. We would
like to know more about the specific upstream events in Texas that
prevented the interstate pipelines from delivering gas on February 2nd
and 3rd 2011, that NMGC had ordered and paid for. There are questions
that need to be addressed about the reliability of well head
production, and natural gas gathering lines and processing plants. Our
concern is that the necessary investigation and analysis will not occur
absent oversight by this Committee and a concerted fact finding
investigative effort by federal regulators. Our goal as a company is
that NMGC will be able, later this year, to provide assurances to our
customers that steps have been taken to prevent this kind of event in
the future. If we achieve that goal, it will be in large part because
of the initiative this Committee is demonstrating today. We thank the
Committee for its efforts and pledge our cooperation.
I. Background
The majority of NMGC's gas supply comes from New Mexico and is
received into our system either directly from the San Juan Basin, near
Farmington, or through the Transwestern and El Paso Interstate
Pipelines. The balance comes from suppliers and producers in Texas
which is also transported through the Transwestern and El Paso
pipelines. This includes gas from our contracted geological storage
facility in Texas.
NMGC operates two primary segments of its system. The South segment
primarily receives gas fed off the El Paso south pipeline, and serves
the communities of Silver City, Alamogordo, Tularosa and La Luz that
experienced outages. The North segment is primarily fed off the El Paso
north and Transwestern pipelines and serves the northern communities
and Native American pueblos that were affected by outages, including
Bernalillo, Placitas, Taos, Espanola, Red River and Questa, and
surrounding communities.
During the week of January 31, 2011, the delivery of natural gas to
NMGC from West Texas was severely limited by a once-in-50-year event
that the National Weather Service characterized as ``a winter storm of
historic proportions.'' The storm and rolling electrical blackouts in
Texas significantly reduced vital gas field operations and gas
processing facilities. Pressure on the interstate pipelines which
transport gas to New Mexico and three other states, California, Arizona
and Texas dropped significantly. Gas outages were reported in New
Mexico, Arizona and Texas. NMGC experienced a dramatic loss of gas
supply, and significant pressure reductions from the interstate
pipeline system. In contrast, our direct suppliers in New Mexico
continued processing and delivering approximately 90% of scheduled gas.
The facility specific facts and circumstances that caused these
losses in the interstate pipelines are best addressed by the producers,
gas processing plant owners and operators, and interstate pipeline
companies. Gas delivery off these facilities to the New Mexico Gas
Company system was severely limited. Without these disruptions in
supply of gas, NMGC would not have had to curtail or interrupt service
to its customers. Thus, while this event has been described as a local
gas supply matter, it is more accurate to describe it as a disruption
in the interstate gas delivery system which we understand was caused by
electricity disruption and/or weather conditions in Texas.
II. The Events at NMGC on February 1-3, 2011
NMGC routinely monitors long-and short-term weather forecasts. In
the long-term forecast, NMGC saw an emerging weather system that had
the potential to affect demand for gas as early as January 31, 2011. As
with all storms, NMGC preparations commenced early. Our system
transmission lines were safely packed with extra gas, and NMGC
confirmed that our gas storage facility was positioned for withdrawals
when needed. Additional gas was purchased for the anticipated surge in
demand by our customers. For February 1st, 2nd, and 3rd, NMGC had pre-
purchased 36%, 55%, and 62%, respectively, more gas than our forecasted
need. In other words, NMGC had bought significantly more gas than our
forecasting models had predicted we would need considering this type of
storm--correctly anticipating how severe it would be.
These steps were intended to ensure supplies were ready when our
customers' use reached its peak.
Given the severity of the anticipated storm, at 9:00 a.m. on
Wednesday, February 2, 2011, NMGC requested that large industrial and
commercial customers throughout the state voluntarily reduce or curtail
their gas usage. In total, NMGC contacted 39 customers asking for
voluntary curtailment.
Throughout the work day on Wednesday, NMGC monitored gas supply and
pipeline pressures as is our normal practice. Pressures and supply
remained within operational limits. NMGC had purchased and was
anticipating an incremental delivery of gas at 9 p.m. on Wednesday.
At 9:00 p.m. Wednesday, the pre-ordered gas was not delivered from
the interstate pipelines as scheduled. As a result, throughout the
night and into Thursday morning, NMGC repeatedly contacted suppliers
and pipeline operators in an effort to secure additional gas for
customers. At 2:36 a.m. on Thursday morning, because of low pressures
on the South segment of the NMGC system, the Company declared a System
Emergency on the South segment and began the process of curtailing
customers. During the night, we were coordinating with the Otero County
Emergency Coordinator, the Otero County Sheriff and Tularosa Police
Department as service was being curtailed.
Despite the problems on the South segment, NMGC, monitoring the
North segment in the pre-dawn hours, believed it to be stable, with
adequate line pack and that NMGC would be able to meet the anticipated
morning surge in demand. Additionally, NMGC was scheduled to receive an
incremental delivery of gas at 8 a.m. Thursday. Never in the history of
gas operations at NMGC, or its predecessors, had the regional gas
infrastructure failed to deliver purchased incremental gas on two
consecutive occasions, and therefore NMGC reasonably expected this
morning delivery.
By 7:30 on Thursday morning, NMGC was experiencing a significantly
increased demand for gas--70% greater than peak day demand, and
therefore was experiencing a decline in line pack at an extraordinary
rate. By 7:30, NMGC declared a System Emergency on the North segment of
its operations. This situation triggered preparations for reducing
system demand in the event the anticipated 8:00 a.m. incremental
delivery of gas did not materialize, including immediately initiating
mandatory curtailment of service to large commercial and industrial
customers. In total, NMGC curtailed service to 9 large customers during
Thursday.
At 8:00 Thursday morning, NMGC learned that the pre-ordered gas
scheduled for delivery at 8:00 a.m. was not being delivered. Given this
development, as pressure on the Taos Mainline began to drop
precipitously, NMGC shut off the Ottowi valve to curtail service to the
Taos Mainline. This curtailment was an effort to safely control this
portion of the system as it lost pressure and to reduce demand
throughout the system and in order to preserve the remainder of the
system. Shortly after this, NMGC, working with PNM, curtailed service
to the Cobisa power plant in Albuquerque. Further action was taken to
reduce customer demand by closing valves to curtail service to
Bernalillo and Placitas. Altogether, these actions reduced demand on
the North segment and preserved the remainder of the North segment. Had
NMGC not closed valves in the North, including Bernalillo and Placitas,
NMGC risked losing its entire system.
Regarding these actions, the design of NMGC's distribution system
alone dictated that NMGC move quickly to identify critical valves that
were easily accessible by crews that would, once shut down, reduce
customer demand and increase pressure throughout the system. By
``easily accessible,'' we mean valves that could be reached and closed
within 20 to 30 minutes.
In addition, we had to close valves to those portions of the system
already experiencing the lowest pressures. The system design and valve
configuration in communities such as Albuquerque and Santa Fe are too
complex to complete a shut down in the time required to provide support
for the remainder of the system.
III. Recovery and Post-Response Efforts
Following the difficult decisions in the pre-dawn and early morning
hours of Thursday, pressures on both segments of the system--North and
South--began to stabilize. The South segment stabilized quickly, and by
10:34 a.m. the North segment had achieved a balance between supply and
demand. Throughout Thursday, line pack increased. At the same time,
NMGC remained concerned about its ability to handle anticipated
customer demand on Friday morning. NMGC, working with cities and the
state government, renewed efforts for voluntary curtailment, including
closing non-essential services, schools and businesses. As a result of
all these efforts, plus moderating temperatures, the line pack was
restored throughout Thursday and by Friday morning, with reduced
customer demand, the Company could turn its attention and its full
resources to restoring the service to its customers that had been
curtailed.
In order to restore service, the following procedures were set in
motion: First, NMGC has to physically shut off each individual meter in
order to be able to purge the lines of air. After the lines are purged,
each individual meter must be turned on and the appliances relit. The
second step, re-lighting, could not commence until all customers in an
area that had their meters shut off and the lines in that area had been
purged of air. The act of relighting a home required customers to be
home.
Among its efforts to bring all resources to bear in this effort,
NMGC, enlisted the service of utility workers from across the country
to come to New Mexico to assist, including 69 from its sister company
in Michigan. NMGC also utilized the services of Plumbers and
Pipefitters Local 412, many private contractors from the affected
areas, and National Guardsmen, fire personnel, and state and local
police. At the height of the effort, over 1,100 individuals
participated in the recovery process.
Despite the application of all of these resources to re-
establishing service, our initial estimate as to when service would be
up and running was overly optimistic. Our goal was Sunday February 6th,
but service was not restored to all of our customers until Tuesday,
February 8th. Some customers--less than 50--were ``red-tagged'' because
appliances were unsafe. On February 12th and 14th our crews went back
to those customers and undertook the necessary repairs to restore
service at no charge.
IV. Lessons Learned: Review of NMGC Operations and System
While NMGC is not responsible for the production, processing or
interstate transmission of gas to our system, we have learned from this
situation and accept responsibility for the things we could have done
better. In addition to participating in the numerous investigations
that will result from these events, NMGC is independently undertaking
the following actions.
First, NMGC established a $1 million relief fund to assist
customers with their needs arising from the outage. A claims form and a
process for evaluating claims have been set up. NMGC continues to seek
additional contributions to this fund from others in the industry.
Second, in the coming months, NMGC will conduct a complete review
of its processes and procedures and will retain outside consultants as
necessary to conduct an independent assessment of our actions.
Third, NMGC will institute completely revamped communications plans
and processes, including:
A. Developing a dial-out early warning system capable of
alerting customers of emergency situations.
B. Developing a customer communications plan outlining steps
to be taken, including more aggressive pre-emergency
communications and the use of social media, where appropriate.
C. Additional use of local radio and television.
D. Enhancing direct communications with state and local
elected officials and government agencies, Native American
pueblos, and the state's Emergency Operations Center and the
State's Department of Homeland Security.
Fourth, NMGC has already retained an independent consultant to
conduct a thorough evaluation of its entire emergency operating
procedures and policies and make recommendations for improvements.
Fifth, NMGC will review and revise its customer curtailment and
service restoration procedures including better ways to sectionalize
areas of our system to make sure that system operation is better
situated to minimize the impact on the areas that suffered during this
event.
Sixth, NMGC will evaluate all physical system improvements
including the feasibility of establishing back-up supply measures,
including LNG, propane air systems, above and underground storage;
methods to loop lines or building new lines so that branches of the
system are less susceptible to pressure loss.
V. Industry-Wide Improvements Needed
In the last two weeks, the root causes of the failure of the
regional gas supply infrastructure have received little public
scrutiny. This is understandable for several reasons. First, as this
testimony is prepared, the storm and the gas curtailments occurred only
two weeks ago. Second, the facts are difficult to gather. Third, there
is no single regulatory body that has jurisdiction over all of the
industry segments.
The gas industry is no longer vertically integrated. There are many
parties involved in our industry including gas producers, suppliers,
gathering systems, processing plants, pipeline owners and operators and
natural gas storage providers. The importance of a reliable electricity
supply cannot be overstated. Each company in the gas and electric
industries plays a critical role in delivering gas to customers. Each
can undoubtedly make important contributions to the fact finding
effort, and each should be involved. Industry involvement can also help
develop system wide improvements that will be needed to accomplish this
Committee's goal of improving the reliability of the regional energy
infrastructure.
Mr. Chairman, NMGC very much appreciates the chair's initiative in
scheduling this hearing today. The New Mexico Public Regulatory
Commission and the Federal Energy Regulatory Commission have initiated
inquiries into the events of February 1, 2, and 3. NMGC is looking
forward to participating in these hearings. We pledge our cooperation.
We note that FERC in its February 14, 2011 order commented on the
investigations that have commenced in Texas, New Mexico and Arizona.
FERC stated that it ``would seek to coordinate efforts with those
states and their regulatory authorities, and exchange relevant
information so that we are mutually able to determine quickly what went
wrong and how to prevent a recurrence.'' Mr. Chairman, New Mexico Gas
Company concurs. Cooperation and coordination will be key to
accomplishing this Committee's objectives. There are various models for
effectuating this cooperation including the multi jurisdictional task
force approach, under the auspices of the Department of Energy, that
was used to convene the investigation, and author the definitive report
on the 2003 blackout in the northeastern United States and Canada.
With respect to fact finding, there is a consensus that the bad
weather, frozen pipes, and rolling blackouts in the electric grid in
Texas hampered the ability of producers and processing plants to push
gas into the interstate pipelines. The details of and the
interrelationship between these events must be developed.
On a policy level, there are issues that should be explored. Should
critical areas, such as gas producing basins, be exempt from rolling
blackouts because of their importance to the safety and well-being of
citizens? Should all critical facilities, including processing plants,
be required to have back-up generation? Do all wellheads and gathering
systems have the proper dehydration equipment in place to minimize
freezing? What is the best approach to ensure that segments of the
industry critical to the natural gas infrastructure achieve a greatly
enhanced level of reliability?
Clearly, there should be increased real time information sharing
among all parties in the natural gas delivery system. An improved
approach to the critical interdependence between the electric grid and
the natural gas industry needs to be developed. This recent crisis
clearly demonstrates that a failure in the electric grid can disrupt
natural gas supplies, which can impact thousands of natural gas
customers.
To conclude, and bring this matter and testimony back home to New
Mexico, NMGC is determined to do what it can to insure that we are in a
better position to minimize service interruptions, to communicate more
effectively, and in the aftermath of an event to do everything we can
to expedite the restoration of service to all of our customers. To
achieve this goal and to improve the regional infrastructure, we pledge
NMGC's full cooperation.
Thank you again for this opportunity to present New Mexico Gas
Company's perspective and insight into the system failures that
occurred on February 1, 2, and 3, 2011. This concludes my testimony.
The Chairman. Thank you very much.
Ms. Corman, go right ahead.
STATEMENT OF SHELLEY A. CORMAN, SENIOR VICE PRESIDENT,
COMMERCIAL & REGULATORY TRANSWESTERN PIPELINE COMPANY, LLC,
HOUSTON, TX
Ms. Corman. Chairman Bingaman, Senator Udall, Congressman
Lujan and Congressman Heinrich, thank you very much for the
opportunity to testify today.
My name is Shelley A. Corman. I am the Senior Vice
President of Commercial and Regulatory Affairs for Transwestern
Pipeline Company. I am here to offer my knowledge of the facts
concerning Transwestern's transportation service and our
pipeline system operating conditions during the recent period
of winter weather.
Transwestern recognizes the importance of gas service
reliability. I want to assure this Committee that our personnel
did everything in our control to facilitate deliveries to New
Mexico customers. Because natural gas service has historically
been so reliable, Transwestern agrees that we must ensure that
even in the exceptional conditions that we've experienced that
the natural gas deliveries----
During the recent winter weather Transwestern allowed--to
make up--Transwestern is an interstate natural gas company that
transports natural gas from San Juan Permian Basin to market in
the Midwest, Texas, Arizona, New Mexico, Nevada and California.
We have 28 delivery points in the State of New Mexico including
10 delivery points to New Mexico Gas Company.
Transwestern is a transportation only pipeline. We don't
buy or sell gas for resale. Shippers purchase their own
supplies and contract with Transwestern to receive, transport
and re-deliver the gas at specified delivery points.
We own and operate compression with the gas from receipt
point to delivery point and to maintain an operating pressure.
Approximately 75 percent of Transwestern compression runs
on gas while 25 percent of the compression is driven by
electric motors with power provided by local utilities. Recent
extreme weather conditions reduced the supplies flowing into
Transwestern. At the very same time shippers requested
dramatically increased volumes of gas.
On February 2, substantially more gas was drawn out of the
pipeline at delivery points than was being put into the
Transwestern system at receipt points. For several hours during
February 2nd nearly 400,000 MMBTU more gas volume was being
delivered out of Transwestern than was being received into the
system. As a result the pressures in the pipeline were lowered
and the ``line pack,'' that is the volume of gas in the
pipeline was reduced.
Despite these operating changes Transwestern kept its
pressure above our contractual minimum operating pressures.
Transwestern had more than enough of pipeline capacity to meet
our shipper delivery requests. There was no compression or
pipeline outage on the Transwestern system that impeded our
ability to receive or deliver gas to shippers in New Mexico. We
operated our compression to maximize the pressures in New
Mexico given the quantities of gas in the pipeline. Our gas
control personnel worked around the clock through the critical
periods with their counterparts at New Mexico Gas Company to
maximize deliveries.
Beginning on February 2nd and through the extreme weather
we issued critical operating notices where supplies were not
being received. We also issued operating notices to our
shippers informing them of low ``line pack'' conditions.
Transwestern gas control personnel maintained continuous
communication with shippers and operators to keep all parties
up to date.
We do not have firsthand knowledge of why particular
supplies were not received as planned. Nor do we fully
understand whether there were any downstream operating
conditions that prevented shippers from taking gas at lower
line pressures. The extreme cold conditions created unique
difficulties for many segments of the natural gas industry and
the industries that support it.
We are proud of the manner in which we managed our system.
We believe Transwestern used all the tools in our control
to maximize the gas available at New Mexico delivery points.
We believe that participants in the natural gas supply
chain should have the opportunity to meet and review data and
gain a better understanding of each other's systems during this
extreme weather. We understand that the Federal Energy
Regulatory Commission has initiated an inquiry on this issue.
That could be the forum for interested parties to exchange
information, have dialog and form recommendations for future
weather events.
Thank you for this opportunity to testify. I look forward
to your questions.
[The prepared statement of Ms. Corman follows:]
Prepared Statement of Shelley A. Corman, Senior Vice President,
Commercial & Regulatory Transwestern Pipeline Company, LLC, Houston, TX
Chairman Bingaman, Ranking Member Murkowski and members of the full
Committee, thank you for the opportunity to testify today.
Introduction
My name is Shelley A. Corman and I am the Sr. Vice President,
Commercial & Regulatory for Transwestern Pipeline Company, LLC
(``Transwestern''). I am here to offer my knowledge of the facts
concerning Transwestern's transportation service and pipeline system
conditions during the period of recent winter weather. Transwestern
recognizes the importance of gas service reliability, and I assure this
Committee that Transwestern personnel did everything in their control,
and our facilities were ready, willing and able, to receive and move
all supplies delivered to Transwestern and redeliver those supplies to
our customers in New Mexico. Transwestern went so far as to allow
significant depletion of Transwestern's ``line pack,'' gas within its
system, to facilitate deliveries to New Mexico customers.
Background of Transwestern's transportation system
Transwestern is an interstate natural gas company operating
pursuant to a certificate of public convenience and necessity issued by
the Federal Energy Regulatory Commission. Transwestern transports
natural gas from the San Juan, Anadarko, and Permian Basins to markets
in the Midwest, Texas, Arizona, New Mexico, Nevada, and California via
approximately 2,700 miles of pipeline. Transwestern's mainline capacity
flowing west from the Permian Basin to the California border is
approximately 1.2 Bcf/day. Additionally, our San Juan Lateral allows
San Juan Basin supplies to flow South into the mainline. Transwestern
has 28 delivery points in the state of New Mexico, including 10
delivery points to New Mexico Gas Company. Attached is a map* of the
Transwestern system. Also attached is another map* showing
Transwestern's New Mexico delivery points.
---------------------------------------------------------------------------
* All maps have been retained in committee files.
---------------------------------------------------------------------------
Transwestern is a transportation-only pipeline. Shippers purchase
their own gas supplies and contract with Transwestern to receive,
transport, and redeliver the gas at specified delivery points. In
theory, shippers arrange to put an amount into the pipeline equal to
the amount that they want to have delivered. In reality, more or less
gas may be actually received on a given day and the shipper may take
more or less gas at the delivery point than scheduled.
Natural gas moves through pipelines and from one system to another
based on pressures maintained in the lines. Transwestern owns and
operates approximately 330,000 horsepower of compression at 18 mainline
compressor station locations along the mainline and on laterals.
Compression is utilized to move the gas from receipt points to delivery
points and to maintain operating pressures. Approximately 75% of
Transwestern's compression runs on gas, while 25% of the compression is
driven by electric motors with the power provided by local utilities.
Gas supply will only flow into a pipeline if the interconnecting
facility pressure exceeds the receiving pipeline pressure. Similarly,
gas will flow onto downstream facilities at a delivery point so long as
the pipeline's pressure remains higher than the downstream operating
pressure.
Natural gas receipts and deliveries on gas day Feb 2-4, 2011
Extreme weather reduced supplies delivered into Transwestern. At
the very same time, shippers requested dramatically increased volumes
of gas. On the gas day of February 2nd, substantially more gas was
drawn out of the pipeline at delivery points than was being delivered
to Transwestern at receipt points. As a result, the pressures on the
pipeline were lowered and ``line pack'' (the volume of gas in the
pipeline) was reduced as compared to operating conditions on the prior
day. I also attach a chart showing hourly receipts, deliveries and
pressures.
Despite these operating changes, Transwestern's line did not, at
any delivery point, fall below contractual minimum operating pressures,
which are intended to indicate the line pressure required to allow
shippers to receive required quantities. However, operating conditions
on the downstream facilities may have limited the ability to take the
gas away from Transwestern at these contract pressures.
Transwestern had pipeline capacity to meet shipper delivery
requests. There were no compression or pipeline outages on the
Transwestern system that impeded Transwestern's ability to receive or
deliver gas to shippers in New Mexico. Transwestern's compressor
stations remained operational with sufficient horsepower to transport
gas towards the areas of increased demand and maintain required
pressures. Transwestern operated its compression to maximize the
pressures in New Mexico given the quantities of gas in its pipeline.
Transwestern's gas control personnel worked throughout the critical
periods with their counterparts at New Mexico Gas Company to maximize
deliveries to New Mexico Gas Company.
Transwestern declared and issued critical notices of
underperforming receipt points, where nominated supplies were not
delivered to Transwestern, and delivered such notices to receipt point
operators and affected shippers. We also issued Alert Day critical
notices to all shippers informing shippers of lower line pack, where
gas volumes in the pipeline were depleted because volumes delivered
significantly exceeded volumes received by Transwestern. In addition,
Transwestern gas control personnel maintained continuous communication
with shippers and operators to keep such parties up to date on line
pack conditions.
Transwestern does not have first-hand knowledge of why particular
supplies were not delivered to its receipt points when scheduled, nor
do we know whether there were any downstream operating conditions or
limitations that prevented shippers from taking gas at the delivery
points at the prevailing line pressures. The extreme cold conditions
created unique difficulties for many segments of the natural gas
industry and the industries that support it.
Transwestern's View of the Path Forward
Transwestern believes that the most productive response to the
weather events is to allow time and an environment for pipelines and
their shippers and interconnecting parties to review operating data and
develop protocols to better address future extreme weather events based
on this experience.
Thank you for this opportunity to testify. I look forward to
answering any questions at this time.
The Chairman. Thank you very much.
Ms. Parker, please go right ahead.
STATEMENT OF JANICE PARKER, VICE PRESIDENT, CUSTOMER SERVICE,
EL PASO WESTERN PIPELINE GROUP, COLORADO SPRING, CO
Ms. Parker. Thank you. Good morning, Chairman Bingaman,
Senator Udall, Congressmen Heinrich and Lujan. Thank you for
the opportunity to be here. We really appreciate that.
As you said earlier I'm Vice President of Customer Service
and that includes the gas control function for delivery of
natural gas on our pipeline system of El Paso Natural Gas. We
appreciate the opportunity to testify and share any information
we have that could help you as part of your inquiry and also to
talk about the reliability that we did see in some of our
infrastructure during this period of time.
As Ms. Corman said, just like Transwestern, El Paso Natural
Gas is an interstate pipeline company. We're regulated by the
Federal Energy Regulatory Commission. Ever since 1993 we have
been a transportation only pipeline.
We receive natural gas from the suppliers where our
customers purchase their supplies. We transport that natural
gas. Then we deliver it where our customers have instructed us
to make physical deliveries to them. We neither sell gas to our
customers as Ms. Corman said.
Our customers purchase natural gas from third parties.
Actually where it's put into our system, our pipeline system is
downstream of both the production, the gathering, the treating
and the processing of natural gas, so all those activities
happen before it enters our pipeline. So that it is then
pipeline quality for delivery to customers like New Mexico Gas.
It can be delivered to homes. The gas that may also come from
other pipelines or storage facilities also connect into our
pipeline system.
I hope you have in your packet, I did provide a map earlier
that gives a little schematic of our pipeline and shows you
where the Permian Basin and Anadarko Basin is. Do you need any
extra copies?
The Chairman. I think I have that.
Ms. Parker. OK. Thank you, sir. I thought that might be
helpful as we talk about the different supply basins.
We primarily receive natural gas from 2 supply basins. One
is called the Permian Basin. It's in West Texas and Southern
New Mexico and the San Juan Basin which is in Northern New
Mexico and the very edge of Colorado. Our pipeline then
transports and delivers the gas to the customers in various
States including West Texas, New Mexico, Arizona, Nevada,
California and down to the border with the country of Mexico.
In New Mexico one of our customers is New Mexico Gas
Company as well as other municipalities, electric utilities and
industrials. We have a north pipeline system that comes from
the San Juan and serves New Mexico Gas near the Albuquerque
area. Then our south pipeline system picks up gas from the
Permian and delivers it to New Mexico Gas in the Alamogordo
areas.
We own about 2,800 miles of pipe, 20 compressor stations,
all in New Mexico. Then we have about 110 employees located
throughout our system in the State of New Mexico to provide
quick maintenance of our facilities.
Today I'm going to review the operations as we saw them
from January 31st to February 4th, just to help you provide
some information. I think one of the things you'll see as many
panelists have touched on is that everyone seems to have their
piece of information and not the whole picture. So I think
these inquiries that are coming up will help us maybe provide
more comprehensive service.
On the night of January 31st, temperatures were predicted
to be very cold. We packed up our pipeline. As Ms. Corman said,
line pack is basically the gas you already have in your
pipeline system because our responsibilities are to provide
real time delivery. So as our customers are putting natural gas
supplies into our pipeline in the San Juan and Permian areas
our responsibility is to let them go ahead and take it out real
time or simultaneously even though it takes a day or more for
that gas supply to move across our pipeline system. So we do it
with line pack.
We had a heavy day of demand on February 1st, but
everything went fine. We packed our system back up the night of
February 1st for even colder temperatures on February 2nd.
However early that morning of February 2nd, about 6AM, we
noticed that we were not getting the supplies from the Permian
Basin that we expected and that our customers had ordered from
those suppliers.
We immediately started making phone calls to those
suppliers to find out what was going on. Was this a temporary
shortfall or was it longer shortfall? We, at that point in
time, is when we learned there were some rolling blackouts
occurring and some freeze offs and mechanical issues in the
supply basin. Because of the cold weather, unfortunately, the
customers were taking out a lot more natural gas than was
coming into our pipeline system, again that second day. As a
consequence of that what we saw is starting with the El Paso,
Texas area and then the Alamogordo, New Mexico area and later
the Tucson, Arizona area, our line pack and system pressures
were being depleted at a rate much quicker than it was being
replaced by the supplies coming into the system.
On that same morning of February 2nd within a couple of
hours of or within an hour of finding out that information we
started putting out notices on our public website about
conditions on our system, the severity. As things unfolded we
communicated with customers that way and of course as they
called us or we called them. Laid out the actions that we
needed customers to take to make sure that the system was able
to perform the deliveries of the gas that we had and the
potential consequences if that did not occur.
We also proactively listed out our website on the supply
locations that were not providing the gas that they should
have. That was twofold.
One so customers would be aware where we were seeing issues
of gas not coming into our system.
Second, so that they could find other locations at which to
buy natural gas to be delivered to our system.
We did see customers, you know, try to find additional
natural gas, but it was not, with the freeze offs in the
Permian, it was not as available to them as what they were used
to in the past. We did see market demand continue to increase.
So supply continued to go down. Market demand continued to go
up.
One thing I can say that we were able to do in addition to
providing the line pack in our system to hold up deliveries at
least on February 2nd is that we were able to offset some of
the lack of supply through our Washington Ranch storage
facility. It's located near Carlsbad, New Mexico. It operated
very well during this cold period. We were able to withdraw at
the maximum rate during the whole period of time. Unfortunately
it was not enough to offset the total supply deficiency that we
were seeing in the production areas.
By the afternoon of February 2nd, as you can see, things
deteriorated pretty quickly on our south system with the
Permian supply not coming in at the rate customers needed.
Basically we saw pressures on our south system, which I mention
again, serves the Alamogordo area of New Mexico, start to fall.
So right after lunch we were starting to see pressure problems
in El Paso.
Then that progressed across the system. By the morning of
February the 3rd which was a Thursday, we were below our
typical operating pressures at all locations on our south
system. There were supply freeze offs in the San Juan basin
that we experienced from February 1 to February 2. But after
that it stabilized and our pressures on our north system that
serve the Albuquerque area did stabilize slightly lower than
what customers were used to, but above the contract pressure
was.
Unfortunately the pressures on our south system, our
customers depend on a certain pressure to then operate their
facilities or distribute natural gas to the far ends of their
system. So that lower pressure did impact their ability to
fully distribute the gas that they received. We finally started
seeing recovery during the day, late in the afternoon of
February 3rd, that Thursday. Customers were able to start
finding some additional gas supplies to help and demand was
starting to lessen just a little bit in some areas of the
system.
We were back to normal operating pressures to New Mexico
Gas the afternoon of February 3rd. They could then start their
re-light strategy and process. By midday of February 4th, which
was Friday of that week, pressures were back to normal
everywhere on our pipeline system.
The main things I'd like to point out on your question of
reliable infrastructure that did work well on our system is we
did re-deliver all of the natural gas supplies that our
customer's suppliers put into our pipeline system, plus almost
another 20 percent that we were able to deliver through our
line pack and our storage facility. However it was still not
quite enough to keep the pressures up on the pipeline without
sufficient gas coming in to replace those deliveries.
We did lose some power from some of our local utilities at
some of our compressor stations. But we immediately put staff
out at each critical compressor station 24 hours a day during
this period. We had 2 shifts going at all times to make sure we
could overcome any cold weather issues. We had backup
generators at some of the critical facilities and we were able
to maintain service through those compressor stations to move
what gas we did have available on the system.
We were in constant communication with our customers. I
will tell you that New Mexico Gas, in particular, was very
proactive in their outreach to us. As we were all seeing the
pressure and supply issues on the system they gave us advice on
where to best deliver natural gas to their north system so that
they could effectively, you know, maximize whatever gas supply
was coming to them. We appreciated that opportunity to work
closely with them.
To conclude basically what we think the State of New Mexico
experienced at that first week of February was a highly
unusual, but widespread winter weather event. It involved both
temporary natural gas supply shortages from the cold weather
and extremely high demand also due to the cold weather. That
imbalance basically meant that we received not enough gas into
our pipeline to satisfy the demand going out of the pipeline.
I will commit to you that although the natural gas supply
function is not our role or something we can control. We're
very committed in working closely with our customers to
evaluate the system performances and to improve the reliability
to the more distant part of their systems in any way that we
can assist.
Appreciate the opportunity to testify. I look forward to
answering any questions you may have at the moment.
[The prepared statement of Ms. Parker follows:]
Prepared Statement of Janice Parker, Vice President, Customer Service,
El Paso Western Pipeline Group, Colorado Spring, CO
Good Morning, Chairman Bingaman. My name is Janice Parker, and I am
the Vice President of Customer Service for El Paso Natural Gas Company
(EPNG). Thank you for the opportunity to testify today before the
Senate Energy and Natural Resources Committee regarding the recent
natural gas service disruptions in New Mexico and the reliability of
regional energy infrastructure as it relates to El Paso Natural Gas
Company's pipeline system.
EPNG is an interstate natural gas pipeline company regulated by the
Federal Energy Regulatory Commission. As an interstate natural gas
pipeline company, our role, since 1993, is to receive, transport and
deliver to our customers the natural gas supplies that they purchase
from third parties. We do not sell natural gas to our customers.
Instead, our customers purchase natural gas from third parties who then
cause the natural gas supplies to be delivered into our pipeline system
at a variety of locations. All of these locations where we receive gas
from our customers' suppliers are after the gas has been produced,
gathered, treated, and processed by other companies. The gas may also
come from other pipelines or storage facilities.
Our pipeline system primarily receives gas that our customers
purchase from the Permian Basin in West Texas and Southern New Mexico,
and the San Juan Basin in Northern New Mexico and Colorado. Our
pipeline then transports and delivers the gas to our customers located
in West Texas, New Mexico, Arizona, Nevada, California and at the U.S.
border with Mexico. In New Mexico, one of our customers is New Mexico
Gas Company, along with other municipalities, electric utilities and
industrials. EPNG has a north pipeline system with delivery locations
to New Mexico Gas in the Albuquerque area and a south pipeline system
with delivery locations to New Mexico Gas in the Alamogordo area. In
New Mexico, EPNG owns and operates approximately 2,800 miles of
pipelines and 20 compressor stations, and we have over 110 employees
who maintain our facilities in New Mexico.
Today, I am here to testify about our pipeline operations from
January 31-February 4, 2011:
On January 31, temperatures were cold across the EPNG system
and the demand for natural gas was growing. Colder temperatures
were predicted for the next couple of days and on the night of
January 31, we made sure our pipeline was packed with natural
gas for a heavy morning demand. EPNG keeps gas in the pipeline
(``linepack'') to allow us to deliver gas to our customers on a
real-time basis while the customers' suppliers put their
natural gas into the system to replace the linepack.
Early on the morning of February 2, we saw that the natural
gas our customers had arranged for delivery into our pipeline
from the Permian Basin was not materializing. Later that
morning we found out that this lack of supply was due to
problems at third party processing plants and well freeze-offs
in the production area. Because of the cold weather, however,
customers continued to take deliveries of significantly more
volumes of natural gas from EPNG's system than was being
delivered into our pipeline by their suppliers. As a
consequence, our linepack on the south system serving cities
such as El Paso, Texas, Alamogordo, New Mexico, and Tucson,
Arizona, was being depleted at a rapid rate and was not being
replaced.
On February 2, EPNG issued operational notices to our
customers at 7:24 a.m. Mountain Time (MT), 9:31 a.m. MT, 10:07
a.m. MT, 10:20 a.m. MT, and then at 11:51 a.m. MT as conditions
worsened. The Notices laid out the severity of the situation,
provided action items that customers should take, and potential
consequences if customers continued to take more gas off our
system than was delivered on their behalf. We also posted a
list of all third-party supply locations that were delivering
insufficient gas into our system, so that our customers could
try to find other locations with natural gas available for them
to purchase. Market demand for natural gas continued to
increase.
To offset the lack of supply, EPNG was operating its
Washington Ranch storage facility near Carlsbad, New Mexico, on
its south system to withdraw as much gas as we could from the
storage field. This facility performed well during the outage
and was on maximum withdrawal. The gas withdrawn from our
storage field helped to replace some, but not all, of the
produced gas that was not being delivered to our pipeline. We
also used the available linepack to support deliveries on
February 2.
By the afternoon of February 2, the lack of sufficient
supply to meet the high level of market demand for natural gas
on the EPNG south system caused the pressure in our south
system to start falling. Customers continued to try to purchase
gas, but the processing plant outages and well freeze-offs in
the Permian Basin continued to limit the availability of supply
to meet the market demand on the south system. There were also
some supply freeze-offs in the San Juan Basin from February 1
to February 2 but the pipeline pressures on our north system
serving the Albuquerque area did not experience any significant
change.
By the morning of February 3, pressures on our south system
were lower than normal in most locations. There were some
locations where our customers needed a specific pressure to
allow them to deliver the natural gas to the far ends of their
systems.
EPNG did not start seeing recovery until late in the day of
February 3 when customers were able to locate some additional
supply at pipeline interconnects and demand started to lessen.
Normal operating pressures to New Mexico Gas in the Alamogordo
area returned the afternoon of February 3 which allowed them to
start their relight strategy. By mid-day February 4, pressures
were back to normal everywhere on the EPNG system.
Specific to the question of reliable infrastructure, I would like
to point out the following highlights:
EPNG redelivered all of the natural gas supplies that its
customers purchased that were received into our pipeline system
during this event. In fact, through the use of our linepack and
our Washington Ranch storage facility, we were able to deliver
significantly more gas than we took into our system from third-
party suppliers. Available pipeline capacity on EPNG's system
was not an issue.
While we lost power supplied by our local utility at some
compressor stations for a short time, we were able to restore
operations at the critical units through back-up generators and
the expertise of our maintenance and reliability team. We did
experience issues caused by the cold weather but we staffed the
critical compressor stations 24 hours per day during this event
to ensure that the units continued to run as needed.
We were in constant communication with our customers. New
Mexico Gas, in particular, was very proactive in its outreach
to us to ensure that the locations where we delivered their gas
were the best locations for them operationally.
To conclude, what New Mexico experienced in the first week of
February 2011, was a highly unusual, weather-driven event involving
both natural gas supply shortages and extremely high natural gas
demand. That significant supply-demand imbalance resulted in too little
natural gas being delivered into our system and too much gas being
taken out. While the natural gas supply function is not within our
control, we are very committed to working closely with our customers to
evaluate system performance and to improve reliability to the more
distant parts of their systems.
Thank you for opportunity to testify and I look forward to
answering any questions.
The Chairman. Thank you very much.
Mr. John Dumas, who is Director of Wholesale Market
Operations with ERCOT, the Electric Reliability Council of
Texas. Thank you for being here.
STATEMENT OF JOHN DUMAS, DIRECTOR OF WHOLESALE MARKET
OPERATIONS, ELECTRIC RELIABILITY COUNCIL OF TEXAS, TAYLOR, TX
Mr. Dumas. Thank you for allowing me to testify, Senator
Bingaman and Senator Udall, Congressmen. I have prepared a
short presentation I'd like to go over with you that covers the
emergency event that occurred in ERCOT. I have extra copies if
anyone needs a copy.
The Chairman. Alright, does everyone have a copy of this?
OK, go right ahead.
Mr. Dumas. ERCOT is an independent or a single interconnect
transmission grid that covers about 85 percent of the load in
the State of Texas. There are areas in East Texas that are not
part of ERCOT. There's areas in the panhandle and El Paso that
is not part of ERCOT. We are connected through DC ties in the
East region, top right hand corner of the State in the north
and we do have some DC ties with Mexico as well.
A couple of points to note on this graph. Our winter peak
was 57,282 megawatts. That was experienced on February 10th,
approximately 1 week after the rolling blackouts that we
experienced on February the 2nd. We set a summer peak in August
23rd of last year of 65,776 megawatts.
As it was mentioned earlier this was a very extreme cold
weather event. These were some of the headlines that were in
the newspapers leading up to the event. Major winter storm
expected. Very cold temperatures were expected.
We go through a process whenever we have winter weather
approaching. We take a look at the transmission outages, the
planned outages that we have in place. To the extent that we
can cancel those transmission outages and put the grid as many
lines in service as possible to maintain the expected high
loads during that period. We do that.
We had ten 345 KV lines that were put back in service.
2,738 KV lines that were put back in service. 345 is the
highest KV level that we have in ERCOT. We also put back in
service some transformers. So we were preparing January 28th
through the 31st for higher loads due to this cold weather.
Then on January 31st leading into February the 2nd, rolling
blackout event, we ordered online some of our longer lead time
generation. We have a unit there that has a longer lead time so
we ordered it online. We ask it to be online and available on
February 1st.
Then we had a unit that can burn oil. We asked it to start
burning oil. This is a unit that is in the Dallas region.
This was not, for ERCOT, this was not a gas supply issue to
the power plant. So I'm going to talk about the number of power
plants that tripped off due to the severe cold weather in a
minute. But this was not due to shortage of gas supply in the
ERCOT system.
There were some isolated areas. Lake Hubbard is one area
that does have isolated issues with getting gas. But we did
have that plant on 100 percent oil.
We issued operating condition notices that as the cold
weather was approaching to notify the transmission companies
and the generating companies that weather was expected to be
very, very cold. That the metropolitan areas would be affected
as well and starting around February 1st at 9AM. As we
progressed through that period on February 1st, we did have a
day ahead market in which people come and schedule and plan
generation to be online. They also have the opportunity as
loads to buy supplies bilaterally so that they are not
dependent upon the spot market prices. They're able to hedge
themselves. We did have a lot of our loads that were able to do
that.
But we also have reliability tools. We have a reliability
unit commitment program that we are able to start any available
generation through essentially it's command and control. We're
able to start those units up and are able to move on. We
started 13 generators in preparation for the cold weather.
As you can see on the next slide a couple lines to note.
The expected or the planned committed generation that we had
available going into--and this is a view from midnight February
the 1st going into the cold weather event on February the 2nd.
You can see that we had approximately 63,000 megawatts of
generation that was planned to be online and generating to
serve approximately forecasted load of 57,000 megawatts of
load. So we had enough generation planned to cover what we
expected the peak load to be on that day.
As we move through midnight the next graph, the red line
shows the planned megawatts that are adjusted due to unit
failures or unit trips. So you can see as we progress from
midnight through the morning hours that there were a number of
units that came off line. Throughout the day there was
basically 82 units that either tripped off line or failed to
start. So our planned generation which is the blue line was
adjusted due to those outages by the red line. There were
approximately 8,000 megawatts of generation that was
unexpectedly off line simultaneously.
The next graph is a plot of our frequency in ERCOT. Because
we are a single interconnect. This frequency represents the
frequency that was observed across all of ERCOT.
You can see that at 5:20 in the morning we had responsive
reserves that we were able to utilize and fully deploy. Those
load resources that are providing that responsive reserve were
asked to come off line at 5:20. Then at 5:44, approximately
5:44 in the morning, we began firm load shedding.
Then we started the rolling blackouts at 5:43, 5:44 in the
morning. That was the first 1,000 megawatts. Then at
approximately between 6 and 6:10 we--or 6:04 we issued another
1,000 megawatts. Then at 6:23AM, February the 2nd, we issued
another 2,000 megawatts of firm load shedding. This is a total
of 4,000 megawatts of firm load shedding.
The way those instructions go out from ERCOT we make a
hotline call to all of our wires companies, all of our
transmission companies. We give them a number that we need them
to shed 1,000 megawatts. They have a percentage based upon
their service area. They get a percentage of that number. They
have procedures that they go through and start opening the
breakers that are pre-designated to start the rolling
blackouts.
Now this timeline doesn't show it but beginning at 11:39 in
the morning we were able to start restoring that firm load. We
restored it in 500 megawatt blocks. By 1:07 PM that afternoon
we had completely restored, we'd issued the order to completely
restore the load that we had shed that began the rolling
blackouts. So at that point, at 1:07 PM on February the 2nd, we
had completed the rolling blackouts and had restored the firm
load. So it was approximately 7 1/2 hours.
The next slide gives you an indication of where the
generation that we lost was located in the State. As you can
see it was a widespread event. It wasn't isolated to just North
Texas or down in the Houston area or the West Texas area.
The generation that we lost, we lost several large coal
plants. We lost gas. Every fuel type with the exception of
nuclear was affected. Our nuclear generation was not affected
on this day.
There was a lot of interagency cooperation that we
experienced during this time of the event in the cold weather.
The Public Utilities Commission which governs us and the power
industry worked very closely with the railroad commission and
staff. They were cooperating looking for any issues with the
natural gas. They were, like I said earlier, there were a
couple of areas where they worked to try to get some more gas
for units in those areas.
Also our Public Utilities Commission and the Texas
Commission on Environmental Quality worked together to develop
and encourage any additional generation that possibly was
limited due to emissions. The TCEQ was able to allow those
generators to produce more power if necessary due to
enforcement. They basically relaxed some of the enforcement
during that period to get more power from those generators.
We're continuing to review the actions leading up to the
event and the handling of the event itself. We've spoken with
the FERC staff. They're opening up an inquiry.
We're working very closely with the independent market
monitor who is reviewing the information available in the
market and looking at how generators were operating. Also the
Texas Regional Entity which is our NERC Regional Entity is
also. We've also provided information to that entity as well.
We're actively participating with the generators looking at
weatherization and those particular issues.
We're also reviewing our communication policies. This is
primarily in an effort to get the word out to the public as
soon as possible of what's going on, how much load is being
curtailed and allow the first responders from the fire
department/police department and agencies like that to respond
as quickly as possible. We're setting up internal phone banks
to be able to answer questions from these agencies on exactly
what the situation is. We will be looking at working with our
transmission providers. Looking at if there's any opportunities
to use some of the advanced meters that we've deployed in Texas
and how that possibly could be done during this event as well.
There are, I guess, a number of questions that have come up
about which customers are on those load shedding circuits. The
wires companies designed those load shedding plans to avoid
what are considered critical customers. There are some
guidelines that are at the PEC that identify, you know, nursing
homes, hospitals, things of that nature that would be
considered critical care customers.
Gas compressing stations are not on that critical list at
the moment. I think that is something that will be reviewed by
our agency, State agencies, as we go through evaluating lessons
learned and what could possibly be improved. I don't know the
history of that plan when it was first developed. I think at
the time possibly a lot of your gas compressions were not
electric they were utilized more from a gas perspective, but
that's an area I'm not familiar with. I'm more familiar with
the power system and the power grid.
Looking forward to your questions. Thank you for the
opportunity----
[The prepared statement of Mr. Dumas follows:]
Prepared Statement of John Dumas, Director of Wholesale Market
Operations, Electric Reliability Council of Texas, Taylor, TX
My name is John Dumas. I am Director of Wholesale Market Operations
at the Electric Reliability Council of Texas, Inc. (ERCOT). On behalf
of ERCOT, I have been asked to describe the grid emergency events
affecting the ERCOT system on February 2, 2011. ERCOT appreciates the
opportunity to address the Committee as it reviews issues regarding
system reliability.
On February 2, 2011, ERCOT experienced outages across the state of
approximately 82 generating units representing more than 8,000 MW of
generation. This included generating units that were online that
tripped offline and units that unsuccessfully attempted to come online.
In many cases, the extremely cold ambient temperatures combined
with high winds causing problems with plant control systems such as
plant transmitters, transducers, or valves. Many of the outaged
generating units returned to service in time for the next morning's
peak. In addition, ERCOT deployed other emergency tools at its disposal
as grid operator, including responsive reserves and emergency
interruptible load service. Nevertheless, ERCOT was required to order
rolling outages throughout its region to address the situation.
During the morning and afternoon of February 2, ERCOT issued
appeals for energy conservation. ERCOT also provided instructions to
restore firm load as generating capacity became available and the loads
moderated. By the early afternoon, ERCOT had recalled all curtailed
firm load. To ensure it could maintain system stability, ERCOT remained
on alert due to freezing temperatures that continued throughout Texas
into February 3-4, 2011.
Due to the cold weather, ERCOT set a new winter peak record of
56,493 MW at 7:15 P.M. on February 2, 2011. ERCOT again set a new
winter peak the next week: the peak on February 10, 2011 hit 57,282 MW.
Notably, ERCOT set a new peak record of 65,776 MW in the summer of
2010.
On February 3, 2011, ERCOT experienced significant instability in
the electrical system in the South Texas region. Because several
generating units at a combined cycle facility tripped off line in the
South Texas region, low voltage conditions resulted in rolling outages
in communities in South Texas. South Texas transmission operators
managed the situation with controlled rotating outages until they were
able to retain balanced load and generation by the early morning hours
of February 4, 2011.
The ERCOT region experienced another freezing weather event during
the week of February 7, 2011, but operations on the ERCOT system were
normal.
ERCOT has expressed its appreciation for the sacrifices of Texas
residents who were without power during the rotating outages, and we
also appreciate the conservation efforts by consumers during this
emergency situation as well as load resources in our demand response
program. We also want to thank the media for their assistance in
getting information out to the public about the need to conserve.
I also want to note the support and assistance ERCOT received from
the transmission providers and generation owners in our region, the
Public Utility Commission of Texas, the Railroad Commission and the
Texas Commission on Environmental Quality.
ERCOT is very proud of the great work by the ERCOT operators in
handling what could have been a disastrous situation for the entire
state if they had not taken the quick action necessary to preserve the
security of the grid.
The Chairman. Thank you very much for being here. Thank you
for your testimony.
Why don't we go on to Mr. Cauley, who is President of NERC
out of Washington, DC, President and Chief Executive Officer?
Thank you for being here.
STATEMENT OF GERRY CAULEY, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, NORTH AMERICAN ELECTRIC RELIABILITY CORPORATION
Mr. Cauley. Morning, Chairman Bingaman, Senator Udall,
Congressman Lujan and Congressman Heinrich.
My name is Gerry Cauley and I'm President and CEO of the
North American Electric Reliability Corporation. I'm a graduate
of the U.S. Military Academy at West Point and a former officer
in the U.S. Army Corps of Engineers. I have more than 30 years
experience in the areas of nuclear and electric power safety
and reliability including as a lead investigator for the 2003
Northeast blackout.
NERC's mission is to ensure the reliability of the bulk
electric system of North America and to promote reliability
excellence. The bulk electric system includes generation and
transmission facilities operated at greater than 100,000 volts
in contrast to the local distribution of electricity to homes
and businesses.
In 2006 NERC was designated as the electric reliability
organization by the Federal Energy Regulatory Commission in
accordance with the Energy Policy Act of 2005. NERC's
reliability standards then became mandatory in mid 2007.
NERC oversees more than 1,900 organizations that produce or
delivery bulk power including investor owned utilities,
Federal, State and municipal utilities, member owned
cooperatives, independent generators, power marketers and
regional operators. NERC membership represents diverse
interests of all reliability stakeholders including large and
small electricity customers, State regulators and Canada with
whom we share the North American bulk power grid.
In early February extreme cold weather conditions across
multiple States in the Southwest led simultaneously to high
customer demand for electricity and a significant unexpected
loss of generation especially in the Texas area. As a result
operators in Texas issued energy emergency alerts and public
appeals for the reduction of electricity use and ultimately
implemented load shedding as a necessary step to maintain
overall grid reliability. Throughout the event NERC's Situation
Awareness Team monitored conditions and coordinated with
representatives from the Federal Energy Regulatory Commission,
the Department of Energy and the Department of Homeland
Security.
In addition to enforcing compliance with our mandatory
standards NERC has a rigorous program to analyze electric
system disturbances to determine what happened and root causes
to uncover lessons learned and to issue relevant findings to
industry as advisories, recommendations or essential actions.
On February 7, 2011 NERC announced that we examined the
bulk electric system performance during the extreme weather
conditions to determine the adequacy of preparations and
potential improvements.
On February 11, we issued a letter providing formal notice
of our intent to conduct an analysis and notified the
applicable registered entities to secure and maintain all
documents and data associated with the event. We plan to
determine the causes of various generation and transmission
issues that occurred on the bulk electric system and what steps
need to be taken to minimize the risk of these scenarios
occurring in the future. As warranted by our findings, NERC may
at some point open compliance enforcement proceedings in these
matters.
I'm most concerned that the industry has experienced cold
weather issues in the past. NERC will be evaluating what we can
do to ensure the institutional memory needed to avoid such
incidents in the future. For example, in January 2007 there was
a cold weather event impacting Arizona's Salt River Project.
Extreme cold weather, loads greater than forecasted and the
loss of 8 critical generating resources created a shortage.
In February 2006, Public Service Colorado experienced
electric generation plant failures due to the combination of
cold weather, high humidity and other mechanical issues. During
the event a total of 18 generators tripped off line or were
capacity limited.
In January 1994 an Arctic deep freeze hit the Midwest and
Mid Atlantic States. Utilities faced unusually high demands for
electricity and cold weather related problems with generators
and fuel supplies.
Although it is too early to conclude the causes of the
events of early February 2011, we need to ensure that our
electricity generation and delivery equipment are adequately
winterized to operate dependently when needed.
We will also be reviewing the impacts of interdependencies
between the electric system and natural gas supplies and
pipelines including the extent to which reduced gas supplies
may have impacted generator availability or the extent to which
rotating blackouts may have affected gas pipeline compressors.
Our review will be conducted in close coordination with FERC's
inquiry into these matters and our results will be made
available to FERC. FERC's review is much broader and includes
many areas beyond NERC's jurisdiction as you will hear from Mr.
McClelland.
NERC views the cold weather impacts of February 2011 as
significant. We are acutely aware of the impacts and
frustrations that occur when the electric system does not
provide a reliable service to end use customers. I am further
concerned that these issues are not new. Severe weather has
happened before and will happen again. We must ensure the
industry is learning and that institutional knowledge is
retained.
Thank you. I look forward to your questions.
[The prepared statement of Mr. Cauley follows:]
Prepared Statement of Gerry Cauley, President and Chief Executive
Officer, North American Electric Reliability Corporation
Good morning Chairman Bingaman, fellow panelists and those joining
us in the audience. My name is Gerry Cauley and I am the President and
CEO of the North American Electric Reliability Corporation (NERC). I am
a graduate of the U.S. Military Academy, a former officer in the U.S.
Army Corps of Engineers, and have more than 30 years experience in the
bulk power system industry, including service as a lead investigator of
the August 2003 Northeast blackout and coordinator of the NERC Y2K
program.
Background
NERC's mission is to ensure the reliability of the bulk power
system of North America and promote reliability excellence. NERC was
founded in 1968 to prevent cascading outages like the one that occurred
in November 1965 and overall to ensure reliability of the bulk power
system. The bulk power system is defined as generation and transmission
of electricity greater than 100kV, in contrast to the distribution of
electricity to homes and businesses at lower voltages.
In 2006, NERC was designated the Electric Reliability Organization
(ERO) by the Federal Energy Regulatory Commission (FERC) in accordance
with the Energy Policy Act of 2005, and NERC's reliability standards
were approved by FERC and became mandatory across the bulk power system
in mid-2007. In carrying out its activities, NERC works with and
through its regions and stakeholders, which include large and small
customers and state regulators in addition to investor-owned utilities,
municipal utilities, co-ops, independent generators, power marketers,
ISOs and RTOs, and federal entities like TVA, Bonneville and the
Western Area Power Administration. Equivalent entities from Canada are
also a part of NERC's stakeholders.
As part of NERC's mission to ensure the reliability of the bulk
power system in North America, NERC conducts detailed analyses of
system disturbances to determine root causes, uncover lessons learned,
and issue relevant findings as advisories, recommendations and
essential actions to the industry. Through the analysis by NERC and the
Regional Entities, possible violations of standards may be revealed. If
such violations are identified, they are addressed through NERC's
Compliance Monitoring and Enforcement Program.
The bulk power system in North America is one of the largest, most
complex, and most robust systems ever created by man. It provides
electricity to more than 334 million people, is capable of generating
more than 830 gigawatts of power, moves that electricity across more
than 211,000 miles of high voltage transmission lines and represents
more than $1 trillion in assets. The electricity being used in this
room right now is being generated and transmitted in real time over a
complex series of lines and stations from possibly as far away as
Montana or British Columbia.
The knowledge that disturbances on the grid can impact operations
and customers thousands of miles away has influenced the electric
industry's culture of coordinated planning, operations and protecting
the bulk power system.
NERC's event analysis process reviews numerous events that occur on
the bulk power system. These events can range from loss of a single
component to loss of large amounts of load or generation. The events
analysis process provides us with a path to learn from what happened
with the goal of sharing those lessons with others to prevent it from
happening again.
The key ingredients of an effective event analysis program are to:
Identify what transpired-sequence of events;
Understand the causes of events;
Identify and ensure timely implementation of corrective
actions;
Develop and disseminate recommendations and valuable lessons
learned to the industry to enhance operational performance and
avoid repeat events;
Develop the capability for integrating risk analysis into
the event analysis process; and
Distribute key results to facilitate enhancements in and
support of the various NERC programs and initiatives (e.g.,
performance metrics, standards, compliance monitoring and
enforcement, training and education, etc.)
As a learning organization, NERC's event analysis serves an
integral function of providing insight and guidance by identifying and
disseminating valuable information to users, owners, and operators of
the bulk power system that enable improved, enhanced and more reliable
operation. As such, event analysis is one of the pillars of a strong
ERO.
NERC's February 2011 Inquiry
Ice, snow, and extreme cold weather severely affected multiple
regional entities and multiple states in early February which led to
high customer demand for electricity and the significant unexpected
loss of generation capacity. As a result, operators issued Energy
Emergency Alerts (EEA), public appeals for reduction of electricity
use, and ultimately implemented extensive load shedding to maintain
grid reliability
Throughout the event, NERC's situation awareness group, in
coordination with the Regional Entities and reliability coordinators
who direct grid operations, received information on the current state
of reliability and the impact to the bulk power system in the affected
areas. This information was shared through established communication
processes with representatives from FERC, the Department of Energy
(DOE) and the Department of Homeland Security (DHS). On February 7,
2011, NERC announced it would examine the bulk power system impacts
from the recent extreme weather conditions to determine the adequacy of
preparations and potential improvements. On February 11, 2011 NERC
issued a letter providing formal notice of its intent to conduct an
Event Analysis on the preparation and performance of the system during
these cold weather events. As part of this notice, NERC requires
applicable registered entities impacted by the February event to secure
and maintain all documents and data associated with the event to
support the event analysis.
The NERC inquiry encompasses two efforts to meet both short-term
and long-term objectives related to the event.
The first is a formal analysis to identify the causes of the
various generation and transmission issues that occurred on the bulk
power system related to the February event, determine what steps need
to be taken, and communicate lessons learned from the event to minimize
the risk of these scenarios recurring in the future. The Texas
Reliability Entity, Inc., and the Western Electricity Coordinating
Council, along with affected entities and system operators, are already
working with NERC on analysis of the events. While controlled rotating
interruptions are deployed by system operators as a means to maintain
bulk power system reliability by providing adequate levels of operating
reserves, further review is underway to determine what happened in
these specific circumstances, and to identify lessons learned and
improve future operations.
Secondly, for a longer term outlook, NERC's Reliability Assessment
and Performance Analysis group will review the projected electric and
gas interdependencies and vulnerabilities given the shift toward
greater reliance on natural gas to produce electricity in certain
areas. This assessment will be a broad look at areas in North America
where extreme cold weather or loss of a major gas supply could impact
electricity production, review existing procedures for coordination
between planners and operators in both industries and input into NERC's
standards if needed. Building upon NERC's 2010/2011 Winter Reliability
Assessment, which noted the long-term outage of gas pipelines or import
paths could lead to the loss of significant amounts of generating
capacity, NERC will identify the reliability affects of gas/electricity
interdependencies through multiple scenarios, including extreme cold
weather scenarios, pipeline interruption, and overall vulnerability
identification across North America. Further, NERC will develop an
industry reference guide in coupled workings of the bulk power and
natural gas systems.
Past cold weather events
While the depth and pace of the severe cold temperatures were an
unusual event, cold weather events have occurred before. It is
important for the NERC analysis to review what was done correctly in
this event, as well as what can be improved upon so other users, owners
and operators of the bulk power system facing cold waves in the future
can learn from the impacts of this event. It is essential to identify
what changes can be made from a process-perspective to appropriately
anchor these learnings to preclude similar future events. For examples,
some past cold weather events include:
In January 2007, there was a cold weather event impacting
Arizona's Salt River Project SRP). The extreme cold weather,
loads greater than forecasted, and the loss of eight critical
generating resources forced adjacent control areas into a
``capacity limited'' condition. Backup generation failed to
start, which exacerbated the situation.
In February 2006, Public Service Colorado (PSCO) began to
experience electric generation plant failures due to the
combination of cold weather, high humidity and other mechanical
issues. During the event, 18 generators tripped off line or
were capacity limited. The controlled load shedding conducted
by PSCO involved approximately 100,000 customers for
approximately 30 minutes each.
In 1994, a major cold wave swept across the Midwest and Mid-
Atlantic states. Utilities were faced with unusually high
demands for electricity and cold weather related problems with
generators and fuel supplies. Two control areas had to resort
to manual curtailment of firm customers resulting in rotating
outages to ensure the reliability of the bulk power system.
Significant amounts of electricity were transferred to the
Midwest and East that were running short of generation
capacity.
Assembly of the basic facts, including load, resources, reserves,
generator availability, fuel supply and delivery problems, the
effectiveness of public appeals, curtailment of interruptible loads and
rotating outages were all reviewed. These issues resulted in
recommendations and lessons learned. In 1994, use of NERC's Operating
Criteria and Guidelines, along with industry's own practices and
procedures were found to contribute positively to the resolution of
this event.
This history is not presented as an exact comparison to what
occurred in February 2011. It is offered to emphasize a number of
questions that must be answered. We need to understand the unique
circumstances of the cold weather event that impacted much of New
Mexico and Texas, and determine why lessons from the past were either
unable to be applied or were not applied in this event. Were there
problems with the electric/gas interfaces? Why were coal plants
affected? Was this an issue solely about winterization of equipment?
Why was this not addressed? What was the timing? In answering these
questions, NERC will look at all regions affected by this event to
identify those steps that may not have been taken, as well as steps
that were taken to protect the reliability of the bulk power system.
NERC's Events Analysis Process
Working with teams in each of NERC's eight regions, NERC experts
have analyzed numerous events. System owners and operators are required
to report the occurrence of defined bulk power system disturbances and
unusual occurrences to the applicable Regional Entity and NERC in
accordance with various NERC and Regional reliability standards and
other requirements. Each of these standards specifies timeframes within
which initial and final Event Reports are required. Additional
reporting requirements may also be required.
Operators of the system, Regional Entities and NERC need to become
aware quickly of events and disturbances that take place throughout the
bulk power system. This `initial impression' information and insight
needs to be produced and delivered quickly and made available to
personnel with planning and operations responsibilities across the
system. This initial information sets forth a workable structure for
very short-term analyses and reports, which can be followed by more
intensive studies.
During the event triage process, NERC's events analysis staff and
the involved Region(s) collaboratively determined the appropriate level
of any event analysis that should be conducted. Most single-Region
analyses are conducted by the Regions or, for less significant events,
the registered entity with overview by the Region and NERC. Multi-
regional events such as this recent event fall under the direction of
NERC events analysis.
The ERO enterprise-wide event analysis program is based on the
recognition that bulk power system events that occur, or have the
potential to occur, have varying levels of significance. The manner in
which system owners and operators and NERC evaluate and process these
events is intended to reflect the significance of the event or specific
system conditions germane to the reliability of the bulk power system
and the circumstances involved.
The role of NERC and its coordination with other organizations
Numerous organizations have indicated their interest and concern
over the February 2011 events. As noted, NERC and the Regions review
these events, and have an established process for the analysis of the
event and the issuance of lessons learned. Successful event analysis
relies on effective coordination through which registered entities,
Regional Entities, and NERC work together to achieve a common goal. The
process requires clarity, certainty, and consistent adherence to
reliability principles by bulk power system operators that perform a
wide array of reliability functions.
FERC provides oversight and in most cases, closely participates in
these efforts, including whether aspects of those events constitute
possible violations of reliability standards. FERC and NERC have
different areas of responsibility. As the economic regulator, FERC has
the responsibility for wholesale electric markets and oversight of
interstate gas transmission as well as oversight of NERC for bulk power
system reliability. NERC's responsibilities are directly focused on
analysis of the specific system conditions and their impact to the
reliability on the bulk power system.
On February 14, FERC issued an order directing its staff to
initiate an inquiry into outages and disruptions of service in Texas
and the Southwest. The FERC order recognized the importance of NERC's
analysis and also FERC's jurisdiction under the Natural Gas Act and the
Natural Gas Policy Act. Per FERC's order, FERC's broader inquiry is to
be coordinated with NERC's efforts, as well as inquiries by affected
States. We expect the coordination of this process between FERC and
NERC will be similar to what was used for the 2003 Northeast blackout.
During that effort, FERC performed an inquiry; while NERC performed
events analysis and submitted it to FERC for their use as needed. Both
FERC and NERC share a commitment to ensure the reliability of the bulk
power system.
Conclusion
I want to reemphasize that NERC views the cold weather impacts of
February 2011 as significant. We are acutely aware of the impact and
frustration that occurs when the electric infrastructure does not
provide reliable service to end-use customers. While NERC is focused on
the impacts to the bulk power system, when events such as this occur on
a multi-state, multi-regional level, it is clear there are numerous
lessons to be learned. The events of February 2011 give me cause for
significant concern. These are not new issues. We've had severe weather
before. We must continue to ensure industry is learning from the past,
and must not allow institutional knowledge to fade. These issues must
be kept at the forefront.
The Chairman. Thank you very much.
Mr. McClelland, with the Federal Energy Regulatory
Commission, thank you for being here.
STATEMENT OF JOSEPH MCCLELLAND, DIRECTOR, OFFICE OF ELECTRIC
RELIABILITY, FEDERAL ENERGY REGULATORY COMMISSION
Mr. McClelland. Mr. Chairman, Senator Udall, Congressman
Lujan and Congressman Heinrich, thank you for this opportunity
to appear before you to discuss natural gas service disruptions
in New Mexico and the large scale disruptions of both electric
and natural gas services in the broader Southwest region of the
United States.
My name is Joe McClelland. I'm the Director of the Office
of Electric Reliability at the Federal Energy Regulatory
Commission. I'm accompanied here today by my colleague Jeff
Wright, Director of the Office of Energy Projects.
During the first week of February unusually cold weather
spread across much of the United States. For instance
temperatures were 20 degrees below normal throughout the
Southwest. Large parts of Texas experienced sub freezing
temperatures for 70 consecutive hours.
Deliveries of natural gas were disrupted in New Mexico,
Texas and elsewhere in the Southwest, the supply from the San
Juan and Permian Basins declining by as much as 33 percent.
Roughly 28,000 customers in New Mexico were without service
during this period. Approximately 19,000 customers lost
service, gas service in Arizona. In addition the power system
in Texas and Arizona experienced a loss or partial loss to as
many as 82 generating facilities during a period of high demand
for electricity from customers.
These outages and disruptions of service affected many
customers throughout the region. Approximately 1.5 million
electricity customers experienced an outage during this time.
When we were at the very early stages of data gathering
preliminary information from ERCOT indicates that within ERCOT
as many as 80 generating units tripped, could not start or loss
partial capability on February 2nd, including several large
coal fired units totaling approximately 4,800 megawatts.
Approximately 70 gas fired units totaling 9,200 megawatts and
an undetermined amount of wind and other sources.
Outside of ERCOT preliminary reports state that the El Paso
Electric lost several generating units which coupled with high
demand required the shedding of load of approximately 50 to 100
megawatts on several occasions. In total there were
approximately 350,000 customers out at varying times between
February 2nd and February 4th. Also on February 2nd, the loss
of several generating units in Arizona required rolling outages
affecting 65,000 customers.
In New Mexico 80 megawatts of generation was lost. Between
February 3rd and 4th the California Independent System Operator
had to reduce 1,000 megawatts of generation and initiate public
appeals for conservation in the Imperial Valley area. Although
no firm service electric customers were interrupted. It would
be premature at this time to make definitive statements about
the causes of the outages and disruptions in service. Although
the winterization of the generators, generation capacity and
fuel procurement and a gas pipeline scheduling arrangements are
certainly subjects of interest.
On February 14, 2011 the Commission initiated an inquiry
into these matters. The inquiry has 2 objectives.
First, the Commission seeks to identify the causes of the
disruptions.
Second, it seeks to identify any appropriate actions for
preventing a recurrence of these disruptions.
The Commission's priority at the moment is to gather the
relevant facts, identify the problems and fix them to the
extent possible. Under section 215 of the Federal Power Act the
Commission has oversight authority over the reliability of a
bulk power system through mandatory and forceful standards
developed by the Electric Reliability Organization which is the
North American Electric Reliability Corporation. As the ERO,
NERC independently initiated its own analysis of the problems
in the bulk power system relating to these events. The
Commission has broad responsibilities and authorities under the
Natural Gas Act and the Natural Gas Policy Act as well as
jurisdiction over the reliability of the bulk power system.
We plan to ascertain how disruptions or reductions in
service by natural gas pipelines as well as interruptions to
the bulk power system under our jurisdiction occurred. The task
force has invited NERC and its regional entities from Western
Electricity Coordinating Council and the Texas Regional entity
to participate in our efforts and hopes to be able to call upon
all of their resources during this inquiry. Similarly we
understand that the affected States have initiated or may
initiate their own inquiries.
The Commission recognizes that some of the natural gas
service disruptions and electric outages affected facilities
that are not within the Commission's jurisdiction. That is
disturbances on intrastate pipelines performing purely
intrastate service on natural gas or electric distribution
facilities which are within the State's authority. The
Commission staff task force will be most effective if it can
coordinate our efforts closely with the States and their
regulatory authorities and exchange relevant information. This
will enable all interested authorities to timely and
efficiently determine what went wrong and how to prevent a
returns.
In view of the wide ranging circumstances to the
disruptions to the bulk power system and to the provision of
natural gas described above, the Commission will designate a
staff task force to conduct this inquiry. A staff task force
has been directed to report its findings and recommendations to
the Commission as soon as practical. Once the Commission
receives this report the Commission will determine the
appropriate course of action to pursue.
Although I do not have enough information to state what
actions are recurrent to these problems today this will be a
primary objective of our initiative. Thank you again for the
opportunity to testify today. I would be happy to answer any
questions you might have.
[The prepared statement of Mr. McClelland follows:]
Prepared Statement of Joseph McClelland, Director, Office of Electric
Reliability, Federal Energy Regulatory Commission
Mr. Chairman and Members of the Committee:
Thank you for this opportunity to appear before you to discuss
natural gas service disruptions in New Mexico and the large-scale
disruptions of both electric and natural gas services in the broader
southwest region of the United States. My name is Joseph McClelland. I
am the Director of the Office of Electric Reliability (OER) of the
Federal Energy Regulatory Commission (FERC or Commission).
During the first week of February, unusually cold weather spread
across much of the United States. For instance, temperatures were 20
degrees below normal throughout the Southwest, and large parts of Texas
experienced sub-freezing temperatures for 70 consecutive hours.
Deliveries of natural gas were disrupted in New Mexico, Texas, and
elsewhere in the Southwest, with supply from the San Juan and Permian
basins declining by as much as 33 percent. Roughly 32,000 gas customers
in New Mexico were without service during this period. Approximately
19,000 gas customers lost gas service in Arizona.
In addition, the power system in Texas and Arizona experienced a
loss or partial loss of as many as 80 generating facilities during a
period of high demand for electricity from customers. These outages and
disruptions of service affected many customers throughout the region.
Approximately 1.5 million electricity customers experienced an outage
during this time.
While we are at the very early stages of data gathering,
preliminary information from ERCOT indicates that within ERCOT as many
as 80 generating units tripped, could not start, or lost partial
capability on February 2, including several large coal fired units
totaling approximately 4,800 MW, approximately 70 gas fired units
totaling 9,200 MW, and an undetermined amount of wind and other
sources.
Outside of ERCOT, preliminary reports state that El Paso Electric
lost several generating units which, coupled with high demand, required
the shedding of between 50-100 MW of firm load on several occasions. In
total, there were approximately 350,000 customers out at varying times
between February 2 and 4.
Also, on February 2, the loss of several generating units in
Arizona required rolling outages affecting 65,000 customers. In New
Mexico, 80 MW of generation was lost. Between February 3 and 4, the
California Independent System Operator had to reduce 1,000 MW of
generation and initiate public appeals for conservation in the Imperial
Valley area, although no firm-service electric customers were
interrupted.
It would be premature at this time to make definitive statements
about the causes of the outages and disruptions in service although the
winterization of the generators, generation capacity and fuel
procurement, and the gas pipeline scheduling arrangements are certainly
subjects of interest.
On February 14, 2011, the Commission initiated an inquiry into
these matters. The inquiry has two objectives. First, the Commission
seeks to identify the causes of the disruptions. Second, it seeks to
identify any appropriate actions for preventing a recurrence of these
disruptions. The Commission's priority at the moment is to gather the
relevant facts, identify the problems and fix them, to the extent
possible.
Under section 215 of the Federal Power Act, the Commission has
oversight authority over the reliability of the Bulk-Power System
through mandatory and enforceable reliability standards developed by
the Electric Reliability Organization (ERO), the North American
Electric Reliability Corporation (NERC). As the ERO, NERC independently
initiated its own analysis of the problems on the Bulk-Power System
relating to these events. The Commission has broad responsibilities and
authorities under the Natural Gas Act and the Natural Gas Policy Act,
as well as jurisdiction over effects on the reliability of the Bulk-
Power System. We plan to ascertain how disruptions or reductions in
service by natural gas pipelines as well as interruptions to the Bulk-
Power System under our jurisdiction occurred. The task force has
invited NERC and its regional entities, the Western Electricity
Coordinating Council and the Texas Regional Entity to participate in
our efforts and hopes to be able to call upon all of their resources in
our efforts.
Similarly, we understand that the affected states have initiated or
may initiate their own inquiries. The Commission recognizes that some
of the natural gas service disruptions and electric outages affected
facilities that are not within the Commission's jurisdiction, i.e.,
disturbances on intrastate pipelines performing purely intrastate
service or on natural gas or electric distribution facilities, which
are within the states' authority. The Commission's staff task force
will be most effective if it can coordinate our efforts closely with
the states and their regulatory authorities, and exchange relevant
information. This will enable all interested authorities to timely and
efficiently determine what went wrong and how to prevent a recurrence.
In view of the wide-ranging circumstances of the disruptions to the
Bulk-Power System and to the provision of natural gas described above,
the Commission will designate a staff task force to conduct this
inquiry. This staff task force has been directed to report its findings
and recommendations to the Commission as soon as practicable.
Once the Commission receives this report, the Commission will
determine the appropriate course of action(s) to pursue. Today,
however, I do not have enough information to state what actions would
help prevent a recurrence of these problems.
Thank you again for the opportunity to testify today. I would be
happy to answer any questions you may have.
The Chairman. Thank you very much. Thank you all for your
testimony. Let me start with a few questions and then refer to
Senator Udall for his questions.
One obvious question that is embedded in all that went on
here is the whole issue of to what extent did the failure of
gas supply here in New Mexico result from a loss of electrical
power in Texas?
To what extent did the loss of electrical power in Texas
result from a loss of gas production, I guess, in Texas or New
Mexico, in the San Juan Basin or the Permian Basin or anywhere
else? I don't know, Mr. Dumas, you might be the right person to
ask that question to.
As you understand the situation was--were the rolling
blackouts that you folks ordered in Texas a cause, approximate
cause, of the loss of natural gas here in New Mexico?
Mr. Dumas. I do not know the answer to that question. We
ordered firm load shedding that goes out to the wires companies
who have certain breakers that they open and certain loads that
they put on the rolling blackout. It's usually the rolling
blackouts are typically 20 to 30 minutes in length when they
rotate through your breakers.
I don't know what circuits are on those designated circuits
that they trip. To your earlier--well and I will say that the
outages that we ordered began at 5:44AM. We were able to end
those rolling blackouts at 1:07PM. So that was the timeframe.
I'm not familiar with the outages in New Mexico so I don't
know how those timeframes correspond, so.
The Chairman. So am I right that you, in the 7 and a half
hours that you had these rolling blackouts going in Texas, the
gas compressor stations that were dependent upon electricity
were in fact experiencing those blackouts?
Mr. Dumas. It is possible. I'm not familiar with the
Permian Basin area. I do know that we did receive some calls in
the Dallas area that there some compressors that had went off
and on call was working to restore those in that area. But I'm
not familiar with the Permian Basin area.
The Chairman. OK, let me ask the folks here representing
the 2 pipeline companies that are involved here. As I
understand what I think I heard from both of you. The
compressors that you folks own and operate were not in fact
impacted by the rolling blackouts.
Was that what you said or do you not know that?
Ms. Corman. No, that is correct, Chairman and Senator. We
did not experience any power outages on our compressors on the
Transwestern pipeline system. The folks that put the supply gas
into the pipeline, the processing plants, interconnected
facilities, they may have had power outages that influenced
their ability to put gas into the system. But we do not have
firsthand information about that.
The Chairman. Let me ask Mr. Dumas, just--and then I'll get
to El Paso. But I was asking about compressor stations. How
about processing plants? They're also subject to the blackouts
as you understand it?
They're not on any priority for avoiding blackouts in
Texas, is that right?
Mr. Dumas. I'm not aware of any priority there. The
priorities and like I said earlier, there's some guidelines
that are part of the Public Utilities Commission. Those
guidelines define critical circuits which tend to be more the
hospitals and the nursing homes and those types of circuits.
We reviewed that and gas compressors are not on that list
of critical circuits. So I think that's----
The Chairman. Gas compressors are not.
Mr. Dumas. Right.
The Chairman. Processing plants are not either as far as
you know.
Mr. Dumas. Far as I know they're not.
The Chairman. Yes. Let me ask about El Paso. Did you
experience any interruption of electrical service on any of the
facilities that you operate?
Ms. Parker. Mr. Chairman and Senator Udall, we did on a
handful of units. As far as we can tell and we're still
investigating it, it wasn't a result of any of the rolling
blackouts that the ERCOT organization initiated. We did have
some interruptions from El Pas Electric, EXCEL Energy and a
company called Continental.
The Chairman. These were interruptions to the power at your
compression stations?
Ms. Parker. Yes, sir.
All of our compressor stations are gas driven compressor
stations. But you have electricity to auxiliary equipment like
cooling fans or controls. At many of our compressor stations we
have gas fired back up generators in case things go down.
Unfortunately at one of our stations I know of our
generator was damaged through surges in the electricity because
the electricity was going off and on for a period of 2 days.
However I'll say with respect to our service, the outages were
fairly limited in nature and things that we could overcome
through our backup generators. What we primarily saw, and this
is anecdotal information we got through telephone calls to the
processing plants is that they were the primary parties
affected early in the morning of the second, either by El Paso
Electric's outages or the rolling blackouts.
We can't tell and don't have any firsthand knowledge which
of those were the electricity issues that then allowed freeze
ups to happen or it could have been just cold weather
mechanical issues.
The Chairman. But you believe that the interruption of
supply that you described for us earlier was gas coming from
the processing units. The processing units were affected by the
loss of electrical power. Is that what I'm understanding?
Ms. Parker. Yes, Mr. Chairman. That's what we understood
from the processing plants we talked to.
The Chairman. So you think there was a connection between
the loss of electrical power at the processing units and
processing plants and their ability to get gas to you for
delivery to New Mexico?
Ms. Parker. Yes, sir, Mr. Chairman, I do. Again that's
based on the plant communication, verbal communications to us,
not any analysis or in depth information that we have.
Unfortunately what happened and nobody knew the extent of
either the loss of electrical power to these processing plants,
when it was going to be restored, if it had been restored in a
few hours I think, you know, things would have been OK.
But unfortunately with the cold temperatures and the gas
just sitting in the line then they started becoming ice plugs
in the gathering lines. So when some of the processing plants
tried to come back up and we contacted them every few hours to
see what the status was of some of the bigger ones.
Unfortunately some of them couldn't come up for as much as 2
weeks because of damage they had. Some of them----
The Chairman. So they just came up in the last few days
you're describing?
Ms. Parker. A couple of them did, yes, sir. Some of them
were ready to come up within a day or so, but then the gas
freeze offs were worse and they didn't have any gas to put
through the plant. So it was a variety of combinations that we
heard of in our conversations with those plant operators.
The Chairman. Let me ask Transwestern. Did you have any
knowledge of this issue of some of the supply that you were
expecting or normally would get into your system was also
impeded by the fact that these processing plants didn't have
electrical power?
Ms. Corman. Yes.
Similarly to what El Paso stated we have notes and--of
records of telephone conversations and what not where we were
discussing with the processing plant why the gas wasn't coming
into the system. They would report that they had power
problems. But also they had problems with their equipment given
the cold temperatures.
I think the only other point that I would make is that on
the day of February 2nd, the supply shortfalls on our system
about half of it was in San Juan. Half of it was in the Permian
Basin, so certainly not all of the supply shortage related to
Texas power outages and weather conditions in Texas. Quite a
bit of it also related to weather conditions in the San Juan
Basin.
The Chairman. OK. The shortages or the supply disruption in
the San Juan Basin was not a result of any electrical failure
but was a result of just general cold weather? The processing
plants were not, are not equipped to handle cold weather.
Is that what you're saying?
Ms. Corman. I don't know the answer to that, Mr. Chairman.
I would only be speculating.
The Chairman. OK. Let me ask any of our other witnesses if
they have some wisdom to give us on any of these questions that
I've been asking questions about here?
Yes, go right ahead, Mr. Cauley.
Mr. Cauley. Chairman Bingaman, we're obviously are still
early in our data gathering and assessment and analysis. I
think there are many stories to be told in this one. I think
even the testimony this morning throws into question that the
preplanning in terms of the electric supplies to processing
plants and compressors.
However, most of the information that I have received to
date does not point to that as the primary culprit. Even though
it's a practice that we've known for many years, at least 10
years that I'm aware of, that we would give priority to gas
pipeline processing and compressors. But I think the primary
culprit from at least what I've heard initially is just purely
the cold weather affecting the auxiliary equipment at the power
plants as well as the well heads for the gas supply and as well
as the processing plants.
I think to some extent the electric and gas systems share a
lot of common features of pipes and tubes and equipment that's
exposed to the cold weather. It just throws into question what
weather that equipment was adequately winterized for the severe
temperatures that we saw. So at this point, for me, from a NERC
perspective, the jury is still out in terms of the actual
impacts between electric and gas.
If we haven't learned a lesson by now making sure that the
gas infrastructure has a high priority for electric supply than
I certainly intend to make that a priority coming out of this
incident.
The Chairman. Mr. McClelland, do you have anything to--and
let me just ask you to just address the issue of whether or
not--I mean, NERC has authority or responsibility for the
reliability of the electrical system in the country, the
electrical grid. Does FERC consider itself to be the agency
with responsibility for the reliability of the natural gas
distribution system in the country?
Mr. McClelland. Let me back up just for a second as far as
the relationship between FERC and NERC. NERC is the Electrical
Reliability Organization. FERC is the Regulatory Agency that
oversees NERC's efforts.
FERC also has 3 types of jurisdiction. It has original,
concurrent and also appellate. In this particular case, FERC is
exercising its original jurisdiction into the inquiry.
So we are using and coordinating with NERC and their
regional entities. But we're by no means stepping aside as far
as the electric reliability because it does tie to your
question. It does tie to the natural gas.
There were at this point it's very dangerous to draw
conclusions. But there are strong indications that as Mr.
Cauley mentioned, the winterization of plants, the electric
plants, was a culprit, but also the gas supply. So if for
instance in the Permian Basin and not in the San Juan Basin,
but in the Permian Basin if there were electrical outages and I
could see from the chart here that it does look like there were
facilities or there were pockets of generation that were
implicated in that basin.
If they affected the production then the line pack would
have been depleted. Supply would not have been put into the
line. That then affects the generator.
In some ways it's a vicious cycle because the generators
weren't winterized. They didn't startup the generators that
would have been starting up or called into action may not have
been able to start because of low gas supplies. Additional
generation may have been tripped off and was not a result of
the electrical interruptions in the Permian Basin.
That's an important question. My colleague, Mr. Wright may
have something to add to this. But he also passed a note to me
to explain that FERC does not have jurisdiction over the
processing plants. There are eight gas fields and 2 gathering
pipes and they are not FERC jurisdictional.
So the inquiry, the structure of the inquiry is
particularly important because we'll need the State's
assistance to pull information about those facilities.
The Chairman. So there is no Federal oversight or
regulatory authority over gas processing plants? Is that
correct?
Mr. McClelland. Yes.
The Chairman. Let me defer to Senator Udall for some
questions.
Senator Udall. Thank you, Senator Bingaman. That was an
excellent line of questions and I think very revealing there.
Mr. Schreiber, could you talk a little bit, I see at least
one of the mayors here and I know Governor Dasheno is here,
about the issues that they raised in terms of their
communities? They raised a number of questions about
notification and could this have been done better. People on
the ground, the first responders if they'd been told as early
as possible that they were going to have a 5-day/6 day loss of
natural gas they would have done things completely differently.
I think some of them feel, you know, why them? Why a
community in Questa? Why a community in Taos? Why the Santa
Clara Pueblo?
I think as I described to you at one point these are very
rural communities. It's very hard to locate individuals. The
gas company people, my understanding, were circulating asking
the street addresses.
Many of the places don't function on street addresses.
You'd have to have somebody that really knows and apparently
the actual natural gas meter people were someplace else. You
weren't utilizing the same people.
Then I think they also raised the question they offered
help. They had people in their community. I think the chamber
of commerce witness, many people were saying we want to help
you and their sense was you didn't need their help. So could
you try to answer some of those?
Mr. Schreiber. Yes, certainly. I think to start off on your
point on communication. We need to improve that. OK? Let me
start right there.
We did send out some notice early in the morning on
February 3rd. Obviously it wasn't extensive enough. Obviously
we did not have the right processes in place to have a blast
type of broadcast to emergency responders to local communities
to that kind of thing.
So that is very high on our agenda to be able to make sure
that we contact the local authorities, the local first
responders as well as the Governor's office and the State
resources to be able to get the word out as quickly as
possible. We were laboring under the assumption early in the
morning on February 3rd that we were going to get a second
delivery of gas. Now, that being said, we probably should have
been out and in more detail in touching all the bases that
needed to be touched.
We did get out in the--around 8:15 on the morning of
February 3rd to contact the Pueblo leadership. We had been out
the night before at about 3AM. The Otero County emergency
coordinator we had been contacting.
But during that timeframe when we thought we were going to
be getting gas. Hindsight is 20/20. As we look back we probably
should have been talking to other communities.
To your question as to why the communities and where we
curtailed and where we didn't. We basically had to move very
quickly. We basically had between 20 minutes and 30 minutes to
try to shed load.
We saw the pressure on the Taos main line which leads up to
the areas that was most affected. That the pressure at around
8AM or very shortly thereafter was dropping dramatically. We
had to act to see if we could shed load because we had to
stabilize the system.
In other words we had to put the amount of demand on the
system and the amount of supply we had to get them back into
equilibrium. Because what was happening at that point on the
morning of the 3rd was that demand was so extraordinary and the
gas was not coming in that we had to shed load. It is extremely
unfortunate that we had to do that.
It was probably the toughest decision our operating people
have ever had to make. But we had to find valves that we could
turn quickly to try and reduce that load. The 2,000 Bernalillo,
the one on the Taos main line we could get to within the
timeframe we needed to get to. Because what was in jeopardy was
a loss of the entire system.
As I said in my statement if we had lost the Bland to Santa
Fe corridor in addition to Bernalillo and Placitas we'd be re-
lighting people probably for the next month and a half. So what
we're trying to do is preserve as much as we could.
Senator Udall. Can I just stop you there for 1 minute?
Mr. Schreiber. Yes.
Senator Udall. In hindsight looking at it and looking at
what you know about these sparsely populated areas and the
ability of the people to go out and find and shut off and then
re-light and all of that. Is that the decision you had to make
was the decision for that area of Northern New Mexico along
that line or could have it been other areas that you could have
taken that action where it would have resulted in fewer people
without gas for that lengthy period of time?
Mr. Schreiber. Unfortunately the way the system is
currently designed and again this is what I mentioned in my
statement. We are looking at how we are better able to isolate
our system. OK?
The system that we had on February 1st, 2nd and 3rd did not
have isolation points in the urban areas where you could take
out a block quickly but then be able to re-light that block
quickly. When I'm talking about a block it might be, you know,
5,000 customers or 10,000 customers. So what we were faced with
with the system that we purchased that did not have the
isolation ability which would have been able to promote exactly
what you're suggesting.
We are looking at that right now. We are going to put in
valves around the system so that we are able to isolate other
parts of our system and not have to isolate like the valve on
the Taos main line which allows us to try and get the system in
balance at that point. So yes, we know that that is something
that needs to be addressed. That is definitely in our planning
as we look out forward to make sure that we minimize the amount
of re-light.
Senator Udall. How about this whole issue of offers of
assistance in that?
Mr. Schreiber. We've, as you know, and I think everybody
knows we have put together a relief fund. We are the only
utility that has done that. In any other outage whether
electrical or gas there has been no other utility that we've
been able to find to my understanding and the research that
we've done to this point that has ever done any kind of
voluntarily relief effort.
We are addressing this relief fund to those who were the
hardest hit. As you and I have spoken before, we are very
sensitive to the economic situation in the northern part of the
State. We know that for a lot of our customers if they get a
$50 or $100 plumbing bill that is a big deal. OK?
We had voluntarily tried to put money into this fund to
help those kinds of folks that are most in need.
Senator Udall. My understanding is that you've put in a
million dollars to try to take care of these personal and
individual losses. Is that correct?
Mr. Schreiber. That's correct.
Senator Udall. You have asked Transwestern and El Paso to
also match, each of them, to match you. Is that correct?
Mr. Schreiber. Yes. I think we have been asking. Yes, sir.
Senator Udall. Yes. The reason you're doing that is because
based on past kinds of situations you believe the amount will
actually be closer to $3 million than to $1 million.
Mr. Schreiber. We're getting the process going right now,
Senator. We have about 800 claims at this point. We're starting
to work through those.
We've already worked through--we had over 50 red tag
claims. In other words, when we got into re-light we found we
couldn't re-light. It was not safe.
So we sent on our own cost back into these 50 or 55. I'll
have to get the exact number for you. But it's in that
neighborhood. Licensed folks to go in, fix the appliance that
was unsafe so that the customer was back on line. We've already
taken care of that.
Yes, we're just, as I said, it's a relief fund that we're
trying to, you know, provide for the folks that really are the
most in need to help them try to get through this whole
situation.
Senator Udall. Now the chamber official raised the issue of
a small business that is not going to be covered by business
interruption insurance. Are you hearing that testimony today?
Are they going to be allowed to apply to this fund? If they can
show that they don't have insurance are they going to be able
to recover?
Mr. Schreiber. We have split the process into a residential
process and a commercial process. Yes, we will be accepting
claims from those people.
Senator Udall. I hope that Transwestern and El Paso would
be receptive to your appeals especially to match you in terms
of the dollars. Because as this moves along and you're not able
to satisfy the claims out there with the money that's up there
it would make sense to me to have them or others try to help
you help you out.
Now on offers of assistance and I'm going to turn back to
Senator Bingaman now. Others, the mayor said they offered you
also assistance in terms of re-lighting or anything like that.
Why didn't you take them up on that?
Mr. Schreiber. We tried to take up as much assistance as we
can. We had 1,100 folks on the ground in the re-light process
which included National Guard, local police, State police, fire
departments. Part of the issue is the safety requirements of
our business, Senator, dictate that the folks that are handling
meters, re-lights and those kinds of operations have to be
licensed and qualified to have been trained and the safety
requirements of our business say that that's a fact.
So while we had a whole lot of folks show up, we didn't
have licensed folks to pair them up with. I mean we had
licensed technicians in here, in the State of New Mexico from
ten different States. SUNCO Energy, our Michigan company sent
69 people down here to help on the re-light process.
But what we had to do is we tried to build on local
knowledge and match them up with our technicians to try and be
as productive and efficient as possible in this re-light. Did
we underestimate it? Yes, we did.
But I think, you know, while it is unacceptably long, there
is no question about that. We had a lot of folks that were
working 14, 16, 20 hour days. The 19,000, we've heard that it
was 15,000. But 19,000 gas customers that were out in Arizona
they were re-lit by Tuesday the 7th. Our 28,707 were re-lit
by--I mean on Monday. Our 28,000 were re-lit on Tuesday.
So we had a whole lot of folks that were working very hard
to get our customers back on because we knew what they were up
against. We were very sympathetic to that and we were trying
like the devil to get them back on.
Senator Udall. Thank you. I assume we're
Mr. Schreiber. Senator, could I just make----
Senator Udall. Yes, please.
Mr. Schreiber. OK. Just one comment and Ms. Parker
mentioned an electricity supplier named Continental, OK? It has
nothing to do with my business or New Mexico Gas. I don't know
who that Continental Company is, but it is not my company. I
just wanted the record to reflect that.
Thank you, Senator.
Senator Udall. Thank you. Thank you very much.
The Chairman. Let me ask a couple more questions. Then
Senator Udall, I think, has a few more as well.
You know we spent a lot of time in Washington talking about
the Strategic Petroleum Reserve. The obvious question is why
wasn't there more storage of natural gas available to deal with
this problem when the inadequate supply was coming into these
pipelines? Now you indicated that El Paso Natural had a storage
unit down by Carlsbad which is called Washington Ranch Storage
Facility?
Ms. Parker. Yes, Mr. Chairman.
The Chairman. But that's the only storage that I've heard
discussed here today. Let me ask does Transwestern have any
storage of natural gas that they could have brought on line to
deal with the shortfall of supply?
Ms. Corman. Mr. Chairman, Senator, Transwestern does not
own any gas storage facilities. We are interconnected with a
gas storage facility in Texas. In fact many of our customers
ordered gas from that storage facility during these winter
weather events.
However, that storage facility was one of the
underperforming supply locations on our system. Much of the gas
shortfall on the gas day of the 2nd and the 3rd of February was
because we were not getting the volumes out of the storage
field that we expected.
The Chairman. Let me just ask again from El Paso's point of
view. You had no problem getting gas out of your storage
facility. You just ran out of stored gas. Is that right?
Ms. Parker. We didn't have any problems, Mr. Chairman,
getting gas out of our storage field throughout the event. We
didn't run out of gas. There's always a maximum withdrawal
capability that the storage field is designed for. We ran at
the maximum every day until it----
The Chairman. So you were taking it out of your storage
facility as fast as you could.
Ms. Parker. Yes, sir.
The Chairman. But that was not enough to keep the gas
supply that you needed in your pipeline.
Ms. Parker. It wasn't enough to offset the shortfalls we
experienced in the Permian supply or the San Juan supply
completely.
The Chairman. Let me ask Mr. Schreiber. Just from a logical
point of view it would seem to me that a utility might consider
storage facilities for natural gas. Is that something that you
contemplated or is that not done by utilities or what's your
view on that?
Mr. Schreiber. No, Senator. It is done by utilities. In
fact, New Mexico Gas Company contracts with Chevron for 2.2
billion cubic feet of storage which is in the Permian Basin.
That storage was impacted on the morning of the 2nd of
February for about 3 hours. But then the----
The Chairman. By impacted you mean?
Mr. Schreiber. An electric shortage.
The Chairman. So they were unable to provide anything from
that storage facility.
Mr. Schreiber. Make a withdrawal, to withdraw. But then it
performed well after it got past the first rolling blackout. We
believe it was from El Paso Electric.
To your general question about storage for utilities. Yes,
it is something, in fact our sister company in Alaska is
investing in an 11 BCF storage facility. It's $180 million
investment.
One of the things that we're going to be doing in New
Mexico Gas is looking to see if there is geology available in
the State of New Mexico, like a depleted reservoir or a salt
dome formation where we could create, own and operate our own
storage facility depending on, you know, for just these kinds
of circumstances.
The Chairman. Alright. Let me call on Senator Udall for any
additional questions he has.
Senator Udall. I would want to turn to our 2 witnesses with
NERC and FERC. Ask the issue here and I think Senator
Bingaman's done a very good job in his questioning of
emphasizing reliability and reliability of the system. We all
know from the witnesses we've heard here today how important it
is to have reliability.
If the system fails we hurt business. We hurt small
business. We hurt people, the disabled people and you know, you
heard all of the stories.
What, from what you have heard today at the testimony. I
don't want to get into your investigations and where you're
headed. But I think Mr. McClelland you talked a little bit
about things that needed to be looked at.
From the testimony today what does this tell you about
reliability? What does this say about what we need to do in
terms of the system? Should there be new Federal reliability
standards to cover the interdependency of electricity in the
natural gas supply infrastructure?
Mr. McClelland. I think from the testimony I heard today I
didn't hear that the electric compressors on the pipelines were
impacted. That's not really a surprise. That seemed to be what
was coming back to us from preliminary information.
I also heard somewhat of a validation that the Permian
Basin was impacted by the blackouts or by electrical outages or
maybe perhaps winterization of the facilities themselves, lack
of winterization that caused gas production to decline.
Prior to that and it's something that Mr. Cauley made the
point about and I'll second again here is that the
winterization of the electric generation facilities is of
particular importance. There were scheduled outages of about
12,000 megawatts, but there were forced outages in excess of,
well, there was about 4,000 megawatts of coal fired power
plants for instance that were out and 9,000 megawatts of gas
powered facilities that were out. The primary causes that we're
hearing at this point were not because of gas shortages. They
were because of lack of winterization.
There are--I'm sorry.
Senator Udall. Yes. No, just to stop you a second.
When you say winterization we mean something as simple as
with the outage being caused by a pipe bursting and not having
thermal tape on that pipe because if you'd had thermal tape or
something along that line, the pipe would have been able to
continue to function. You would have been able to then get the
electricity out that was needed. Simple things like that,
right?
Mr. McClelland. That's exactly correct.
Senator Udall. Yes.
Mr. McClelland. Typically I mean, I asked staff to put
together a dirty dozen of the winterization items that we know
at this time. We fell short on time. We have about 9 right now.
But it is primarily water systems, you know, the systems
that pipe water and then a lack of insulation or heat tape or,
you know, some sort of anti-freezing mechanism associated with
it. So we saw failures of the power plants in mass. Those
failures may have then impacted the Permian Basin which then
impacted the line pack which then impacted the gas pressure and
the downstream results where it interrupted customers, those
distribution customers.
There are winterization requirements and standards. They're
not specific, but they're there. So one of the places that we
will look at what did the folks and how did they interpret
those standards. What winterization measures did they take?
Another important point and it's in Mr. Cauley's testimony.
I'll point this out as we move toward single source fuel
dependency and Mr. Chairman, you touched on this when you spoke
of the storage facilities. But as we move toward single source
fuel dependency for these electric generators once they're
onsite storage mechanism if they're bidding firm power into the
market, but they're buying interruptible gas is it really firm
power?
If they need the firm power perhaps they should have onsite
storage. Perhaps there should be distillate onsite, 3 day
supply of distillate dual fuel facilities in order to
facilitate continuance of operation, a continuity of operation
to keep the natural gas supply from interrupting. So there's a
lot of pieces at this point.
I'm not here to draw conclusions. Happily answer any of the
pieces at this time. I think what we really need to do is get
the comprehensive inquiry.
It needs to span more than the electric and more than gas.
It needs to explore the interdependencies. It needs to look at
what the communication protocols were, what the arrangements
were for buying the natural gas.
Was it bought in interruptible basis or was bought on a
firm basis? Then how did that transpire the next day? What were
the root causes of the interruptions? Who affected who as we
move down the line for this interruption?
Mr. Cauley may want to add to this.
Mr. Cauley. Senator Udall, I would concur with Mr.
McClelland's response.
The 2 things I take away principally the first being the
winterization of equipment. When we bring in a lot of new
generation and looking at competitive markets, winterizing a
plant is probably one of the places where you can save money
and be more efficient cost wise. But in my view it's a low cost
thing that can be done to the plant to assure that it's
available during extreme cold weather. So I think we'll be
looking at that. I would extent that beyond just the electrical
plants though to the gas well heads and refineries and the
storage to ensure that all essential infrastructure performed
in extreme cold weather.
The second issue which has been raised which is clear is
the interdependency. There may be an opportunity to improve our
standards in that area to obviously the practice has been well
known for a number of years. But evidently there's an
opportunity to do much better in terms of assuring that we
don't cutoff electrical supply to processing plants and storage
facilities.
Senator Udall. Thank you very much. Just one additional
question to Mr. Schreiber.
Mr. Schreiber, you mentioned in your testimony I think on
page 2 you're talking about once in a 50 year event, I believe
and a winter storm of historic proportions. Then on the next
page you talk about half way down that you routinely, the New
Mexico Gas Company, routinely monitors long and short term
weather forecasts. I assume as part of that that you're
monitoring what all the scientists are telling us in terms of
climate change that we are going to get more severe winter
incidents in the future.
Is that correct? Is that something you're also looking at?
I mean because we've had here in New Mexico over 100, you know,
100 year events in terms of floods, catastrophic fires that
people that have been looking at forest fires for 30, 40 years
say we've never seen anything like this.
I would assume in this situation, the winter weather, where
from what the scientists are telling us we're going to see
things like that. Is that something you're looking at in terms
of these short term and long term weather forecasts and putting
that into the equation?
Mr. Schreiber. I'm afraid, Senator, we're a little more
myopic than that, you know. We're not at this point as
concerned of the impact of the global climate change on our
delivery weather. When I say long term, you know we may be
looking out a month or 2 and trying to determine whether La
Nina--and now I'm getting into things I don't really know a
whole lot about but the La Ninas and El Ninos and all that
business and how it's going to impact weather patterns.
Then on a short term basis, as I said, January 30/31 we
were studying that storm. We could see that this storm was
going to be something like we haven't seen in a long, long
time. But in terms of the huge picture of global climate
change, you know, we don't, you know, individually I'm sure
some of my colleagues do and I do. But we're much more focused
on how we're going to keep 500,000 customers with gas in their
homes when they most need it, so.
Senator Udall. I want you to do that. But I think what
scientists are telling us is that, you know, this 50 year
event, we may see 50 year events much more frequently.
Mr. Schreiber. Right.
Senator Udall. We want the system, as I was talking to
these gentlemen here to be reliable in those kinds of
circumstances. That's really the point, I think.
Mr. Schreiber. Right.
From a business point of view, Senator, we are doing that.
We are looking at storage. We're looking at propane air. We're
looking at possibly LNG. We're looking at other ways that we
can provide greater operational capability to minimize the
risks that we have in delivering gas. So that is all part of
the equation. If the weather is going to be much more volatile
and much more extreme we're going to have to start planning our
businesses to be able to undertake, to operate in those kinds
of conditions.
Now I will also tell you that if we were to have the system
capable of withstanding the kind of event that occurred there
on the first of February, you are talking about millions and
millions of dollars of capital expenditures to get the system
to where we had redundancies in pipelines, where we had storage
facilities, where we had more valves, where we had more supply,
you know. It would be a huge undertaking on the part of New
Mexico Gas to try and get the risk down to zero on that kind of
event. So there is judgment on what our plant and our
operations need to be to withstand those kinds of storms. We
thought we were in pretty good shape. But we couldn't get the
gas.
Senator Udall. Thank you to all the witnesses.
The Chairman. Let me just ask one other question.
Now Mr. Dumas, you were, as you're well aware, whenever
there's a crisis people try to use it to make a point that they
were trying to make before the crisis occurred. One of the
allegations that I heard right after the rolling blackouts
occurred in Texas was that the EPA regulations were what were
causing these rolling blackouts. That generators were not able
to generate power as they would otherwise be generating it
because of excessive regulation by the Environmental Protection
Agency. Is there anything to that?
Mr. Dumas. No, Mr. Chairman, we didn't see any evidence of
that being a factor. All the planned outages so far that the
reports that we've gotten are related to frozen instrumentation
and weather related.
The Chairman. Let me ask one other question. There was also
an allegation thrown around that Texas' heavy reliance on wind
energy generation was part of the problem here. That if Texas
just didn't have so many wind farms there wouldn't have been
any problem.
Have you analyzed that?
Mr. Dumas. We have, Mr. Chairman. Wind was actually
producing pretty well during this event. I have a chart and I
regret that I didn't put it in the presentation, but I'd be
glad to give you a copy.
It produced between 3,000 and 2,500 throughout the event.
The Chairman. So rather than being part of the problem it
was trying to help avoid the problem? Is that what you're
saying?
Mr. Dumas. It was producing very close to the expected
forecast for wind. So the megawatts that it produced were
utilized during the capacity shortage situation. So it
performed pretty well during this event.
The Chairman. Alright. I appreciate that, and I appreciate
all of you testifying.
I think it's been a useful hearing. It's gotten a lot of
questions raised. Obviously we don't have the answers to the
questions, but I'm encouraged by the fact that we have some
studies and investigations going forward and we look forward to
the results of those.
We look forward to putting in place the procedures and
precautions to prevent this from ever happening again. So thank
you all very much. That will conclude our hearing.
[Whereupon, at 12:57 p.m. the hearing was adjourned.]
[The following statement was received for the record.]
Statement of David W. Stevens, Chief Executive Officer, El Paso
Electric Company
Chairman Bingaman and Senator Udall, thank you for the opportunity
to submit a written statement to the Committee on behalf of El Paso
Electric Company (EPE). My name is David Stevens, and I am the Chief
Executive Officer of EPE.
EPE is a vertically integrated electric utility that provides
electric service to parts of far west Texas and southern New Mexico.
EPE is one of three investor-owned utilities providing electric service
in the State of New Mexico. EPE operates within the southwestern corner
of the Western Electricity Coordinating Council (WECC), a regional
reliability entity of the North American Electric Reliability
Corporation (NERC). In light of the heat typically experienced in this
part of the nation, EPE, like its neighboring electric utilities, is a
summer-peaking utility.
For the Committee, I would like to address the series of abnormal
weather events that occurred in this part of the country during the
first week of February 2011, the impact of those events on EPE, and
EPE's response to those events. By way of overview, it appears this
weather event was the worst in at least 45 years. Based upon the
information known at this time, the phenomenally cold weather (over 60
continuous hours at temperatures below 18 degrees Fahrenheit) and
severe wind effects negatively impacted a generation fleet that is
primarily designed to withstand excruciating summer temperatures, and
not prolonged subfreezing temperatures in the low teens and single
digits. Like those of EPE, many generating plants in Texas, New Mexico,
Arizona, and in the northern Mexican cities of Juarez and Chihuahua
(our neighbors to the south), experienced difficulties with generation.
To maintain system stability, EPE was required to undertake controlled
load shedding during peak usage times to help compensate for the loss
of our local generation. Fortunately, the weather did not cause any
loss in transmission. Our backbone 345 kV transmission system, which
connects us to our remote generation in Arizona (Palo Verde) and New
Mexico (Four Corners) and to the rest of WECC, weathered the storm
without incident, thereby allowing us to maintain system integrity
throughout this unprecedented severe weather event.
Although EPE is a summer-peaking utility, each year EPE winterizes
its generating plants prior to the beginning of the winter season. This
winterization process encompasses, among other things, verifying that
heat tracing and heat strips are properly functioning as well as making
sure that insulation is properly installed at all of EPE's local
generation facilities. EPE also verifies that equipment in its
substations, the element of the transmission and distribution systems
historically most susceptible to cold temperature extremes, can
withstand projected winter temperatures. During the final weekend of
January 2011, EPE was monitoring the actual weather and the forecast,
as is our standard procedure. The weather forecast indicated
significantly colder weather than normal for this time of year. Thus,
on January 31, 2011, prior to the onset of this weather event, EPE
initiated its severe weather preparations, which included verifying
winterization of generation and identification of transmission and
distribution facilities that could be impacted by ice and high wind
loading; reviewing system operations plans; contacting the operator of
EPE's Palo Verde generating facility to make sure the units were not
experiencing any issues; reviewing the availability of natural gas for
use in our gas-fired generating facilities; preparing for potential
constraints in the gas pipelines that serve EPE; and putting employees
on call as needed during the weather event. EPE's System Operations
group requested that EPE's Power Marketing & Fuels group keep
additional generation on-line. The Power Marketing & Fuels group
complied with that request as early as January 31 for projected loads
for Wednesday, February 2, when the anticipated severe weather was
forecasted to begin. In addition, they contacted natural gas pipeline
personnel at El Paso Natural Gas (EPNG)\1\ and WesTex Gas (Westex) for
status updates of their efforts to maximize line-pack in their
pipelines in preparation for cold weather. On Monday, the operator at
EPE's Newman generating plant was told to prepare for the possible need
to burn fuel oil in the event natural gas supply was interrupted. We
also increased natural gas nominations on the Westex pipeline, as a
back-up measure, to ensure sufficient supply and pipeline pressure in
the event of EPNG gas curtailments. On Monday, EPE personnel developed
plans to procure daily natural gas from Keystone and Waha basins to
avoid potential curtailments due to wellhead freezes in the San Juan
basin.
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\1\ Despite the similarity in names, El Paso Electric Company and
El Paso Natural Gas Company are not, and have never been, affiliated.
---------------------------------------------------------------------------
Unfortunately, not only did the temperature drop to record levels
and much lower than forecasted on January 31, but the wind was blowing
at average speeds of 10 to 20 mph, with wind gusts at much higher
speeds, creating very low wind chills--and hazardous conditions for the
employees working outside. The strong wind rapidly dissipated heat
around key power plant components and accelerated the temperature drop
of those components. Because of our climate, most generating plants in
this region, including those in EPE's service territory, are not
enclosed and are designed primarily to withstand extremely hot summer
temperatures but not extreme levels of sustained subfreezing
temperatures. Thus, as the temperature rapidly fell into subfreezing
levels, equipment at our generation facilities began to freeze. Not
only did critical water lines freeze, but instrumentation that controls
the generation froze as well. Facing wind chills as low as minus 17
degrees and battling single digit temperatures and harsh wind, EPE's
employees worked around the clock during the entire event in an effort
to thaw and repair equipment and to bring the generation plants back
on-line. Yet, the success of thawing one piece of equipment was met
with the freezing of another component. Even the backhoes needed to dig
out broken pipes would not operate because their hydraulic components
were frozen.
During the afternoon and evening of February 1, the weather
deteriorated significantly, with temperatures dropping from 31 degrees
at 4 p.m. to 18 degrees at 10 p.m. Temperatures remained below 18
degrees for the next two and a half days, with a low temperature of 1
degree recorded on February 3, 2011, and 3 degrees on February 4, 2011.
The maximum air temperature of only 15 degrees on February 2, 2011, was
the coldest maximum (high) temperature ever recorded in our service
territory. Records were set on February 2, 3 and 4. The low temperature
each of those days was the lowest temperature ever recorded in our
region on that particular day in El Paso and southern New Mexico
history.
As a result of the almost unprecedented conditions, EPE lost most
of its local generation fleet over a period of hours beginning Tuesday
evening and into early Wednesday, thereby reducing EPE's load-serving
capability. EPE did have approximately 55 MW of local generation from
its combustion turbine, Copper (63 MW rated capacity), running
throughout the severe weather event and even during the worst portion
of the weather. Copper, combined with purchases from generation
resources in south-central and southwestern New Mexico, provided
dynamic reactive voltage support. That voltage support made it possible
for EPE to import power for delivery over its 345 kV transmission
system--most notably, power from EPE's remote generation at Palo Verde
and Four Corners--and to successfully maintain system integrity.
On February 2, 2011, EPNG issued an Operational Flow Order (OFO)
for an Emergency Critical Operating Condition (COC). The OFO was issued
to direct EPNG customers to stop taking more gas off of the pipelines
than they had scheduled. EPE had properly maintained its natural gas
schedules on EPNG's pipeline in the event local generation was returned
to operation. Thus, with the weather's continued impact on EPE's local
generation, EPNG was able to make use of the approximately 130,000
MMBtu of natural gas in the pipeline from February 2 through the end of
the COC on February 5. If EPE's local generation had remained
operational and able to burn natural gas throughout the severe weather,
EPE would not have been able to provide this benefit to the pipeline.
On Wednesday, our Power Marketing & Fuels group directed a portion
of EPE's natural gas supply to Tri-State's Pyramid generating station
to replace Tri-State's fuel oil supply that was being used to produce
energy for delivery to EPE. We also communicated closely with Texas Gas
Service and made arrangements in the event EPE needed to supply natural
gas to Texas Gas Service on an emergency basis. We worked with Public
Service Company of New Mexico (PNM) to implement a natural gas
agreement so that, if needed, natural gas could be directed to PNM's
Afton and Luna generating stations.
During February 2 and 3, and part of February 4, EPE continued to
struggle against extreme weather conditions to return more local
generation to service. EPE employees and contractors, working in
extraordinarily harsh weather conditions, sought to protect critical
equipment and sensors from freezing by working throughout the emergency
to thaw out and repair the frozen equipment and sensors.
When it became apparent that the Company's local generation would
not be quickly returned to service, and as load increased coincident
with peak usage, we began to reduce load in order to maintain system
stability. First, we curtailed our interruptible customers who, as part
of their contract with us and in exchange for a lower rate, allow EPE
to interrupt them for up to a certain number of hours per year. In
addition, between the hours of 7 a.m. to 12 p.m. and 6 p.m. to 10 p.m.
on February 2, 5:30 p.m. to 10:30 p.m. on February 3, and 6:30 a.m. to
12 p.m. on February 4, the Company executed controlled load shedding to
further reduce the strain on the system and to help protect the health
and safety of our customers and avoid the risk of system collapse. This
was undertaken consistent with EPE's Electric Service Emergency
Operations Plan (Plan).
EPE's Plan was adopted to comply with the Public Utility Commission
of Texas (PUCT), Substantive Rule (SR) Sec. 25.53, Electric Service
Emergency Plans. The PUCT rules define, among other things, ``critical
loads.'' These are loads that are considered crucial for the protection
or maintenance of public health and safety, including, for example,
hospitals and fire stations. The PUCT rules require electric utilities
such as EPE to maintain a registry of such critical loads and customers
and to have emergency load shedding procedures, which EPE had in place
and executed in this instance. EPE's Plan is on file with the PUCT.
Pursuant to the Plan, EPE updates its registry of critical loads as
needed and at least annually. EPE applies its Plan to its entire system
in Texas and New Mexico.
Consistent with federal and state reliability regulations and to
preserve the integrity of its system, EPE maintains the capability to
manually drop customer loads. This is done at a ``feeder level'' and
the number of customers dropped at any given time depends on how many
are served from the feeder. (The granularity required to drop
individual customers is not available on EPE's system.) Customer load
shedding occurs during Emergency Conditions only after other measures
have been attempted or completed.
EPE's manual load shedding protocol is designed so that electrical
feeders are grouped into 35 ``blocks'' that contain about 50 MW of load
based on summer peak demand. EPE's System Operations Department
utilizes pre-defined and prioritized protocols to shed load blocks in a
controlled manner, beginning with the first group and then rotating
into the next group, and so on, where feasible. When the system is
operating at its limit, and all other authorized avenues of relief have
been utilized, shedding customer load is a last resort to avoid a more
severe and widespread disturbance. The goal of controlled load shedding
is to keep the entire electrical system stable so that it does not go
into an uncontrolled blackout under the loss of a critical transmission
element.
EPE's Plan contains a list not only of the critical load customers
but also of what feeders serve them. There are currently 109 such
feeders, up from 85 in 2008. Feeders that are identified as serving a
critical loads are given high block numbers (blocks 18 and above.) This
list of feeders and customers has been developed, refined and updated
over the years to identify (and to add to or replace) those customers
for whom continued service is considered crucial to the maintenance of
public health and safety. There are five general categories of such
customers: Hospitals, Dialysis Centers, Radio and TV Stations, certain
Government Agencies (for example, fire departments, police dispatchers,
airports, prisons), and certain Water Utility Stations and Plants.
Other customers can contact the Company if they believe they qualify
for treatment as ``critical'' to the maintenance of public safety.\2\
For example, an industrial customer might qualify as a critical load
customer under the PUCT's rules if it could show that an interruption
would create a dangerous or life-threatening condition on the
customer's premises. A review of our records reveals no request made by
a natural gas pipeline or utility for a facility in our service
territory to be classified as critical load. Thus, none were classified
as such.
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\2\ Even though EPE has placed these critical facilities at the
bottom of the manual load shedding list, they will be shed if required
by the severity of the Emergency Conditions.
---------------------------------------------------------------------------
During emergency conditions, blocks number 1 through 17 will each
be dropped by EPE System Controllers in a rotating fashion for about an
hour or less at a time to lower and balance the load on EPE's system
and enhance the stability and security of the entire EPE system. In
carrying out the controlled load shed, EPE operators cycle the areas
being dropped across the EPE system to minimize the overall impact on
individual customers. This controlled load shedding is done (and was
done during this severe weather event) on a non-discriminatory basis
across the entire system in both New Mexico and Texas, with the
exception of those circuits identified as containing critical
customers. On February 4, EPE was able to return 300 MWs of generation
to service and eliminate all controlled load shedding. On February 5,
the Company was able to allow most customers that are served on
interruptible rates to return to their normal operations, and all such
customers were allowed to return to their normal operations by February
6.
As a result of the advance planning of the various EPE departments,
and the effort and extraordinary support of EPE employees and
contractors, as well as the cooperation of public and private
organizations, businesses and individuals, EPE was able to maintain
system integrity by using our transmission lines connecting us to the
rest of WECC to bring in power from EPE's own remotely located
generation as well as purchased power. The Company received tremendous
cooperation from all of our neighbors including, but not limited to,
PNM, Southwestern Public Service Company (SPS), Arizona Public Service
Company (APS), Tri-State Generation & Transmission, and Tucson Electric
Power Company (TEP). In addition to these parties, WECC, the States of
New Mexico and Texas, and all of our counties and cities quickly
mobilized as requested to assist EPE and our customers. Working through
the various emergency management systems and the media, we were able to
communicate with the various constituencies.
We understand the concern from the Committee, regulators, the
public, and our customers. Clearly, we never want to interrupt electric
service to a customer when it can be avoided. On this occasion, we
fortunately were able to maintain the integrity and stability of the
electrical system so that any disruptions due to events beyond EPE's
control, and resultant public safety impacts, were minimized.
Nonetheless, EPE is committed to finding out what we and the industry
can learn from this unprecedented weather event.
Chairman Bingaman and Senator Udall, these are the chain of events
that occurred. Our purpose in the near-term is to address what actions
we can take in the future to minimize such impacts to our customers
when such severe weather occurs.
APPENDIX
Responses to Additional Questions
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Responses of Joseph McClelland to Questions From Senator Bingaman
Question 1. NERC was designated the Electric Reliability
Organization (ERO) by the FERC in accordance with the Energy Policy Act
of 2005. In that role, NERC works with all stakeholder segments of the
electric industry to develop standards for reliability planning and
reliable operation of the bulk power systems. Are there similar
standards applicable to reliability planning and reliable operation of
the interstate natural gas pipelines? If not, how is reliability
planning and reliable operation of the interstate natural gas pipelines
established and by whom?
Answer. In the Energy Policy Act of 2005 (EPAct 2005), Congress
conveyed a major new responsibility to oversee mandatory, enforceable
reliability standards for the Nation's bulk power system (excluding
Alaska and Hawaii). This authority is in section 215 of the Federal
Power Act (FPA). Section 215 requires the Commission to select an
Electric Reliability Organization (ERO) that is responsible for
proposing, for Commission review and approval, reliability standards or
modifications to existing reliability standards to help protect and
improve the reliability of the Nation's bulk power system. The
Commission has certified the North American Electric Reliability Corp.
(NERC) as the ERO. The reliability standards apply to the users, owners
and operators of the bulk power system and become mandatory in the
United States only after Commission approval.
The Commission may approve proposed reliability standards or
modifications to previously approved standards if it finds them ``just,
reasonable, not unduly discriminatory or preferential, and in the
public interest.'' The Commission itself does not have authority to
modify proposed standards. Rather, if the Commission disapproves a
proposed standard or modification, section 215 requires the Commission
to remand it to the ERO for further consideration. The Commission, upon
its own motion or upon complaint, may direct the ERO to submit a
proposed standard or modification on a specific matter but it does not
have the authority to modify or author a standard and must depend upon
the ERO to do so.
Currently, the Commission's jurisdiction and reliability authority
is limited to the ``bulk power system,'' as defined in the FPA. This
term excludes facilities used for local distribution as well as any
facilities located in Alaska and Hawaii. The interpretation of ``bulk
power system'' in effect at this time also excludes certain
transmission facilities. Under this interpretation, the ``bulk power
system'' excludes virtually all of the grid facilities in certain large
cities such as New York, thus precluding Commission action to mitigate
cyber or other national security threats to reliability that involve
such facilities and major population areas.
In contrast, the interstate natural gas pipeline industry that is
under FERC's jurisdiction does not have a reliability organization that
is similar to the ERO. The industry does, however, have the North
American Energy Standards Board (NAESB) which develops certain
industry-wide standards for the interstate natural gas pipeline
industry, but those standards mostly pertain to business practices such
as nominations, scheduling, penalties, billing, capacity release, and
what information needs to be posted on a pipeline's electronic bulletin
board. These standards must be approved by the Commission and are then
incorporated by reference into the Commission's regulations governing
jurisdictional gas pipeline tariffs. The tariffs are only applicable to
those entities that engage in jurisdictional transactions covered by
these tariffs.
For the interstate pipeline system, we rely primarily on the
experience and expertise of pipeline operators to maintain and manage
their pipelines in a manner that will promote system reliability for
the customers. The pipelines determine what facilities are required to
serve their customers, and they decide when a facility needs repair or
upgrade.
Although FERC does not directly oversee pipeline reliability as it
does for the bulk electric system, it does promote system reliability
through its oversight of interstate pipeline tariffs and service
agreements. Each interstate pipeline under FERC's jurisdiction operates
under a FERC-approved open access tariff, which is a document that
delineates what services the pipeline offers, what rates it may charge,
and other operational parameters. Under Part 284 of the Commission's
regulations, interstate pipelines are required to offer both firm
transportation and interruptible transportation services. Together the
pipeline tariffs and service agreements delineate the limits ofeach
shipper's service as well as their mutual rights and obligations. The
numerous terms and conditions of service set forth in a pipeline's
tariff are implemented to assure a reliable service to the shipper.
These include scheduling requirements, the establishment of hourly flow
restrictions and implementation of operational procedures should system
integrity of a pipeline be compromised. These terms and conditions of
service are necessary because the pipelines do not own the natural gas
they transport, and to the extent a shipper violates these terms and
conditions, it can have service implications for the pipeline's other
shippers. In a sense, even though FERC does not have direct
jurisdiction over system reliability for interstate gas pipelines, it
regulates and oversees pipeline tariffs and service agreements in a
manner that promotes system reliability.
Question 2. Are there any regulatory requirements that direct
communications between interstate gas pipeline operators, natural gas
processing facilities and the ultimate recipients of natural gas
shipments?
Answer. Yes, certain regulations require or govern communications
between these entities. As stated above, NAESB is a non-profit
standards development organization that serves as an industry forum for
the development of business practice standards. NAESB has developed a
number of business practice standards that the Commission has
incorporated by reference into its regulations, thus making compliance
with these standards an enforceable and mandatory Commission
requirement for jurisdictional transportation service under the gas
pipeline tariffs. NAESB has established standards for interstate
natural gas pipeline business practices and electronic communications
and has periodically updated the standards. The currently effective
version is 1.9, which the Commission incorporated by reference in May
2010.
The NAESB business practice standards establish uniform practices
and standards governing the format and content of communications
between the pipelines, producers, and wholesale gas customers. While
the standards apply only to pipelines, they, of course, control the
communications from the pipelines to all parties. For example, the
standards contain a dictionary of terms, and prescribe how gas is
nominated for transportation and delivery, including timeframes for
nominations, confirmations, responses and scheduling. They also
prescribe information to be posted on gas quality, billing, delivery
mechanisms, and capacity releases. In addition, NAESB has adopted
specific standards regarding communications between the pipelines and
electric transmission and generation utilities, which the Commission
has incorporated by reference in both its natural gas and electric
regulations.
Question 3. Can FERC discuss how, generally, plans for firm load
curtailment are crafted? How often are these plans updated? Are they
reviewed by the state regulatory commissions or any other regulatory
bodies? How are critical facilities identified and prioritized for the
purposes of such plans?
Answer. FPA section 215 provides that, in the event of system
emergencies, Transmission Operators and Balancing Authorities
(Balancing Authorities balance electric load and resources, mainly
generation, in an assigned area) on the bulk power system are required
by reliability standard EOP-001 (Emergency Operations Planning) to have
emergency plans. (EOP-001 was developed by NERC's standards development
process and approved by FERC.) This standard also requires that in
developing these emergency plans, entities consider, among other
things, fuel supply and inventory, load management and voltage
reductions, and load curtailment. Attachment 1-EOP-001-0 to EOP-001
describes load curtailment as ``A mandatory load curtailment plan to
use as a last resort. This plan should address the needs of critical
loads essential to the health, safety, and welfare of the community.
Address firm load curtailment.'' There is no further direction in the
standard about ``critical loads.'' The standard requires Transmission
Operators and Balancing Authorities to review and update each emergency
plan annually. The emergency plans are provided to the area's
Reliability Coordinator and to neighboring Transmission Operators and
Balancing Authorities. Compliance with the requirements of standard
EOP-001 is primarily monitored and enforced by the Regional Entity for
that area (there are 8 Regional Entities that cover the contiguous 48
states). NERC and FERC oversee the regional compliance and enforcement
activities. In the majority of cases, the affected entities identify
loads at the retail level that will be curtailed in the event of system
emergencies. FERC does not generally require submission of information
on these plans for curtailing firm load and does not track whether each
state reviews these emergency plans, and in particular the treatment of
``critical loads.'' Finally, apart from FPA section 215, the Commission
has certain authority over curtailment plans under FPA section 202(g).
The latter's requirements appear to overlap significantly the
requirements of EOP-001 as proposed by NERC and approved by the
Commission, but the Commission has not reevaluated its pre-existing
authority since approving EOP-001.
Question 4. What are the connections between FERC's inquiry and
NERC's event analysis and natural gas study?
Answer. Although NERC has initiated an analysis of the problems on
the bulk power system relating to the weather events in question,
FERC's jurisdiction is broader than that of NERC, and includes
oversight of NERC in its role as the ERO. Moreover, FERC has
responsibilities and authorities under the Natural Gas Act and the
Natural Gas Policy Act that apply here, beyond issues solely related to
the bulk power system. To avoid duplication of efforts, we are
coordinating with NERC but our inquiry is broader and addresses not
only the reliability of the bulk power system, but also examines the
roles and responsibilities of natural gas pipelines under our
jurisdiction. Both NERC and FERC are examining the interplay between
the natural gas and bulk power segments ofour energy infrastructure.
Responses of Joseph McClelland to Questions From Senator Tom Udall
Question 1. Are water utilities usually classified as critical
infrastructure and protected from blackouts?
Answer. As explained in response to question 3 above, the
Commission does not generally require submission of information on
plans for curtailing firm load or ``critical loads.'' The vast majority
of water utilities receive service at the retail level. Classification
of retail loads as critical infrastructure is not jurisdictional to
FERC and should be resolved between the water utility, the electric
utility, and the applicable state public utilities commission.
Question 2. Are you going to consider classifying natural gas as
critical infrastructure to be protected from rolling blackouts, at
least during winter?
Answer. As part of the Commission's inquiry into this outage, it
will identify and examine the factors that caused this incident,
including the interdependency of the Bulk Power System and natural gas
pipelines. The purpose of this work will be to produce recommended
actions to prevent a recurrence of this problem. As part of this
initiative, we plan to consider how natural gas facilities were
considered, and subsequently treated, during this system emergency. In
this respect, I would highlight two sections in the reliability
standards relevant to the designation of natural gas facilities as
either critical loads or critical infrastructure.
First (as was detailed earlier), reliability standard EOP-001
requires the applicable entities to have emergency plans. This standard
also requires that in developing these emergency plans, entities
consider, among other things, fuel supply and inventory, load
management and voltage reductions, and load curtailment. Attachment 1-
EOP-001-0 to EOP-001 describes load curtailment as ``A mandatory load
curtailment plan to use as a last resort. This plan should address the
needs of critical loads essential to the health, safety, and welfare of
the community. Address firm load curtailment.'' There is however, no
further direction in the standard about ``critical loads,'' including
whether or not natural gas facilities should be designated as such.
Second, the group of Critical Infrastructure Protection (CIP) NERC
standards address the identification of assets by defining them as
``facilities, systems, and equipment which, if destroyed, degraded, or
otherwise rendered unavailable, would affect the reliability or
operability of the Bulk Electric System.'' Additionally, to identify
which facilities are critical assets, the reliability standards
implement a risk-based assessment that requires entities to consider
the following assets: certain control centers and backup control
centers, certain transmission substations, generation resources,
systems and facilities critical to system restoration, certain systems
and facilities critical to automatic load shedding, certain special
protection systems, and any additional assets that support the reliable
operation of the Bulk Electric System that the Responsible Entity deems
appropriate to include in its assessment. These are not applicable to
facilities outside the Bulk Power System, however, as each responsible
entity must identify. ``its Critical Assets,'' which implies that the
only critical assets to be identified are the ones under the ownership
or control of that entity.
It is important to note here, that although the standards can be
modified to require that natural gas infrastructure be included as
critical loads, the Commission does not have the authority to either
author or modify these standards. By statute, the Commission depends
upon the ERO to accomplish this objective, which is subject to
stakeholder vote through its reliability standards development process.
Question 3. This incident shows that the reliability of electricity
and natural gas systems is intertwined. Is this a trend in the U.S.
energy system?
Answer. Yes, there has been a trend for over a decade of more
reliance by the electric industry on generation fueled by natural gas.
Influences contributing to this trend include the lower emissions of
natural gas-fired generation, less difficult siting and permitting of
natural gas-fired generation, increased supplies of natural gas, and
lower up-front capital cost to construct natural gas-fired generation.
This singlesource fuel dependency can present challenges such as larger
generation losses through single-mode failures (i.e., gas pipelines), a
lack of on-site fuel storage (if dual-fuel generation is not
installed), constrained fuel infrastructure, and higher
interdependencies between the generators and the gas pipelines.
Question 4. Do you have full authority for reliability within Texas
electricity system and are you able to fully conduct investigations
involving Texas?
Answer. Subject to the limitations of section 215 of the FPA that
have been previously detailed, the Commission has electric reliability
authority for the Bulk-Power System within Texas. Sections 215(b)(1)
and section 215(k) of the FPA, 18 U.S.C. Sec. 824o(b)(l) and 824o(k)
(2006), provide that the Commission shall have jurisdiction, within the
United States, except for Alaska and Hawaii, over the ERO (i.e., NERC),
each Regional Entity, and all users, owners and operators of the Bulk-
Power System, for purposes of approving reliability standards and
enforcing compliance. Although the part of Texas that lies within the
footprint of the Electric Reliability Council of Texas (ERCOT)
generally is not subject to the Commission's jurisdiction over the sale
for resale and transmission of electric energy in interstate commerce
under Part II of the FPA, the Commission has section 215 authority over
reliability of the Bulk-Power System within ERCOT as well as in the
rest of Texas.
The Commission has full authority under section 215, other FPA
provisions, and its regulations to investigate issues relating to
reliability of the Bulk-Power System within Texas as well as in other
states for purposes of its Southwest Inquiry. In particular, section
39.2(d) of the Commission's regulations, 18 C.F.R. Sec. 39.2(d)
(2010), requires all users, owners and operators of the Bulk-Power
System, as well as NERC and the relevant Regional Entities, to provide
the Commission with all information necessary to implement section 215.
Question 5. Does FERC have authority to look into market
manipulation in Texas?
Answer. Section 1283 of the Energy Policy Act of 2005, as
implemented by 18 C.F.R. Sec. lc.2 (2007), makes it unlawful to engage
in market manipulation in connection with the purchase or sale of
electric energy or the purchase or sale of transmission service subject
to the jurisdiction of the Commission. The transmission grid that the
ERCOT independent system operator administers is located solely within
the State of Texas and is not synchronously interconnected to the rest
of the United States. As a consequence, absent a jurisdictional nexus,
the Commission generally does not have authority to prosecute market
manipulation over the portion of Texas within the footprint of the
ERCOT.
Question 6. As a general matter, if a state or electric grid system
that is relatively isolated, like Texas, adds more interconnections to
other grids, does that make them more resilient in the event of local
power plant failures?
Answer. I believe that the answer to the question as stated is yes.
However, a key phrase is ``local power plant failures.'' There may be
no benefit and in fact, there will be a detriment to reliability if a
neighboring grid is experiencing similar or worse failures at the same
time.
______
Responses of Gerrry Cauley to Questions From Senator Bingaman
Question 1. NERC's mission is to ensure the reliability of the bulk
power system of North America and promote reliability excellence. Are
there industry standards, requirements, or guidelines for weatherizing
electric generating units? If no, how would NERC and stakeholders from
within electric industry the industry go about creating new reliability
standards to address weatherization, if necessary? If yes, how would
those same entities go about revising them, if necessary?
Answer. Currently, there are no NERC reliability standards for
weatherizing electric generation units. As noted in my testimony on
February 21 in Albuquerque, the February 2011 extreme cold weather
event analysis process may identify the need for such a standard. The
development of any such standard, however, would need to be coordinated
with other ANSI-accredited standards development organizations (such as
the American Gas Association, the Institute for Electrical and
Electronics Engineers, the Society for Mechanical Engineers, and the
North American Energy Standards Board) and with the manufacturers of
and companies providing service to generating units to avoid the
creation of conflicting requirements related to weatherization of
electric generation units. Additionally, Section 215 of the Federal
Power Act, which is NERC's enabling legislation, limits the scope and
purview of what may be addressed in a NERC Reliability Standard to
those matters necessary to provide for the reliable operation of the
bulk power system.
NERC develops Reliability Standards using NERC's Reliability
Standard development process, which is an ANSI-accredited process, and
is outlined in NERC's Standard Processes Manual\1\. NERC's standard
development process is coordinated to avoid conflict with other ANSI-
accredited standard development organizations and may entail developing
standards jointly with another standards setting organization. For
example, a NERC Reliability Standard may require generators to be
installed to meet a range of predicted weather patterns, while another
standard-setting organization may develop a construction standard
identifying how to weatherize a generating unit.
---------------------------------------------------------------------------
\1\ NERC's Standard Processes Manual was approved by the Federal
Energy Regulatory Commission on September 3, 2010. NERC's Standard
Processes Manual is available at: http://www.nerc.com/docs/standards/
sar/Appendix_3A_Standard_Processes_Manual_20100903_2_.pdf.
---------------------------------------------------------------------------
A proposal to develop a new or revised reliability standard can be
initiated at the request of any entity or individual. Some standards
are proposed as a result of event analyses, some are proposed as a
result of regulatory directives, and some are proposed as a result of
other findings, such as an audit team finding that an existing standard
needs revision.
The first step in developing a new or revised standard is to
establish a technical basis for the new or revised requirements. In the
case of generator weatherization, this could include analysis of the
data from the recent cold weather events to assist in establishing the
criteria generators would need to meet to remain connected under
specific low temperatures. Once there is a technical basis for the
development of the requirements, a proposal for the standard is
submitted to the Standards Committee (with or without a set of proposed
requirements) and then posted for stakeholder review.
If stakeholders agree on the scope of the proposed standard, a
standard development project is initiated and, if not already in place,
the Standards Committee will appoint a drafting team of experts to
develop the standard. Upon development of the proposed standard, a
ballot pool is formed from interested members of its registered ballot
body. Approval of any standard action requires:
A quorum, which is established by at least 75% of the
members of the ballot pool submitting a response with an
affirmative vote, a negative vote, or an abstention; and
A two-thirds majority of the weighted segment votes cast
shall be affirmative. The number of votes cast is the sum of
affirmative and negative votes, excluding abstentions and non-
responses.
Proposed standards are reviewed and approved by the NERC Board of
Trustees, and are then submitted to the U.S. Federal Energy Regulatory
Commission, Canadian provincial regulators, and the Canadian National
Energy Board. Once approved by FERC, the standards become legally
binding on all owners, operators and users of the bulk power system in
the United States.
Question 2. Can NERC discuss how, generally, plans for firm load
curtailment are crafted? How often are such plans updated? Are they
reviewed by the state regulatory commissions or any other regulatory
bodies? Does NERC have a role in crafting guidelines or standards for
such plans? How are critical facilities identified and prioritized for
the purposes of such plans?
Answer. Load shed plans have traditionally been the responsibility
of the Load Serving Entity [utility] and developed in conjunction with
coordinated emergency planning performed by state and local government
agencies. This allows for local management and decision making on how
to best plan for and implement emergency procedures if rotating
blackouts are required. NERC's only role with regard to load shedding
is to require that each Transmission Operator and Balancing Authority,
working in conjunction with its Load Serving Entities, develop,
maintain, and implement a set of plans for load shedding to be used as
a last resort in managing electricity supply shortages in the event
that becomes necessary. [Reliability Standard EOP-001-1, Requirement
R2.3]
Electric utilities typically identify the circuits available for
use in rotating outages in accordance with policies developed by state
and local government agencies. Distribution circuits (overhead or
underground electrical lines that supply power to a combination of
customers within a given geographical area) are classified by disaster
importance and placed into groups that represent all customer types
(i.e., residential, commercial and industrial) and are dispersed
throughout a utility's service area. Each group includes a number of
circuits that comprise a given number of megawatts of electricity usage
per group (say 50 or 100 megawatts per group), with each circuit
generally serving between 1,000 to 2,000 customers, depending on the
nature of the utility's service territory and customer mix.
Most of an electric utility's distribution circuits are subject to
firm load shedding (rotating outages) when a serious supply emergency
arises. Under state public utility commission or local government rules
or policies, only those circuits that serve specifically designated
classes of customers who provide essential public health, safety, and
security services (such as large hospitals, fire and police stations,
911 emergency control rooms, energy pumping stations, water and sewage
treatment facilities, generating station auxiliary loads, TV/radio
broadcast sites, key government sites, etc.) are exempted from rotating
outages. Some of these circuits may also be interrupted if the supply
emergency is serious and long-lasting enough. In those cases, circuits
serving facilities that have their own independent back-up generators
could be interrupted.
Plans for rotating outages are typically reviewed annually, and in
some cases more frequently, by the distribution arm of each utility,
with high level changes filed with the appropriate state or local
government agencies. Some states have a mandatory utility disaster/
major event/major weather plan requirement. In some cases, the
governmental authority may set the criteria for what must be considered
highly critical loads. Also, anytime a switching procedure moves a
critical load to an adjacent circuit, the ``new'' feeder is added to
the exempt list.
Question 3. What lessons were learned from cold weather events that
impacted energy production in Arizona and Colorado in 2007 and 2006
respectively? Were changes required and implemented?
Answer. In January 2007, there was a cold weather event impacting
Arizona's Salt River Project (SRP). The extreme cold weather, loads
greater than forecasted, and the loss of eight critical generating
resources forced adjacent control areas into a ``capacity limited''
condition. Backup generation failed to start, which exacerbated the
situation.
In its review of the event, SRP determined its Valley plants
experienced freezing of instrument sensing lines as a result of the 20-
year freeze that occurred. SRP developed and implemented plans to
insulate and heat trace all critical plant instrumentation to avoid
this situation recurring in the future.
In addition, because dispatchers were not aware of the California
Independent System Operator (CISO) Emergency Assistance procedure or
impact to CISO System, they did not notify the Reliability Coordinator
of the seriousness of the situation. Protocols were subsequently put in
place and conveyed to SRP marketing and dispatching to notify the
Reliability Coordinator prior to emergency energy requests.
In February 2006, Public Service Colorado (PSCO) began to
experience electric generation plant failures due to the combination of
cold weather, high humidity and other mechanical issues. During the
event, 18 generators tripped off line or had their output limited. The
controlled load shedding implemented by PSCO involved approximately
100,000 customers for approximately 30 minutes each.
PSCO and the Western Electricity Coordinating Council (WECC),
separately and together, studied the event and developed
recommendations in a number of areas, including: weather forecasting;
protocols for gas control/supply, economic dispatch, energy trading,
reserve levels and planning criteria; communications protocols between
and among gas and electric arms of PSCO as well as with the Reliability
Coordinator; power plant equipment modifications; procedures for
identifying and communicating information regarding fuel-restricted
generation resources; possibility of additional gas storage facilities;
effect of the gas trading cycle on ability to procure additional gas
supplies; and impact of air quality regulations during electricity
supply emergencies.
It appears that the individual entities involved in these events
identified the problems that led to the event and made appropriate
changes. One focus of the current NERC inquiry will be to identify ways
to share that learning more broadly, so that all entities subject to
extremely low temperatures can take appropriate preventive action.
Question 4. What are the connections between NERC's event analysis
and natural gas study and FERC's inquiry?
Answer. Operational coordination, communication, and cooperation
between electric utilities and gas suppliers and pipelines is important
during all conditions, especially when extreme weather has the
potential to affect either or both electric and gas infrastructures. In
1994, NERC and the Interstate Natural Gas Association of America
(INGAA) recommended that electric and interstate natural gas pipelines,
through NERC and INGAA, jointly review the reliability of electric
supply to critical interstate gas pipeline facilities, such as
compressor stations. Specifically, the recommendation stated that
interstate gas pipelines should contact the electric utilities that
supply electricity to these critical gas facilities and review
cooperatively with them how that supply might be adversely affected
during an electricity supply emergency; e.g., a rolling blackout or
other emergency electricity interruption. The Natural Gas Council
(NGC), on behalf of its member organizations--INGAA, the Natural Gas
Supply Association, the American Gas Association, and the Independent
Petroleum Association of America--has asked to work with NERC to gain a
fuller understanding of what transpired during the cold snap in early
February in the southwestern U.S. and to evaluate any and all measures
that could be applied to prevent similar issues in the future.
NERC will perform a special reliability assessment that takes a
broad view for the upcoming 10 years across all areas of North America.
The assessment will include vulnerability studies where extreme cold
weather or loss of a major gas supply could impact electricity
production, review existing procedures designed to mitigate the
reliability impacts from such events, identify opportunities for
improved coordination and cooperation between planners and operators in
both industries, and provide input into NERC's Reliability Standards,
if required. Additionally, this reliability assessment will review the
recommendations from the 2004 NERC study on gas and electric
interdependencies provide an update and status on these
recommendations, determine follow-on actions to fulfill
recommendations, and present guidance to reduce potential
vulnerabilities.
The study will be divided into two parts:
Part I: A qualitative assessment and primer on gas and electric
interdependencies, including: review of the 2004 recommendations;
assessment of natural gas supply and transportation issues; comparison
of electricity generation operation and planning versus gas pipeline
operation and planning; electric industry coordination challenges;
contribution to vulnerabilities; assessment of existing Regional
practices and operational procedures for managing gas pipeline and fuel
delivery vulnerabilities; discussion of modeling requirements to
simulate severe pipeline failures; and discussion of potential best
practices for coordination between the electric and gas pipeline
industries.
Part II: A quantitative analysis representing gas pipeline
vulnerabilities through contingency simulations, including: determining
areas most vulnerable to gas pipeline disruptions; modeling pipeline
dynamics to determine leading indicators of catastrophic pipeline
disruption and associated timing for industry reaction; detailed
analysis of compressor station failures and their contribution to
reduction in pipeline throughput; evaluation of historical events and
lessons learned; and recommendations for improving gas-fired generation
reliability and reducing vulnerabilities associated with the
interdependencies of the electric and gas pipeline industries.
NERC is working closely with FERC in their inquiry as FERC has much
broader jurisdiction, including portions of the natural gas
infrastructure. All information we gather and conclusions we draw from
our analysis will be shared with the FERC.
Question 5. Has the NERC undertaken an event analysis before? If
so, how long did that analysis last and how did NERC transfer lessons
learned and best practices across users, owners and operators of the
bulk power system?
Answer. Yes, NERC frequently undertakes event analyses, typically
working with the relevant Regional Entity. NERC led two bulk power
system event analyses following recent major events. First, NERC was
the technical lead for the U.S. and Canadian Task Force that conducted
an event analysis of the Northeast Blackout of August 14, 2003. As part
of that effort, NERC established a Steering Group of industry experts.
Second, NERC led an event analysis of the Eastern Interconnection
Frequency Excursion (Rockport Event) of August 4, 2007. Information
regarding these two event analyses is provided below.
A. Northeast Blackout of August 14, 2003
1. The initiation and close date
a. Start date of August: 15, 2003
b. Date of interim report: November 19, 2003
c. Date of final report: April 5, 2004
2. The length of time it took to complete the event
analysis
a. Time to preliminary report: 3 months
b. Time to final report: 7.5 months
3. Method of Communicating Lessons Learned and Best
Practices
a. The NERC Steering Group developed a public
report, entitled Technical Analysis of the
August 14, 2003, Blackout: What Happened, Why
and What Did We Learn?, dated July 13, 2004.
b. Technical Conferences were held by the
Task Force, in which NERC participated.
c. Recommendations to users, owners and
operators of the bulk power system were set
forth in the final report. In addition,
specific corrective actions for certain
entities were included in Appendix D of the
final report, entitled NERC Actions to Prevent
and Mitigate the Impacts of Future Cascading
Blackouts.
d. The Task Force issued a report one year
after the event, entitled One Year Later:
Actions Taken in the United States and Canada
to Reduce Blackout Risk, August 13, 2004.
e. NERC issued Final Blackout
Recommendations, dated July 14, 2004.
f. NERC issued a Status Report of the August
14, 2003 Blackout Recommendations, dated July
14, 2005.
B. Eastern Interconnection Frequency Excursion (Rockport
Event) of August 4, 2007
1. The initiation and close date
a. Start date of: August 28, 2007
b. Date of final report: December 19, 2008
2. The length of time it took to complete the event
analysis
a. Time to final report: 15.5 months
3. Method of Communicating Lessons Learned and Best
Practices
a. Recommendations to specific users, owners
and operators of the bulk power system were set
forth in the final non-public report.
NERC and the Regional Entities have worked together on other
significant Regional Entity-led event analyses. Two of these recent
efforts are identified below.
A. MRO separation event of September 18, 2007 (led by MRO)
1. The initiation and close date
a. Start date of: October 5, 2007
b. Date of interim report: March 26, 2008
c. Date of final report: December 11, 2008
2. The length of time it took to complete the event
analysis
a. Time to preliminary report: 5.5 months
b. Time to final report: 14 months
3. Method of Communicating Lessons Learned and Best
Practices
a. NERC published a public Advisory entitled,
Power Flow and Dynamics Modeling, issued March
10, 2008.
b. Recommendations to users, owners and
operators of the bulk power system were
included in the final report. In addition,
specific recommendations for certain entities
were included in the final report.
B. South Florida Disturbance of February 26, 2008 (led by
FRCC)
1. The initiation and close date
a. Start date of: March, 2008
b. Date of interim report: May 29, 2008
c. Date of final report: October 30, 2008
2. The length of time it took to complete the event
analysis
a. Time to preliminary report: 3 months
b. Time to final report: 8 Months
3. Method of Communicating Lessons Learned and Best
Practices
a. NERC published three advisories as a
result of this event analysis.
1. Relay Maintenance Practices, issued June 26, 2008
2. Unexpected Loss of Generation due to Low Voltage
on the System, issued June 26, 2008
3. Turbine Combustor Lean Blowout, issued June 26,
2008
b. Recommendations to users, owners and
operators of the bulk power system were
included in the final report.
Responses of Gerrry Cauley to Questions From Senator Tom Udall
Question 1. Are water utilities usually classified as critical
infrastructure and protected from blackouts?
Answer. Water utilities are generally considered higher in the
ranking of critical loads for utilities. It is our understanding there
may be cases in extreme electricity supply emergencies where circuits
that serve water utilities and other critical customers could be
interrupted if those customers have their own backup supply systems,
such as emergency generators.
Question 2. Are you going to consider classifying natural gas as
critical infrastructure to be protected from rolling blackouts, at
least during winter?
Answer. NERC is keenly aware of gas-electric interdependencies, and
the events of early February in the Southwest underscore the need to
address some unresolved issues. Cooperation and assistance from the
natural gas industry and its member organizations will be particularly
helpful in a review of these interdependencies, given the shift
nationwide toward greater reliance on natural gas to produce
electricity. In addition, this review will provide a broad look at
areas across North America where extreme cold weather or loss of a
major gas supply or delivery element could impact electricity
production. NERC's event analysis process will include a review of
existing procedures designed to mitigate the reliability impacts from
such events as well as identify if rotating outages of electric
distribution circuits could adversely impact the operation of electric
powered gas compressors, gas processing facilities, and other equipment
needed to maintain gas quality and throughput on gas delivery systems.
We need to understand the unique circumstances of the cold weather
event that impacted much of New Mexico and Texas, and determine why
lessons from the past were either unable to be applied or were not
applied in this event. Were there problems with the electric/gas
interfaces? Was this an issue solely about winterization of equipment?
Fuel sources do not have to be identified as critical infrastructure in
order for NERC to issue lessons learned or to begin a process to
identify and disseminate valuable information to users, owners, and
operators of the bulk power system to improve its reliable operation.
The recent events in Texas may show the need for utilities to
classify some natural gas pumping stations with higher criticality for
ranking in load shedding plans. However, we must be mindful that the
more loads exempted from load shedding, the more it will hinder the
response to protect the reliability of the overall network and burden
remaining customers. A higher ranking cannot guarantee a load will not
be shed. Classifying more load as highly critical also challenges
under-frequency and under-voltage protection schemes which must act
swiftly and automatically.
Question 3. This incident shows that the reliability of electricity
and natural gas systems is intertwined. Is this a trend in the U.S.
energy system?
Answer. Yes, but this is not a new trend. NERC has been examining
gas-electricity interdependencies since at least 1994 when NERC and the
Interstate Natural Gas Association of America (INGAA) jointly
recommended that electric utilities and interstate natural gas
pipelines, through NERC and INGAA, review the reliability of electric
supply to critical interstate gas pipelines facilities, such as
compressor stations. With growing supplies and lower prices resulting
from the growth of unconventional gas production in North America, gas-
fired generation appears to be the premier choice for new generating
capacity in the near to mid-term future. However, increased use of
natural gas for generating capacity can increase the bulk power
system's exposure to interruptions in gas supply and delivery.
Several drivers are contributing to the growth in gas-fired
generation, and as a result, growth in natural gas demand and pipeline
infrastructure. Natural gas-fired plants are typically easier to
construct, require little lead-time, emit less CO2, and are generally
cheaper to construct when compared to coal and oil-fueled generation
facilities. Certain states have placed or plan to place a moratorium on
building new coal plants, citing environmental and emissions concerns
as justification.\1\ These trends are expected to continue over the
next several years, further increasing the number of new-build natural
gas-fired generating plants in areas with already high dependence on
gas for electricity generation.\2\
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\1\ California's SB 1368 created the first de facto governmental
moratorium on new coal plants in the United States. Other states with
pending proposals include Arkansas, Georgia, Idaho, Maine, New Jersey,
Texas, Utah, Washington, and Wisconsin--though some are temporary.
Additionally, Ontario and British Columbia have also begun initiatives
to not only halt new coal-fired generation, but also reduce coal-fired
generation.
\2\ A detailed fuel assessment int he 2009 Long-Term Reliability
Assessment: http://www.nerc.com/files/2009_LTRA.pdf
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The importance of maintaining bulk power system reliability through
strong coordination with the gas pipeline industry is magnified as
increased system variability materializes. On the supply side,
increased variable generation (primarily wind and solar) will require
more fast-acting and responsive resources to provide ancillary
services. Today, gas-fired generation is largely used to provide
ancillary services for supporting the variability in wind generation.
Unexpected events, such as pipeline disruptions, unit outages, and
extreme weather impacts, must be effectively coordinated between all
stakeholders. Increased communication and information sharing will be
essential in maintaining the reliability of both systems.
A 2004 report by NERC's Gas/Electricity Interdependency Task Force
concluded:
Gas pipeline reliability can substantially impact electric
generation.
Electric system reliability can have an impact on gas
pipeline operations.
In general, pipeline and electric system operators do not
understand each other's business very well.
Pipeline planning and expansion are substantially different
from the electric equivalent.
Communications between pipeline operators and electric
reliability coordinators are generally weak.
Pipeline tariffs for firm delivery service are not
compatible with peaking generation economics in many
electricity markets.
Modern combustion turbines have stringent fuel delivery and
fuel quality requirements.
Mitigating strategies, such as storage, firm fuel contracting,
alternate pipelines, dual-fuel capability, nearby plants using other
fuels, or additional transmission lines from other regions, can help
manage this risk.
NERC is currently developing a Special Reliability Assessment on
natural gas and electric systems interdependencies. To address these
concerns, this reliability assessment will take a broad view for the
upcoming 10 years of areas within North America where extreme cold
weather or loss of a major regional gas supply could impact electricity
production, review existing procedures designed to mitigate the
reliability impacts from such events, required coordination between
planners and operators in both industries, and provide input into
NERC's Reliability Standards, if required. NERC will identify the
reliability impacts that natural gas/electricity interdependencies
could have across North America.
Additionally, this reliability assessment will review the
recommendations from the 2004 NERC study on gas and electric
interdependencies, provide a status update on these prior
recommendations, determine follow-on actions to fulfill those
recommendations, and present guidance to reduce potential
vulnerabilities.
Question 4. Do you have full authority for reliability within Texas
electricity system and are you able to fully conduct investigations
involving Texas?
Answer. NERC has jurisdiction and authority over the bulk power
system within the State of Texas, both for the portions of the bulk
power system within the Electric Reliability Council of Texas (ERCOT)
and for the portions of the State of Texas that are outside ERCOT. NERC
does not have jurisdiction or authority over the local distribution
portion of the electricity system within the State of Texas. NERC
believes it has all the authority it needs to conduct a full inquiry
into the events and circumstances surrounding the extreme cold weather
that severely affected multiple regional entities and multiple states
in early February, including within the State of Texas.
Question 5. As a general matter, if a state or electric grid system
that is relatively isolated, like Texas, adds more interconnections to
other grids, does that make them more resilient in the event of local
power plant failures?
Answer. While additional interconnection capacity adds to the
resiliency of any interconnected grid, as a grid becomes larger the
relative benefits of such additional interconnection capacity becomes
less significant. Further, simply adding additional interconnection
capacity at the border of a grid system does not guarantee that all
imported electricity can be delivered from that point of
interconnection to all areas within the grid due to internal
transmission constraints. In general, a small isolated electric grid
needs a larger percent installed resource margin (installed resources
minus forecast demand as a percent of forecast demand) to achieve the
same level of supply adequacy (reliability) as a system that is part of
a larger interconnected grid.
______
Responses of Shelley A. Corman to Questions From Senator Bingaman
Question 1. It appears that ERCOT issued various Energy Emergency
Alerts between 5:00 a.m. and 6:00 a.m. on Wednesday February 2nd. Was
Transwestern Pipeline aware of these emergency alerts? If not, when was
Transwestern Pipeline aware of the rolling electricity blackouts in the
ERCOT service territory?
Answer. Transwestern was not contacted by ERCOT informing
Transwestern of these ERCOT Energy Emergency Alerts. Transwestern
personnel became aware of rolling electricity blackouts on Wednesday,
February 2nd at the same time that the general public was made aware
through television reports.
Once aware of the publicly announced rolling electricity outages in
Texas, Transwestern checked with the building manager about any
potential outages affecting its Houston office, which includes its gas
control center. The building manager told Transwestern that no power
outages to the Houston office building were expected. Transwestern also
verified that its back-up generator was available to maintain power to
its gas control center and made preparations for conducting its gas
control operations from Transwestern's back-up gas control site if
necessary. In fact, Transwestern's Houston office building did not
experience any power outages, and Transwestern did not have to utilize
its back-up generator or relocate gas control operations.
Transwestern did not experience any power outages at its compressor
stations which impeded its ability to receive or deliver gas to
shippers in New Mexico. Transwestern did experience some power outages
to certain auxiliary field facilities (i.e., field office building
power and telecommunications equipment). One of these field locations
(Kermit, TX) is located within ERCOT. Transwestern has back-up
generators for many of these locations. Auxiliary power issues did not
impede Transwestern's ability to receive or deliver gas to shippers in
New Mexico.
Question 2. Did Transwestern Pipeline Company communicate with
ERCOT, natural gas processing plants and/or suppliers of natural gas in
anticipation of the severe weather conditions of early February? Are
there any regulatory requirements or industry practices requiring
communications with your customers?
Answer. Transwestern does not communicate directly with ERCOT.
Transwestern communicates directly with its utility providers for
electricity supplied to its field office buildings and electric
compressor units. If power to any of these facilities is disrupted, the
utility provider would communicate with Transwestern's local field
office.
Transwestern communicates with the gas processing and supplier
facilities that are directly connected to its pipeline. Several times a
day these parties verify the expected quantities of gas supply that
they will put into Transwestern's pipeline. To the extent actual gas
supply flows differ from the planned quantities, Transwestern gas
control contacts the gas processing or supply facility operators to
discuss these differences and determine the appropriate plan of action.
Transwestern provides notices to its shippers on its Internet
website. Transwestern's FERC gas tariff describes the timing and types
of communication notices to be made to operators and shippers in the
event of adverse operating conditions.
Question 3. Has Transwestern Pipeline Company had discussions with
electric utilities that serve its facilities regarding the inclusion of
its assets in their blackout operations plans?
Answer. Not directly. Transwestern is generally aware of public
comments from ERCOT and FERC about the need to address the priority of
gas facilities in electric curtailment plans. Transwestern is also
generally aware that this matter has been discussed in proceedings at
the Public Utility Commission of Texas.
Question 4. According to a Transwestern Critical Notice (posted on
February 2nd), it appears that low gas volumes on the Transwestern
Pipeline system were due, in part, to less gas than scheduled being
injected at a receipt point. Do you know why these supplies were not
received? What processes do you follow for maintaining delivery service
during these events?
Answer. Transwestern does not have independent knowledge of why
less gas than scheduled was being input. Transwestern gas controllers
received comments from third-party operators about power outages,
freeze offs, and difficulties starting and keeping equipment running.
Transwestern's FERC gas tariff describes the steps that it is
permitted to take during low line pack conditions, including the right
to issue underperformance notices, reduce scheduled quantities when
supplies are not being received, and issue Alert Day notices advising
operators to adhere to scheduled quantities.
Before and during this winter weather event, Transwestern operated
compression to move gas to the areas of greatest demand and maintain
pressures as high as possible given the amount of natural gas in the
pipeline. Transwestern continued to support deliveries by using its
line pack (its own gas in the pipeline) to make up for gas not being
received into the pipeline.
Question 5. Even if New Mexico Gas Company had Found suppliers to
inject natural gas at a delivery point, would New Mexico Gas Company
have been able to withdraw gas on February 3rd, given the lower line
pack in your system?
Answer. Transwestern did not prevent New Mexico Gas Company from
withdrawing gas from the pipeline on February 3 or at any time during
the winter weather. Although mainline pressures on February 3 were
lower than prior days, the pressures at all time remained above
contractual minimum pressures. If suppliers had been able to physically
put more supply into Transwestern's pipeline, then pressures would
likely have remained higher.
Question 6. Has Transwestern identified steps and measures it can
implement immediately, on its own, that would mitigate the severity of
these kinds of events?
Answer. Transwestern cannot control the underperformance of
supplies into its system. Transwestern used the tools within its
control to maximize the gas available for delivery to New Mexico
delivery points during the recent winter weather, while not adversely
affecting service to the other portions of its system. Before and
during the February extreme winter weather, Transwestern operated
compression to maximize pressures in New Mexico given the quantities of
gas in its system. Transwestern also used its line pack gas to offset
to the extent possible customer supplies that were not being received
into Transwestern. Transwestern also took steps pursuant to its FERC
gas tariff to address the situation, including posting operational
alert notices.
Additionally, Transwestern plans to meet with interconnected
parties, including New Mexico Gas Company, to review operating
pressures and determine whether any facility modifications are
warranted.
Responses of Shelley A. Corman to Questions From Senator Tom Udall
Question 1. It is my understanding that the gas processing plants
that went down in the Texas blackouts feeds gas into your systems. Do
you have an idea of how many gas processing plants were lost?
Answer. Transwestern does not know how many processing plants were
impacted by freeze offs, power outages or production outages.
Transwestern is aware which supply facilities connected to Transwestern
were underperforming and posted many notices of underperforming
receipts, including processing plants. A review of operating data
indicates that 7 directly connected gas processing plants gave
Transwestern less gas than scheduled on either February 2, 3 or both
days. These plants are located in both New Mexico and Texas.
Question 2. Would it help you to provide gas to your customers if
critical natural gas infrastructure was not subject to rolling
blackouts? Is that a good policy?
Answer. Yes, it would be a helpful policy if natural gas
infrastructure (including processing plants, gas compression
facilities, and gas control centers) was not subject to rolling
blackouts. Transwestern welcomes the opportunity to work with this
Senate Committee to ensure natural gas infrastructure is recognized as
a priority in any future policy discussions.
Question 3. Your testimony states that both of your systems did not
experience any major failures. Are you subject to federal regulation on
this issue?
Answer. Transwestern is an interstate natural gas pipeline
operating pursuant to a certificate of public convenience and necessity
issued by the FERC and under a FERC gas tariff containing the terms and
conditions of service for its shippers. The operation of Transwestern's
system is also subject the federal Natural Gas Act and related rules,
regulations and policies of the FERC.
Transwestern did not experience any power outages at its compressor
stations which impeded its ability to receive or deliver gas to
shippers in New Mexico. Transwestern did experience power outages to
certain auxiliary field facilities (i.e., field office building power
and telecommunications equipment). However, in many cases Transwestern
has back-up generators and these auxiliary power outages did not impede
Transwestern's ability to receive or deliver gas to shippers in New
Mexico.
Question 4. Did you seek reductions from large, non-residential
utility customers to help conserve gas during the crisis? What was the
response?
Answer. As noted above, Transwestern is an interstate natural gas
pipeline that provides transportation-only service to its customers,
Transwestern does not own the gas that its shippers purchase and put
into the pipeline for transportation. Accordingly, Transwestern does
not have a supply curtailment plan in its FERC gas tariff.
In the event of supply shortfalls, Transwestern's FERC gas tariff
allows it to issue underperformance notices and reduce scheduled
quantities related to the underperformance. Its tariff also provides
that Transwestern can issue an Alert Day notice advising shippers to
adhere to scheduled quantities. Transwestern took both of these steps
during the early February winter weather.
Question 5. Did gas processing plants or gas suppliers notify you
when their assets failed and stopped sending your customers gas into
your system?
Answer. In some cases, interconnected processing plants and
suppliers notified Transwestern of reduced supplies and facility
outages. In other cases, Transwestern gas control personnel contacted
the gas processing plant operators and other supply facility operators
when quantities were not being received as scheduled.
Question 6. NM Gas Company is seeking industry contributions to the
compensation fund. Have you been approached and what has been your
response?
Answer. Yes, Transwestern has been approached by New Mexico Gas
Company regarding a contribution to its compensation fund.
Transwestern and its parent company, Energy Transfer Partners,
participate in a number of community outreach programs. When the
Company receives a request to provide funding, the Company's internal
review board reviews the request and the possible level of prospective
funding from the Company. The Company's review board is currently
evaluating the request from New Mexico Gas Company.
Although the Company is undergoing its evaluation of New Mexico Gas
Company's contribution request, Transwestern believes that it has
already undertaken important actions in support of its customers in New
Mexico. Before and during the February extreme winter weather,
Transwestern operated compression to maximize pressures in New Mexico
given the quantities of gas in its system. Transwestern also used its
line pack system gas to offset to the extent possible customer supplies
that were not being received into Transwestern. Transwestern also took
steps pursuant to its FERC Gas tariff to address the situation,
including posting operational alert notices. Transwestern used the
tools within its control to maximize the gas available for delivery to
New Mexico delivery points during the recent winter weather, while not
adversely affecting service to the other portions of its system.
Transwestern is proud of the manner in which it managed its system
during this time and the efforts of its dedicated employees during this
extreme weather event.
______
Responses of George A. Schreiber, Jr., to Questions From Senator
Bingaman
Question 1. Does the New Mexico Gas Company follow specific
operating procedures in the anticipation of extraordinary operating
conditions? Do these procedures require it to communicate with
suppliers, gas pipeline companies, agencies or people?
Answer. Yes, New Mexico Gas Company (``NMGC'' or the ``Company'')
has numerous policies and procedures in its Gas Operations Manual (GOM)
for extraordinary operating conditions, including communications with
suppliers, gas pipeline companies, agencies and or other people during
such conditions. As indicated by the plan names, these documents
address various aspects of dealing with extraordinary operating
conditions.
Specifically, the Company has a Company-wide Operations and
Maintenance (O&M) Plan (GN-009) and separate O&M Plans for each
operating location throughout the state for operations and
communications during extraordinary operating conditions. The Company
has Engineering/Design Policies during Emergencies, Interruptions,
Curtailments (ED-012) and Engineering/Design Procedures for Emergency
Plan Maintenance (ED-P05). The Company has Emergency Plan Policies as
follows: General (EP-000); Pre-Emergency Plans (EP-001); Reviewing and
Updating Emergency Plans (EP-002); Telephone Numbers (EP-003); Media/
Communications (EP-004); Plan of Action for Emergencies--Summary (EP-
005); Plan of Action for Gas Outage (EP-009); Plan of Action for
Abnormal Operating Conditions and Transmission Systems (EP-010); Plan
of Action for a Potential Incident(EP-011); Plan of Action for
Disasters (EP-013), with Exhibits and Training Information(EP-014
through 016); an Isolation Plan (EP-018); and a procedure for Meter
Turn On, Turn Off, Set, Change or Outage (SI-P05).
Additionally, for interruptions, curtailments and capacity
allocations, as occurred during the week of January 31, 2011, NMGC
operates pursuant to Original Rule No. 21, which was approved by the
New Mexico Public Regulation Commission (``Commission''). A copy of
Rule 21 is attached as *Exhibit 1. Rule 21 has provisions for notifying
on-system transportation end-users prior to any interruption or
curtailment of service under circumstances that do not constitute a
system emergency. An on-system transportation end user is physically
located on the NMGC system, but these end-users purchase their gas from
a shipper, marketer or other third party, i.e. they do not purchase
their gas from NMGC.
---------------------------------------------------------------------------
* All exhibits have been retained in committee files.
---------------------------------------------------------------------------
Different provisions of Rule 21 govern a system emergency. During a
system emergency, NMGC is required to notify each transportation
shipper of the system emergency as quickly as possible, but Rule 21
does not require notification in advance of the system emergency
curtailment. NMGC complied with the provisions of Rule 21 during the
week of January 31, 2011. NMGC's general operating procedures provide
for emergency notifications to key stakeholders. NMGC followed its
emergency communications procedures during the week of January 31,
2011.
Section 17.10.650.14G(3) of the New Mexico Administrative Code
(``NMAC'') requires that the Company notify the Commission by telephone
of, and confirm by letter, any interruption to the service of a major
portion of any single distribution system. This requirement was met
with on February 3, 2011, when the telephonic notification was made,
and on February 16, 2011, when a confirmation letter was filed.
17.10.660.10E(6) NMAC requires that the Company provide to the
Commission within 60 days of the end of an interruption, curtailment or
system emergency actual volumes and time periods of the event for each
transportation customer and the reasons for the interruption,
curtailment, or system emergency. NMGC will file this report with the
Commission on or before April 2, 2011.
Question 2. Please detail the extent of your communications with El
Paso Natural Gas Pipeline, TransWestern Pipeline and the Electric
Reliability Council of Texas (ERGOT) between January 31st and February
3rd.
Answer. The communications are detailed in Exhibit 2, which is
attached to this response.
Question 3. Given that the New Mexico Gas Company provides natural
gas services to Department of Defense facilities, are there formal
communications protocols with those facilities in anticipation of
extraordinary operating conditions?
Answer. Yes. These installations are treated in the same way as all
other customers under the Rule 21 procedures.
Additionally, on February 4, 2010 (1 year prior to the recent
outage), NMGC meet with Utility Managers and Contracting Officers at
Kirtland AFB and Sandia labs to discuss the risk of service
interruptions during extraordinary operating conditions. In particular,
this group discussion was focused on the risk of curtailment and
possible utilization of propane-air backup systems to supplement short-
term gas demands. This meeting and subsequent discussions were
requested by KAFB and Sandia shortly after the decommissioning of their
physical plant, which was capable of operating on alternate fuels. An
expert on propane-air backup systems who has extensive experience with
DOD facilities accompanied NMGC to the meeting. Based on the group
discussion and analysis of redundant gas supplies available to the base
and surrounding areas, the risk of interruption was characterized as
relatively low. The final decision to invest in propane air back-up
systems, however, was left with KAFB personnel and Sandia Energy
Managers.
Question 4. Did the New Mexico Gas Company cut off gas service to
customers based on a formal or established service curtailment plan? If
yes, how and when was that plan created? Was it reviewed and/or
approved by the New Mexico Public Regulation Commission? If no, how did
New Mexico Gas Company decide which communities to shut off over
others?
Answer. As identified above, for interruptions, curtailments and
capacity allocations, NMGC operates pursuant to Original Rule No. 21.
Rule 21 was initially adopted by the Commission when the gas utility
assets were owned by NMGC's predecessor, Public Service Company of New
Mexico. In January 2009, when NMGC acquired the gas utility assets,
Rule 21 was adopted and approved by the Commission for use by NMGC.
On February 2, 2011, pursuant to the provisions of Section VI of
Rule 21, NMGC contacted its large industrial and commercial customers
for voluntary curtailments of gas usage or to switch to alternate
fuels. NMGC also asked residential customers to voluntarily conserve
gas. On February 3, 2011, when system emergencies were declared first
on the south segment of the NMGC system and then on the north segment
of the NMGC system, consistent with Section V of Rule 21, communities
were curtailed ``to ensure, to maintain the ability of the system to
deliver natural gas to maintain the integrity of as many segments of
the system as possible''. Because time was of the essence, the system
segments and communities curtailed were those where the curtailment of
gas service could occur quickly or those that were already experiencing
pressure loss. In the south, this included portions of Alamogordo and
all of Tularosa and La Luz. In the north, this included the towns of
Bernalillo and Placitas and portions of Santa Ana Pueblo, Espanola and
surrounding communities, including all of Santa Clara Pueblo, Ohkay
Owingeh Pueblo, and portions of San Ildefonso Pueblo, and Taos and
surrounding communities, including Taos Pueblo, Questa, and Red River.
Question 5. Did the New Mexico Gas Company sell any gas to entities
other than customers during the week of the outage or the week prior?
Answer. NMGC did not enter into any off-system sales between
January 31 and February 4, 2011--the week of the outage.
As described below, NMGC entered into a baseload sale in December
for each day in January, and there were two additional periods of
incremental off-system sales in January, including during the week and
weekend prior to the outage. In general, as described below, NMGC
enters into gas sales when it has gas supply on its system in excess of
demand and needs sales to balance system and storage levels. These
baseload and incremental sales in January were consistent with this
practice and did not contribute to the outages which occurred on
February 3, 2011.
Baseload Sale in December 2010 for January 2011--On December 22,
2010, NMGC entered into a baseload sales contract providing for a
baseload sale of 15,000MMBtu of gas for each day starting January 1'
and ending January 31st. A sale of this nature is typically made based
on long-term weather projections in order to maintain consistent
storage inventories. This particular baseload sales contract was
entered into in December for January based on unseasonably warm
temperatures experienced in November and December, which had resulted
in reduced NMGC storage flexibility, and on projections for a warm
January. On December 22, 2010, NMGC's storage inventory stood at
1,918,858MMBtu, and NMGC was averaging an injection of 10,000MMBtu per
day of excess system supply gas. As of December 22, if this trend
continued at the same rate (10,000 units per day), NMGC only had 28
days of injection remaining before reaching its storage capacity.
Because long-term weather forecasts were predicting January weather to
be similar to December and November weather and January baseload
volumes were expected to increase by 6,000MMBtu per day statewide in
comparison to December baseload volumes, a decision was made to enter
into a baseload sales contract for 15,000MMBtu per day throughout
January 2011.
Incremental Sales in January 2011--In addition to the baseload sale
described above, twice in January 2011, NMGC entered into additional
incremental sales: the first occurred between January 18 and 21; and
the second occurred between January 27 and 31. Each was the result of
excess storage injections resulting from warm weather periods.
During the four-day period from January 15 to January 18, because
of warm weather, NMGC had experienced reduced demand and had injected a
total of 163,597MMBtu of excess supply into its storage facility near
Andrews, Texas. As a result, on January 18, 2011, NMGC contracted to
sell 6,500MMBtu for January 18th, 35,000MMBtu for January 19th,
25,000MMBtu for January 20th, and 25,000MMBtu for January 21st. These
sales were entered into in an effort to maintain proper system and
storage levels.
On January 27, 2011, coming off another period of warm weather,
NMGC entered into a contract to sell 5,000MMBtu excess system supply
for January 28th. On January 28th, for the same reasons, NMGC
contracted to sell 10,000MMBtu for January 29th, 10,000MMBtu for
January 30th, and 10,000MMBtu for January 31st. Typically, weekend
contracts such as the one on the 28th are entered into on Friday for
the entire weekend, or the weekend plus Monday, and again are common in
the industry to maintain proper system and storage levels. The weather
profile for the week ending January 28, 2011, and the projections for
the weekend of the 29th through 31st were similar to the weather
pattern for the weekend of January 15th through the 18th. As before,
the sales during the period from January 27th though the 31st' were an
effort to maintain system and storage levels following a warm period
and were made to protect against a large injection into the storage
facility.
Responses of George A. Schreiber, Jr., to Questions From
Senator Tom Udall
Question 1. What is the status of your compensation efforts--how
many claims have been filed, for how much, and what types of decisions
are you making?
Answer. As of March 14, 2011, 1540 claims for assistance have been
filed. As for the amount claimed, many claims do not list a specific
amount, so it is difficult to say what the total dollar amount of
claims is or will be. NMGC has six teams working on contacting the
claimants to discuss their claims. The Company is committed to handling
these claims promptly and fairly, on an individualized basis. The
claims vary widely A key goal of the relief fund is to provide help and
financial assistance to those who most need it. In evaluating the
claims, the team members are attuned to the particular circumstances of
the customers, particularly if there are situations where the gas
supply shortage and resulting outage has resulted in hardships. Checks
and balances are in place to ensure consistency and fairness in the
treatment of all claims.
Question 2. Were you aware of the Texas blackouts on Wednesday,
February 2, and their possible impacts on your gas supply?
Answer. NMGC first learned of some rolling blackouts in Texas early
on the morning of Wednesday, February 2, 2011. At that time, Company
personnel were informed by Transwestern gas control that the NMGC
contract storage facility near Andrews, Texas, was not delivering
storage gas to Transwestern. Transwestern control room personnel
indicated that they had been told that the storage facility had been
knocked off line by rolling blackouts. NMGC called the Operations
Supervisor of the storage facility, and it was confirmed that the
storage facility had been knocked off line by rolling blackouts. They
were off line for a few hours returning to service by mid-morning on
February 2nd.
At 10:20 am on the February 2nd, El Paso Natural Gas issued a
Critical Operating Condition notice. This notice stated that ``EPNG has
been informed that rolling blackouts in the West Texas area are
impacting performance out of the Permian Supply basin.'' The document
makes no reference to the existence or effect of rolling blackouts
throughout the remainder of Texas.
NMGC was otherwise not aware of the severe impact of the rolling
blackouts on the remainder of supply into the interstate pipelines
until sometime around 6 am on Thursday February 3, 2011, when the
Company again heard that blackouts were causing disruption in the
natural gas infrastructure.
Question 3. Did you consider mandatory cutoffs of large industrial
users on Wednesday to prevent the need for residential cutoffs on
Thursday?
Answer. Yes, all options were considered at the time. On Wednesday,
February 2, 2011, NMGC elected to proceed with voluntary curtailments
and at 12:24 pm issued a press release statewide asking all customers
to voluntarily conserve gas. During Wednesday, most of the large
industrial and commercial customers contacted by the Company
voluntarily switched to alternative fuels or curtailed their loads
significantly. Mandatory curtailment of large industrial and commercial
customers on February 2, 2011, however, would not have avoided the
curtailment of residential customers, because industrial and commercial
customers are only a small percentage of our overall customer demand.
Question 4. Your testimony stated that you are considering moving
to a system that does not rely on interstate pipelines and would be
more self-sufficient in New Mexico. Could you describe that in more
detail?
Answer. NMGC is evaluating physical system changes, including the
feasibility of establishing back-up supply measures such as LNG,
propane air systems, CNG and underground storage. This evaluation also
includes looking at the feasibility of installing new pipeline(s) feeds
or looping existing lines so that the ends of the system are less
susceptible to pressure loss given a supply shortage scenario as the
Company faced in this event. NMGC has retained outside consultants to
assist in evaluating the different options. That said, the Company does
not believe that severing relationships with the interstate pipelines
altogether is a viable or likely option, because, among other things,
of the diversity of resources those out-of-state options offer.
______
Responses of Janice Parker to Questions From Senator Bingaman
Question 1. It appears that ERCOT issued various Energy Emergency
Alerts between 5:00 am and 6:00 am on Wednesday February 2nd. Was El
Paso Western Pipeline aware of these emer,crency alerts? If not, when
was El Paso Western Pipeline aware of the rolling electricity blackouts
in the ERCOT service territory?
Answer. El Paso Natural Gas Company (EPNG) was not aware of the
Energy Emergency Alerts issued by ERCOT on Wednesday February 2, 2011.
On February 2, 2011, between 5:00--6:00 a.m. Mountain Time (MT), EPNG
first became aware of power outages when EPNG contacted some of the
third-party processing plant operators who were not delivering their
scheduled quantities of gas to the EPNG system. At that time, EPNG was
informed by the plant operators that their operations had been affected
by a loss of power. Between 8:00--9:00 a.m. MT, EPNG was first informed
by some plant operators, and later able to confirm, that rolling
blackouts were occurring in Texas. Shortly thereafter, EPNG also became
aware of power plant outages reported by El Paso Electric (a third-
party electric utility in El Paso, Texas not related to our company)
due to the cold weather.
Question 2. Did El Paso Western Pipeline communicate with ERCOT,
natural gas processing plants and/or suppliers of natural gas in
anticipation of the severe weather conditions of early February? Are
there any regulatory requirements or industry practices requiring
communications with your customers?
Answer. EPNG is not aware of any communications to or from ERCOT
during the weather event in question. Our understanding from ERCOT is
that while ERCOT manages the bulk transmission grid and may order load
sheds or rolling blackouts under emergency conditions, each local
electric distribution provider has an emergency response plan that
determines which of its customers will be affected by rolling
blackouts. We are investigating what public sources of information we
can subscribe to for advanced warning of any electric grid issues in
our area.
With respect to communication with processing plants and gas
suppliers, EPNG electronically sends information seven times per day to
each third-party facility connected to its system and supplier to show
the quantity of gas that each customer has requested for delivery into
EPNG's pipeline for the current or following day. The third-party plant
and/or gas supplier will then confirm whether it agrees to provide that
quantity of natural gas at the location indicated. EPNG then
electronically sends the final scheduled quantity to each customer, the
customer's suppliers, and interconnected third-party facility
operators. This is also done seven times per day. The expectation is
that the customers and their suppliers will ensure the gas is received
by EPNG at the agreed-upon time. If the processing plant or other
third-party facility operator continues to confirm more gas supply than
EPNG has received, or has an expectation to receive based on current
flow, EPNG then reflects such underperformance at that supply location
in what is scheduled for the customers and communicates such
underperfomaance to the affected customers and interconnecting facility
operators.
Question 3. Has El Paso Western Pipeline had discussions with
electric utilities that serve its facilities regarding the inclusion of
its assets in their blackout operations plans?
Answer. EPNG has recently started discussions with the electric
utilities that supply power to its facilities regarding the inclusion
of EPNG's compressor facilities on the utilities' critical
infrastructure lists. Until the cold weather events of February 2011,
EPNG was not aware of the existence of such lists. Nor was the
possibility of being added to such lists ever brought to EPNG's
attention by its electric utility providers.
Question 4. It appears that El Paso Natural Gas declared Strained
Operating Conditions on February 2nd. A declaration notice indicated
the San Juan supply basin was experiencing underperformance issues
related to the cold weather. Does El Paso Natural Gas have processes
for communicating with suppliers of natural gas under these
circumstances? Does El Paso Natural Gas have processes for
communicating with customers under these circumstances? What are your
processes for preserving and maintaining service under Strained
Operating Conditions?
Answer. EPNG uses multiple methods of communication to interact
with its customers and other interested parties. EPNG posts information
on its electronic bulletin board (EBB), as required by the Federal
Energy Regulatory Commission, where the information is available
publicly. Al] notices are also emailed immediately to all subscribers
to the EBB, which includes customers, suppliers, plant operators,
producers, other pipelines, regulators, industry information providers,
and any other interested person. EPNG also contacts third-party
facility operators connected to its pipeline system when it observes
any significant underperformance at supply locations to determine if
the supply shortfall or facility outage is short-term or long-term. If
it is uncertain when the supply underperformance will he corrected,
EPNG then posts a notice of underperforming supply locations on its
EBB. This is a quick signal to affected customers that they should
arrange for supply from other locations capable of tendering sufficient
supplies of natural gas into EPNG's pipeline system to support their
demand.
With respect to maintaining service under Strained Operating
Conditions, EPNG will first utilize its Washington Ranch Storage
facility near Carlsbad, New Mexico, to withdraw gas from the
underground storage caverns to support deliveries on the system until
the customers and their suppliers can perform. EPNG will also use
available gas already in the pipeline system (commonly known as
``linepack'') to try to backstop its customers experiencing supply
shortfalls and to help make deliveries. Linepack has to be replenished,
however, generally within 12-24 hours because it is necessary to ensure
operational stability and manage pipeline operating pressures. Finally,
there are a limited number of delivery points on which EPNG has the
ability to use flow control, either remotely or manually, to limit the
quantity of natural gas being taken by customers. EPNG does set flow
control at deliveries to other interstate pipelines on a daily basis,
but prior to using flow control on deliveries to customers, e.g., a gas
utility, electric utility or industrial customer, EPNG typically would
call and solicit voluntary reductions by that customer. From the
standpoints of safety, facility and consumer protection, it is best for
EPNG's customers to decide voluntarily how and where to limit their
takes of gas from the system to match the quantity of supply they have
been able to secure.
Question 5. On February 2, EPNG issued operational notices to
customers at 7:24 a.m. Mountain Time (MT), 9:31 a.m. MT, 10:07 a.m. MT,
10:20 a.m. MT, and then at 11:51 a.m. The Notices laid out the severity
of the situation, provided actions that customers should take, and
potential consequences if customers continued to take more gas from
EPNG's system than was delivered on their behalf. What were recommended
actions for customers? What are the potential consequences if customers
took more gas off the system than was delivered on their behalf?
Answer. Copies of these notices are attached for your reference as
Attachment 1.* Recommended actions included asking customers to balance
receipts and deliveries (i.e., taking from EPNG only the quantities of
gas actually tendered to EPNG on the customer's behalf). EPNG suspended
making loans of gas from its system or providing interruptible storage
service in order to support higher priority service needs. EPNG also
asked customers who could provide assistance to the system to contact
EPNG's Gas Control Department. Potential consequences for taking more
gas from the EPNG system than the customers had tendered include
financial penalties or having EPNG use flow control. As was seen during
February 2-4, 2011, customers taking significantly more gas out of the
EPNG pipeline system than was supported by the supplies being put into
the pipeline by the customers' suppliers caused pipeline operating
pressures to drop and impact some customers' operations.
---------------------------------------------------------------------------
* All attachments have been retained in committee files.
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Question 6. Even if New Mexico Gas Company had found suppliers to
inject natural gas at a delivery point, would New Mexico Gas Company
have been able to withdraw gas on February 311, given the lower line
pack in your system?
Answer. EPNG was able to deliver all of the natural gas supplies
received on behalf of its customers plus additional gas sourced from
EPNG's Washington Ranch storage facility and linepack. EPNG believes
that it could have delivered additional gas supplies acquired by its
customers. However, due to the integrated nature of EPNG's pipeline
system and the extent of supply shortages, it is difficult to know
whether additional supplies acquired by New Mexico Gas Company alone
would have been sufficient to increase the pipeline operating pressure
on EPNG's south system to the level needed by New Mexico Gas Company to
make all deliveries in the Alamogordo area of its system.
Question 7. El Paso Natural Gas began to see recovery on February 3
when customers were able to locate some additional supply at pipeline
interconnects. Where were these pipeline interconnects? Does El Paso
Natural Gas know why the additional supply was available?
Answer. The pipeline interconnects at which EPNG began to
experience meaningful increases in receipts late on February 3 and
February 4 were located in the San Juan Basin in New Mexico, at the
western end of EPNG's system near California, and in the Permian Basin
of Texas. Since EPNG is a transporter (arid not a supplier) of natural
gas, it does not know the exact reasons for the ability to increase
supplies on February 3-4, but it can state that many of the pipeline
interconnects at which it experienced increased receipts of gas into
its system have access to Rockies natural gas supplies or pipeline-
operated storage.
Question 8. Has El Paso Natural Gas identified steps and measures
it can implement immediately on its own that would mitigate the
severity of these kinds of events?
Answer. EPNG is committed to working with its customers and their
suppliers to implement a tabletop mock emergency, using the early
February supply outages and heavy demand as the mock scenario, to share
lessons learned and determine if there are alternative steps that could
or should be taken by EPNG or the other parties to better withstand a
significant loss of supply, regardless of the reasons.
EPNG is also committed to reviewing its winter preparedness plans
for its assets and people to implement any identified improvements,
including working with its electric service providers to have critical
compressor stations added to their list of critical infrastructure.
EPNG will meet with all affected customers to do a thorough facility-
by-facility performance review and determine if there are any future
enhancements that would have mitigated the effect of the lower pipeline
pressures caused by the supply shortages. EPNG will also participate in
and, as appropriate, take a leadership role in any industry initiatives
to address a similar situation in the future, including improving the
electric and gas grid coordination.
Finally, EPNG is prepared to re-initiate proposed storage
development projects in Arizona and/or New Mexico if customers are
interested in pursuing additional natural gas storage directly
connected to the EPNG system. It is important to note that since EPNG
does not have responsibility for or control over the gas supply
function, it is not possible for EPNG to overcome the magnitude of
shortages that were experienced the first week of February with its
current tools of linepack and Washington Ranch storage. Therefore,
customers may want to assess the feasibility of adding storage to the
EPNG system in which they can store their gas supplies for withdrawal
on demand.
Responses of Janice Parker to Questions From Senator Tom Udall
Question 1. It is my understanding that the gas processing plants
that went down in the Texas blackouts feeds gas into your systems. Do
you have an idea of how many gas processing plants were lost?
Answer. EPNG does not know which processing plants had operating
problems due to rolling blackouts or due to other cold weather issues.
Attachment 2 is a list of the locations where EPNG issued notices of
supply underperformance for February 2-4, 2011, including the operator
and the type of facility.
Question 2. Would it help you to provide gas to your customers if
critical natural gas infrastructure was not subject to rolling
blackouts? Is that a good policy?
Answer. EPNG believes it is a good policy for critical natural gas
infrastructure not to be subject to rolling blackouts especially in the
winter season. This would be the case whether it is EPNG's pipeline
compression equipment or third-party facilities that support natural
gas production or processing.
Question 3. Your testimony states that both of your systems did not
experience any major failures. Are you subject to federal regulation on
this issue?
Answer. EPNG is subject to the comprehensive jurisdiction of the
Federal Energy Regulatory Commission (FERC) for the sale of its
pipeline capacity, its transportation services, and its rates. If EPNG
had a pipeline or equipment failure that affected its contracted firm
transportation capacity, the tariff EPNG has on file with and approved
by the FERC governs the manner in which it would prorate the use of the
remaining available firm pipeline capacity. As stated in my testimony,
EPNG had sufficient pipeline capacity to transport the customers' gas
supplies plus make additional deliveries from its Washington Ranch
storage field and linepack. The U.S. Department of Transportation also
intensively regulates the safety of EPNG's operations.
Question 4. Did you seek reductions from large, non-residential
utility customers to help conserve gas during the crisis? What was the
response?
Answer. Large, non-residential utility customers are customers of
New Mexico Gas Company and they would best be able to answer this
question. As noted above, with respect to EPNG's customers, EPNG did
solicit assistance from its customers through its EBB notices and
received one offer of assistance for February 2, 2011, but this
assistance did not occur as anticipated by the customer due to the
significant shortfall of supplies on that day. Also, EPNG called other
interconnecting pipelines to see if they could assist, and did receive
modest amounts of assistance from those operators. Unfortunately, the
widespread nature of the cold weather limited the ability of other
parties to assist.
Question 5. Did gas processing plants or gas suppliers notify you
when their assets failed and stopped sending your customers gas into
your system?
Answer. No. EPNG's Gas Control Department had to call the operators
with which it had interconnecting facilities to determine why it was
receiving less gas than was confirmed by those parties for delivery
into the EPNG system. This is an area of communication where EPNG would
like to see improvements. EPNG will work with its customers and their
suppliers to determine what they can do to improve proactive
communication back to the pipeline.
Question 6. NM Gas Company is seeking industry contributions to the
compensation fund. Have you been approached and what has been your
response?
Answer. New Mexico Gas Company has requested that EPNG consider a
contribution. EPNG has over 70 years of service history in New Mexico,
and we know that some citizens in the State may have a need during
these difficult economic times. One of EPNG's company values is to be a
good neighbor where we do business. We will certainly consider helping
in a manner similar to what we have done in other situations where a
community need exists.
______
Responses of John Dumas to Questions From Senator Bingaman
Question 1. How are the electric generating units located within
the ERCOT service territory protected against the effects of sustained
severe cold conditions?
Answer. ERCOT market rules call on operators of electric generating
units to ``establish and maintain internal procedures for monitoring
actual and forecasted weather and for implementing appropriate measures
when the potential for adverse weather or other conditions (which could
threaten ERCOT System reliability) arise.'' See ERCOT Protocols Sec.
6.5.9.3.1(5)
The details surrounding the weatherization requirements of electric
generating units can be found in the Public Utility Commission of
Texas' (PUCT) substantive rules. Specific sections of interest are
identified below:
Section 25.53, Electric Service Emergency Operations Plans,
requires power generation companies to file with the PUCT
copies of its emergency operations plans, and any revisions to
those plans no later than 30 days after such changes take
effect. As part of these emergency operations plan submissions,
power generation companies must include a summary of power
plant weatherization plans and procedures (Sec.
25.53(c)(2)(A)).
Section 25.94, Report on Infrastructure Improvement and
Maintenance, requires annual reports to be submitted by all
electric utilities to the PUCT. Areas that are susceptible to
damage during severe weather are required to be identified in
this report (Sec. 25.94(c)(1)).
Section 25.95, Electric Utility Infrastructure Hardening,
requires annual report to be submitted by all electric
utilities to the PUCT. As part of this filing, any actions
before, during, or after extreme weather events are required to
be identified.
Question 2. ERCOT issued instructions for firm load curtailment to
address outages across of approximately 82 generating units. Was ERCOT
aware of the location of natural gas facilities (e.g. production,
processing, and transmission) within its operating territory when it
issued those instructions? What are the roles of the member
transmission owners during such firm load curtailments? Are natural gas
facilities (e.g. production, processing, and transmission) in the ERCOT
territory assigned any particular priority in the firm load curtailment
process?
Answer. ERCOT's interface as grid operator is with electric
transmission and generation providers. The instructions ERCOT issues
regarding firm load curtailment are issued to transmission operators,
and the transmission operators determine the locations subject to load
curtailment. ERCOT communicates with Qualified Scheduling Entities
(QSEs) and Resource Entities who represent, among others, owners of
natural gas-fired electric generating units. QSEs are required to
reflect any anticipated de-rating of capability due to fuel in their
current operating plans (COP), which are hourly capacity schedules
submitted to ERCOT. ERCOT does not currently have visibility into the
location of natural gas production, processing, and transmission
facilities.
The roles of the member transmission owners during firm load
curtailments are outlined in Section 4.5 Energy Emergency Alert (EEA)
of the ERCOT Operating Guides. When ERCOT directs firm load shedding,
the member transmission owners reduce their load by their load ratio
share, as documented in Section 4.5.3.4 Load Shed Obligation of the
ERCOT Operating Guides. ERCOT's instructions to shed a specific number
of megawatts are executed by the transmission owners based on
previously determined shares among the region's transmission owners, so
there is no doubt that sufficient load is curtailed to meet system
demands. The location of the specific load that is curtailed is
determined by the transmission owners, based on their individual plans,
which are informed by regulatory requirements regarding service to
critical loads.
ERCOT does not assign priority of load to be shed as part of the
firm load curtailment process, but simply the quantity of load to be
curtailed. It is up to transmission owners operating in the ERCOT
region to designate priority and to carry out the curtailment of load
as appropriate. Section 25.497 of the PUCT substantive rules define
guidelines for the transmission owners to follow when giving priorities
to customers during load shedding events. The rule defines ``Critical
Load Public Safety Customers'' as customers for whom electric service
is considered crucial for the protection or maintenance of public
safety, including but not limited to hospitals, police stations, fire
stations, and critical water and wastewater facilities. Within those
guidelines, transmission owners determine the priorities of loads shed
during a firm load curtailment directed by ERCOT. The requirements do
not currently assign a ``critical load'' priority to natural gas
facilities.
Question 3. Under what circumstances does ERCOT communicate with
pipeline operators, natural gas processors and/or natural gas producers
in its service territory?
Answer. ERCOT has no authority to direct entities in the natural
gas industry to take particular actions in emergency situations.
Intrastate natural gas regulation in the ERCOT region is managed by the
Texas Railroad Commission. ERCOT operators understand, based on past
experience, how weather may affect natural gas availability in certain
parts of Texas. There is no systematic method in place, however, for
ERCOT to take actions based on the location of natural gas facilities.
As part of its response to the February 2011 weather events, ERCOT is
taking steps to coordinate with natural gas regulators and industry
participants to address natural gas impacts of electric load
curtailment.
Question 4. ERCOT system set a new record for peak winter power
demand on February 10th, a little over a week after ERCOT was forced to
implement rolling blackouts. How were ERCOT' s system preparations and
operations different on February 10th from those on February 2nd? Are
there any preliminary observations ERCOT can make with respect to
reforms it may have implemented in system operations, communications or
in any other area?
Answer. While the weather was nearly the same with regard to
temperature on February 10 as it was on February 2, the wind speed was
significantly lower on February 10. Wind speed and wind chill appear to
have had an important effect on the generation outages experienced on
February 2. Additionally, it appears that those generators who had
experienced freezing equipment on February 2 had the opportunity to
correct issues, or perform additional winterization after the first
event. For both the February 2 and February 10 events, ERCOT procured
additional capacity through the ERCOT Reliability Unit Commitment (RUC)
process. The additional capacity procured on both occasions allowed
many larger generators to be warm and on-line. However, a large number
of generating units that were on-line February 2 tripped, whereas on
February 10 the generators called to come on line performed as planned.
ERCOT would also like to note that it sponsored a ``Lessons
Learned'' meeting with electric generators on February 8, 2011. In the
meeting, ERCOT explained the reasons for the Energy Emergency Alert
(EEA) and firm load shed as being related specifically to the large
number of forced outages and failure to start of several generators.
As a result of the lessons learned from the events during the cold
weather events between January 31 and February 6, 2011, ERCOT
implemented the following before its new winter peak was set on
February 10, 2011. These initial changes primarily addressed
communications shortcomings related to the February 2 events:
The phone numbers of several people outside ERCOT (selected
members of the DUCT the ERCOT Board of Directors) were added to
the emergency communication (NXT Notification) system. This
notification system sends pre-recorded voice messages if a
Watch is issued, if an EEA level is implemented, and if firm
load shed is ordered.
The responsibility to activate the NXT Notification system
was moved from the ERCOT Shift Supervisor to the Shift
Engineer. This helps to free up some of the Shift Supervisor's
time during an emergency.
To correct an inadvertent error with the email system, all
Board members were added individually to the
[email protected] email list.
ERCOT is also working with the PUCT and market participants to
ensure that appropriate weatherization standards are met, to address
both extreme cold and hot weather situations in the ERCOT region. In
addition, ERCOT is making efforts to improve coordination with
regulators and market participants in the natural gas industry to
effectively maintain reliability of electric and gas systems during
future challenges.
Fortunately, the peak demand on February 10 was met without ERCOT
having to resort to emergency procedures. ERCOT believes that the new
role for Shift Engineers in the ERCOT control room, as well as the new
communications procedures, will improve ERCOT's response to future
emergency events.
Question 5. ERCOT has said that it experienced issues with its
external communications that highlight the need for improved
communication with a variety of audiences, including the Texas Public
Utility Commission, market participants and the public. Where in that
list would entities like neighboring states, gas producers and gas
pipelines fall?
Answer. Section 4, Emergency Operations, of the ERCOT Operating
Guides outlines the steps taken by ERCOT and its member transmission
and generation companies during system emergencies. Section 4.5 Energy
Emergency Alert (EEA), provides for issuance of an ERCOT-wide appeal
through the public news media for voluntary energy conservation
(4.5.3(3)). Additionally, this section states that QSEs (Qualified
Scheduling Entities that represent generation owners) and TOs
(transmission owners who operate the transmission facilities, including
distribution feeders) will notify all the Market Participants they
represent of each declared EEA level (4.5.3(1)). Section 6.5.9.4 Energy
Emergency Alert of the ERCOT Protocols has similar language regarding
issuance of public media appeals to conserve energy (6.5.9.4(4)).
Through these various forms of public communication, ERCOT endeavors to
provide broad notice of the events in its region.
ERCOT also files daily reports with the North American Electric
Reliability Corporation (NERC) that profile ERCOT's forecasts for the
day, as well as identify EEA conditions. When emergency events are
developing, ERCOT also notifies Reliability Coordinators in neighboring
states through the electronic ``Regional Coordinator Information
System'' (RCIS). In addition, ERCOT provides specific notice to the
Southwest Power Pool (SPP), its neighboring electric grid operator.
ERCOT also files notices of emergency events to the U.S. Department of
Energy, almost immediately after such events occur.
As noted above, ERCOT does not have direct communications with gas
producers or gas pipelines during EEA events. As part of its response
to the February 2011 weather events, ERCOT is taking steps to
coordinate with natural gas regulators and industry participants to
address the electric/natural gas interface during extreme weather
events.
Responses of John Dumas to Questions From Senator Tom Udall
Question 1. I understand that ERCOT says that Texas is an infra-
state electric market. How do we square that with the reports that
blackouts in Texas caused around 30,000 New Mexicans to lose home
heating?
Answer. The ERCOT Protocols (Section 6.5.9.4 Energy Emergency
Alert) and Operating Guides (Section 4.5 Energy Emergency Alert (EEA)
establish rules related to the Energy Emergency Alert (EEA) action
plan. Part of this action plan is to shed load in order to match demand
and supply (maintain 60Hz frequency). When load shed is ordered, the
member transmission owners reduce their load by their load ratio share
as indicated in Section 4,5.3.4 Load Shed Obligation of the ERCOT
Operating Guides. ERCOT's role is to direct the quantity of load to be
curtailed during emergency conditions. ERCOT does not direct the
location of the load to be curtailed; this is up to the discretion of
the member transmission owners that serve the load.
ERCOT does not have access to information detailing the New Mexico
gas curtailments. If New Mexican natural gas industry participants
would provide ERCOT with documentation that identifies the specific gas
facility outages in the ERCOT region that allegedly impacted New Mexico
customers, ERCOT will ask transmission owners in the ERCOT region to
review their records for the times that these facilities were
interrupted during the February events.
Question 2. Why did ERCOT permit blackouts of critical natural gas
infrastructure in the Permian Basin that keeps New Mexicans warm during
the winter?
Answer. ERCOT's role is to direct the quantity of load to be
curtailed during emergency conditions. ERCOT does not direct the
location of the load to be curtailed; this is up to the discretion of
the member transmission owners that serve the load.
Question 3. How much money did the companies trading electricity
during the period around the blackout make? Could it be in the tens of
millions, or hundreds of millions of dollars, as claimed by Public
Citizen in Texas?
Answer. ERCOT does not have access to specific information
documenting how much individual companies made or lost in the ERCOT
market. The ERCOT market is designed to allow customers to buy and sell
power bilaterally weeks and months in advance. Customers also have the
ability to buy and sell power in the ERCOT Day Ahead Market and avoid
being exposed to real-time spot market prices. Generators that have
sold their power in the forward bilateral market or in the Day Ahead
Market are exposed to real-time spot market prices if they are not able
to physically cover the forward schedules that they have committed to
cover in the bilateral and Day Ahead Markets. This means that some
generators that were unable to generate on February 2, 2011 were forced
to buy energy at real-time spot market prices during a time of
extremely high market prices. It is clear from public reports that this
exposed some companies to large losses due to the events of February 2
in the ERCOT region--and that no market segments were immune from
losses. For example, Luminant (a generation company) disclosed that it
lost approximately $30,000,000 when two of its large coal plants (Oak
Grove and Sandow) came off-line due to the cold weather, resulting in a
capacity loss of nearly 2,700 MW. See Dallas Morning News, Feb 14,
2011.
Question 4. What happened during the 2003 severe winter storm that
led one large power producer in Texas to be fined $210 million, which
was reduced to $15 million? Is Texas doing enough to prevent market
manipulation?
Answer. There were no findings by the PUCT or the PUCT's
Independent Market Monitor (``IMM'') of market manipulation, nor were
there any administrative penalties assessed against any market
participants related to the 2003 severe winter storm. Although
referencing the 2003 severe winter storm, this question appears to be
in reference to the investigation initiated in 2007 by the PUCT and
prepared by Potomac Economics (in its role as the IMM for the ERCOT
wholesale markets) related to the wholesale market activities of
Luminant Power Generation Company, LLC\1\ from June 1 to September 30,
2005. Additionally, the activities of Luminant that were the subject of
this investigation were not the result of a severe weather event.
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\1\ The IMM investigation and subsequent enforcement action brought
by the PUCT Staff involved TXU Corp. and several of its affiliated
companies. After the enforcement actions were filed, TXU Corp. and its
affiliates were merged with Texas Energy Future Holdings Partnership.
As a result of this merger, TXU Corp. changed its name to Luminant
Power Generation Company, LLC. The TXU Corp. affiliates were also
renamed. For ease of reference, the name Luminant is used in this
response to include all of the companies involved in the PUCT
enforcement action.
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The PUCT Staff enforcement action against Luminant was based on a
2007 investigation by the IMM. In the enforcement action filed on March
28, 2007, PUCT Staff alleged that Luminant had engaged in market power
abuse as defined in Sec. 39.157(a) of the Texas Public Utility
Regulatory Act\2\ and Sec. 25.503(g)(7) of the PUCT's substantive
rules.\3\ In its March 28, 2007 filing, PUCT Staff recommended that
Luminant be ordered to pay $210 million, which consisted of an
administrative penalty of $140 million and refunds of $70 million.
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\2\ Public Utility Regulatory Act, TEX. UTIL, CODE ANN. Sec.
39.157(a) (Vernon 2007 and Supp. 2008) (PURA).
\3\ P.U.C. SUBST. R. 25.503(g)(7).
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On September 14, 2007, PUCT Staff filed a revised enforcement
action that corrected an error in the calculations and simulations
underlying its original enforcement action and recommended an
administrative penalty of $171 million. On July 22, 2008, the
Administrative Law Judges (of the independent State Office of
Administrative Hearings) assigned to Docket No. 34061 issued an order
which concluded as a matter of law that the appropriate methodology for
calculating separate violations under PURA Sec. 15.023 in this
proceeding would have resulted in a maximum penalty range of between
$7.9 million and $15.4 million. A copy of the *ALJ's order is attached.
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* ALJ's order has been retained in committee files.
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On November 26, 2008, Staff and Luminant filed a joint settlement
agreement in which Luminant agreed to pay an administrative penalty of
$15 million. In the settlement agreement, Luminant expressly denied any
admission of liability for the allegations set forth in Docket No.
34061.
The PUCT has informed ERCOT that it believes it has ample legal
authority to address market manipulation issues, and that the IMM and
the Commission have taken and will continue to take appropriate actions
to address market manipulation issues in the ERCOT market.
Significantly, when the alleged market power abuse violations which
were the subject of Docket No. 34061 took place, the maximum
administrative penalty allowed under PURA was $5,000 per violation per
day. Effective September 1, 2005, the Texas Legislature increased the
maximum administrative penalty amount to $25,000 per violation per day.
Question 5. Could you explain the electricity price cap changes
before the storm?
Answer. The electricity price cap change that occurred on February
1, 2011 was scheduled years in advance in PUCT rules adopted in 2007.
In the PUCT rules, specifically Section 25.505(g) of the Commission's
substantive rules, the increase to $3,000 was to be implemented two
months after the implementation of the new nodal market in the ERCOT
region, which occurred on December 1, 2010. The specific language from
the PUCT rules reads, ``Beginning two months after the opening of the
nodal market, the HCAP shall be $3,000 per MWh and $3,000 per MW per
hour.'' (Sec. 25.505(g)(6)(D)) The timing in the change of the pricing
rules was therefore set well before the weather events in February
2011.
Question 6. Would more interstate interconnections like Tres Amigas
near Clovis make Texas electricity more reliable and prevent rolling
blackouts?
Answer. An increase in the number of interconnection points would
only improve the reliability of the ERCOT grid during a capacity
shortage event if: spare generating capacity was available on the other
side of the tie(s) and was not being used to serve customers on that
side of the tie(s) during the event; and, sufficient transmission
capacity is available on both the sending or receiving side of the
tie(s) to allow energy to be moved from the spare generating capacity
to the tie (on the sending side) and from the tie to loads in ERCOT.
Additional interconnection(s) would not, per se, improve the
reliability of the Texas grid. The existing Direct Current (DC) Ties
into the ERCOT Interconnection are subject to curtailment when
emergency situations exist in the other interconnections, even during
comparatively mild operating conditions. ERCOT is monitoring the
development of the Tres Amigas project and its various ramifications.
Question 7. How many power plants in Texas went down during the
storm? The reports we see keep rising, first it was 50, then 83, then
over 100.
Answer. The numbers referenced in Question 7 are drawn from reports
prepared by ERCOT that are based on different time periods during the
February 2011 extreme weather events. To clarify the data, ERCOT offers
the following:
The numbers are associated with generating ``units.'' An
electric ``power plant'' may be made up of numerous ``units,''
particularly in large generating facilities. In addition, a
combined-cycle facility may be composed of more than one unit.
The data provided by ERCOT regarding the units that ``went
down'' are based are the number of units that experienced a
``forced outage,'' as defined in ERCOT's market rules, during
the relevant time period. The units involved may have
experienced outages for a significant period of time, or may
have tripped off briefly and returned to service sometime
during the day of the weather events.
The data gathered by ERCOT, on its initiative and in
response to data requests from the PUCT and the Federal Energy
Regulatory Commission (FERC), address several time periods.
These include the period leading to and during the rotating
outages ordered by ERCOT, the full operating day of February 2
(the day of the rotating outages), and the time period
extending from February 1-4, 2011 (the full time period of
unusually cold weather conditions in the ERCOT region).
ERCOT has developed its data on generation outages through
review of its internal operator records, Outage Scheduler
information, telemetry data received from generators, and
responses to information requests sent to generators. The data
has been more thoroughly vetted through this process than it
could be in the days immediately following the February events.
Based on these criteria, ERCOT has identified the following forced
outages during the time periods identified:
------------------------------------------------------------------------
Time Period Number of Units with Forced Outages
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February 2, 2011: Midnight to 5:43 50
AM (time of declaration of EEA3
and rotating outages)
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February 2, 2011: Midnight to 1:00 91
PM (ERCOT concluded rotating (originally estimated at 82 units)
outages at 1:07 PM)
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February 2, 2011: Midnight to 11:59 102
PM (the full operating day of
February 2)
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February 1-4, 2011: The full period 151
of the winter storm (data for this
period was developed in response
to PUCT request)
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ERCOT notes that there were also outages on February 2, 2011 in
parts of Texas outside the ERCOT region. Both El Paso Electric Company
and Xcel Energy experienced outages, and the outages in those
companies' territories also involved generation problems. The data for
areas outside the ERCOT region are not included in ERCOT data provided
above.