NECPUC SYMPOSIUM Concurrent B Natural Gas Conditions Facing New England

1. NECPUC SYMPOSIUMConcurrent BNatural Gas Conditions Facing New England Mark R. Babula ISO New England Inc. Supervisor - Power Supply & Reliability June 17, 2002

2. Changing Landscapes • In the very near future, the majority of New England’s electric generating fleet will be fueled by a single fuel source - natural gas • January 2001 - ISO-NE publishes its Phase I Gas Study • Significant feedback from natural gas sector initiates a need to look further at gas infrastructure proposals • February 2002 - ISO-NE publishes its Phase II Gas Study ISO New England Inc.

3. What the ISO Gas Studies Were • An assessment of New England’s existing and future natural gas pipeline infrastructure (deliverability) • An assessment of electric and gas-side contingencies that may impact the operation of merchant generation • Additional assessments of: • Pipeline operations under restricted conditions • Distrigas LNG • System restoration of electric power grid ISO New England Inc.

4. What the ISO Gas Studies Were Not • Not an assessment of natural gas supply & storage • Not an assessment of natural gas commodity or transportation prices • Not an assessment of natural gas prices on New England’s Electric Energy Clearing Prices (ECPs) • Not an assessment of LDC operations/contracting issues • Not an assessment of electric system resource adequacy or a fuel mix study ISO New England Inc.

5. ISO-NE Gas Study Findings • Gas-fired generation in New England will soar from 16% in 1999 to over 50% by 2004 (high % w/attrition) • Insufficient gas pipeline delivery capacity to satisfy the winter peak day coincident demand from both LDCs and the electric power generation sector • LDC’s will always be served first due to contracting of primary firm transportation rights • Deliveries to the electric generation sector is subordinated due to contracting of secondary non-firm transportation rights ISO New England Inc.

6. ISO-NE Gas Study Findings • One man’s delivery shortfall is another man’s fuel procurement strategy: the so-called “generation-at-risk” • Winter 2002/03 peak day = 3,100 MW (Reference Case) • Winter 2002/03 peak day = 3,950 MW (High Case) • New England has no summer season gas deliverability issues (except for maintenance?) • Improved supplies from Maritime Canada will help pipeline companies respond to gas-side contingencies ISO New England Inc.

7. ISO-NE Gas Studies Findings • Increased vaporization capability at Distrigas LNG is targeted for the new Sithe New Mystic plant - Distrigas availability becomes vital until the Boston/NEMA transmission upgrades materialize • Additional fuel oil volumes of up to 25% of the region’s daily delivery capabilities would be required to meet merchant generators’ backup fuel requirements in the winter (sustainability issues) ISO New England Inc.

8. ISO-NE Gas Study - System Restoration • NEPOOL System Restoration Working Group Question: “What is the impact on New England’s natural gas infrastructure upon partial or full collapse of the bulk electric power grid?” • Assess impacts on gas-side operations (similar to Y2K) • Compressor stations: gas-fired versus electrical drives • Battery backup capabilities on critical equipment & sustainability issues • Revised system restoration procedures/plan and address black start capability issues ISO New England Inc.

9. ISO-NE Gas Study Recommendations ISO-NE Should: • Identify merchant fuel transportation contracts • Safeguard choices for designation of operating reserves • Know which generators have on-site compression • Understand back-up fuel capabilities and investigate ability to “switch on the fly” • Gain access to the gas pipelines’ electronic bulletin boards for real-time operational data on gas system dynamics ISO New England Inc.

10. Expanding Horizons - New York Gas Study Spring 2001 - NYSERDA & NYISO joint venture project to evaluate the operation and interaction of gas & electric systems in New York state - 4 Study Objectives • Objective 1: Better understanding of the potential use of gas for power generation and the pipelines’ ability to deliver • Objective 2: Develop a model of pipelines serving Northeast & NY to determine lower/upper bounds of gas delivery capability • Objective 3: Examine the operation of the gas & electric systems under various contingencies • Objective 4: Technology transfer ISO New England Inc.

11. Expanding Horizons - New York Gas Study • NY Gas Study Technical Evaluation Panel Members: • Empire State Development • The Energy Association of New York State • New York Gas Group • NY Independent System Operator • NY State Dept of: Environmental Conservation, Public Service, Transportation & NYSERDA • Chosen Vendor = Charles River Associates • Project completion date - Fall 2002 ISO New England Inc.

12. Expanding Horizons - Multi-RegionalGas Study • Multi-Regional Northeast Gas Study: • Encompassing the control areas of NE, NY, PJM & IMO • Steering Committee: ISO-NE, NYISO, PJM, IMO, NERC/NPCC • IMO = Project Manager • RFP issued in Spring 2002 • Vendor evaluation/selection by Steering Committee • Phase I - steady-state modeling of 4 regions • Phase II - multi-area contingency analysis & deliverables • Project completion date - Summer 2003 ISO New England Inc.

13. Back to Home - Let’s Address the Issues • New England Gas Association’s Advisory Committee on Power Generation • A new liaison to the electric sector • Committee membership represents companies providing the upstream transportation for nearly 100% of the natural gas consumed within New England • ISO-NE is working with the NEGA ADCOM to attain: • Greater mutual education and understanding of both the electric and gas industries • Increased communications • Reliable and efficient operation of the regional energy system ISO New England Inc.

14. Questions? ISO New England Inc.