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By Thomas Tubman, American Energy Coalition
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National Grid and Orange and Rockland
Utilities, Inc. (O&R) all notified their
“interruptible customers” that they needed
to stop burning natural gas on January
3rd, 2014 due to a forecasted cold air mass
expected to envelop the Northeast on that
day, and linger for several days.
A few days later, as the weather moder-
ated and temperatures warmed, the utilities
notified their interruptible customers
that they could begin to burn gas again.
Con Edison and National Grid had taken
similar steps the previous winter when the
temperature dropped below 20 degrees
and remained there for a few days, but
neither this winter’s service interruption
nor last year’s drew any press coverage of
consequence.
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Service interruption has been common
practice over the years, and utilities do this
because they know the limitations of their
distribution systems and the interstate
transmission lines that bring the fuel to the
region to feed their systems. As the weather
gets colder, higher volumes of gas are con-
sumed for space heating and electric power
generation. The general rule of thumb
over the years has been 20 degree outside
temperature and below is the point where
they max out their ability to supply all of
their customers.
So to address this supply limitation, the
utilities’ have created a “class” of customer,
with the ability to “change over” to an alter-
nate fuel (usually fuel oil). The utilities can
“shut off” these customers when needed
and divert their available natural gas to
other customers.
The quid pro quo here is that the utilities
offer to sell these “interruptible customers”
natural gas at a discounted rate, during
relatively warmer outdoor temperature
conditions, if the customer agrees to stop
burning gas when notified by the utility to
do so. Interruptible customers are usually
larger volume commercial accounts like
apartment buildings, hospitals and schools.
Many commercial industrial burner manu-
facturers offer an “Automatic Temperature
Changeover” option that includes an out-
door sensor, specifically designed for this
type of interruptible application.
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This may sound like a reasonable
business model, but it points out two very
inconvenient facts that the utilities don’t
like to talk about. The first inconvenient
fact is that the natural gas infrastructure is
already limited and cannot reliably supply
their customer base if the temperature falls
below 20 degrees for any extended period
of time.
I will return to this point later, as it has
important implications for both the Oilheat
Industry as a whole and states
promoting natural gas expansion
initiatives. The second incon-
venient fact is that the utilities
need to be able to shut off these
“interruptible customers,” and
without that option they simply
could not reliably supply all their
customers during cold weather
periods.
Since the most common alternate fuel
consumed by these interruptible accounts
when told to stop burning gas is fuel oil, the
utilities are in effect transferring the burden
of their limited ability to supply their
customers onto the heating oil market, and
at a time when Oilheat too is experiencing
higher than normal demand from its own
customer base.
Oftentimes this causes the price of fuel
oil to spike and can even strain the entire oil
heat supply chain. So oil heat customers can
see higher prices during these events driven
mainly by the additional demand created
by the need to supply interruptible gas
customers at a time of already high demand
for fuel oil. I would suggest to you that this
is unfair to retailers and especially unfair to
loyal oil heat customers and shouldn’t be
allowed by utility regulators.
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With the plentiful supply of natural
gas here in the United States, others have
pointed out this limited ability to move that
gas to where it is needed during periods
of high consumption. ISO New England’s
CEO, Gordon van Welie, testified before
a U.S. House of Representatives subcom-
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