Contracts for Gas Prioritization to Power Plants During Winter Emergencies

Fuel supply interruptions at gas-fired power plants are a leading cause of power outages during winter storms, often affecting even plants holding firm contracts. These challenges are especially acute in the Northeastern U.S., where pipeline congestion during peak heating demand restricts gas deliveries to the power sector. This paper examines the potential of Advanced Exchange Agreements, under which industrial customers transfer firm supply and transportation capacity to power plants during emergencies in exchange for compensation. We develop an optimization framework for the joint operation of gas and electricity systems during winter emergencies. The framework captures competing gas uses, contract types, and curtailment priorities, and is applied to a system representing the Northeastern U.S. during the 2014 Polar Vortex, leveraging a novel dataset on gas deliveries by sector and contract type. Our results show that the net benefits of the proposed initiative vary widely (ranging from 1.0% to 40% of baseline costs on days with unserved electric energy), based on assumptions on the share of firm contracts held by industrial customers and the subset of power plants eligible for participation in the bilateral agreements. Limiting power plant participation in the Advanced Exchange Agreements emerges as a greater barrier to realizing the potential benefits of the proposed initiative than modest firm contract holdings of industrial customers.