FERC should put off finalizing its proposed rules on price reporting to publications until it has a chance to evaluate how well its voluntary guidelines are succeeding, producers said in comments filed Monday (RM03-10). If the Commission does proceed with its proposed amendments to blanket certificates, it needs to refine its definitions of prohibited behavior, producers and others said.

“The new reporting guidelines in the Policy Statement on price reporting reformation provide regulatory certainty encouraging companies to increase reporting, thereby bolstering confidence in price in price indices,” the Natural Gas Supply Association (NGSA) said. “Given the accomplishments and related actions to implement those measures in the Policy Statement, the Commission may want to consider further action on the NOPR in the same time frame as when it evaluates the improvements made to price reporting…” FERC has indicated it would pursue a voluntary reform course, giving the market time to recover, through next Spring.

If it does decide to set a new regulatory scheme over published prices, FERC should be aware that its use of the “disgorgement of profits” remedy is misplaced, since that refund remedy is not permitted under Section 5 of the Natural Gas Act, which has been interpreted by the courts as allowing only prospective remedies, NGSA said. This is pertinent because in proposing to condition sales certificates under Section 7 of the NGA, “as proposed in the instant rule, [the Commission] cannot be permitted to diminish an entity’s rights under Sections 4 and 5.”

Beyond that FERC’s proposed NOPR “permits complainants to file complaints any time prices rise. The NOPR creates refund liability for manipulating (or attempting to manipulate) prices, conditions or rules that result in ‘prices that do not reflect the legitimate forces of supply and demand.'” This standard is vague, as even noted economists engage in extensive debates over the definition of legitimate forces of supply and demand. There should be an “intent” to manipulate, NGSA said.

On the other side, the NOPR would condemn “transactions without a legitimate business purpose,” a standard which “is undefined and potentially undefinable. Market participants should not be required to function with this level of ambiguity and regulatory uncertainty.”

TXU Portfolio Management Co. LP agrees that “intent” is a necessary element. It notes that while some transactions may not appear to reflect a legitimate business purpose, they may, in fact, be necessary responses to errors or changing conditions.

Also “wash trades” should be refined since it “could be interpreted to prohibit legitimate exchange transactions that occur through displacement or backhaul and are common in the natural gas industry,” TXU continued. The definition of wash trades should be similar to one that had been in the Sen. Pete Domenici, R-NM version of the energy bill which refers to a deal entered into “with the intent to deceptively affect reported revenues, trading volume or prices.”

Offending “Collusion” should be “as defined by federal or state antitrust laws.” Also, companies should warrant that the information submitted was to their best knowledge and belief accurate at the time it was submitted. Companies should not be liable if inadvertent errors are later discovered.

TXU also believes a “safe harbor” provision should be added as an additional assurance that parties submitting data to index publishers would not be prosecuted for unintended errors.

Comments on FERC’s proposed conditioning of blanket certificates already have been filed by the American Gas Association (see Daily GPI, Aug. 13) and Encana Marketing USA Inc. (see Daily GPI, Aug. 15).

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