In separate filings Wednesday, the American Gas Association (AGA) and the American Public Gas Association (APGA) buttressed each other’s comments and said they generally support — with a few qualifiers — the proposed rulemaking by FERC to revise the transparency regulations for wholesale natural gas transporters and sellers (see Daily GPI, April 20).

The Federal Energy Regulatory Commission’s (FERC) notice of proposed rulemaking (NOPR) would revise the transparency provisions of Section 23 of the Natural Gas Act and the Energy Policy Act of 2005 [RM07-10 and AD06-11]. Among other things, FERC would require intrastate gas pipelines to post on the Internet the daily capacities and volumes of natural gas flowing through their major receipt and delivery points. Buyers and sellers of more than de minimus amounts of natural gas also would be required to report the numbers and volumes of relevant transactions for the previous calendar year.

In addition, holders of blanket marketing certificate authority or blanket unbundled sales services certificate authority would be required to notify FERC annually as to whether they reported their transactions to publishers of electricity or natural gas price indexes and whether the reporting conformed to certain standards.

According to FERC, the revisions would allow the Commission to annually estimate for the first time the size of the physical gas market in the United States and determine the size of the fixed-price trading market, which forms price indices.

In its 16-page filing, the AGA commended the market transparency efforts and said the goal of the proceeding should be for FERC “to obtain meaningful information necessary to assess whether natural gas prices accurately reflect supply and demand fundamentals and to make this information available to market participants.”

The APGA, in an 11-page filing, generally concurred with the AGA’s comments, but it also pushed for FERC to go even farther in mandating some of the transparency proposals.

“APGA has long maintained that enhanced and timely access to supply/demand data was required in order to dampen the volatility in the natural gas markets,” it stated. “…for too long, the weekly storage report issued by the Energy Information Administration has been the focus of the bulls and the bears that stand to make (and lose) huge amounts of money from market volatility. The data that the Commission now seeks to elicit from the intrastate market will, along with the data already available from the interstate market, provide far more meaningful supply/demand data than has been available to the public to date and should provide the proper context for the weekly storage report and other data that are used to drive the market today.”

As a founding member of the Coalition for Energy Market Integrity and Transparency in 2002, the APGA said it was “pleased that suggestions that were once deemed extreme are now considered mainstream. While much remains to be done, much has been accomplished, both on Capitol Hill…and at the Commission…” FERC “has made an open and shut case as to its authority under Section 23 to require the data in question to be posted…and doubts that any party will seriously question the legal basis for what the Commission is proposing.”

The APGA noted that “at least some of the affected intrastate pipelines will try to convince the Commission that the burden is substantial and thus that the Commission should retract, or at least retreat from, its proposal. While APGA does not question that there may be some additional costs imposed on intrastate pipelines to comply with the FERC proposal, we believe that the affected pipelines for the most part already have such information readily available, and thus the added burden will be slight. Further, the public benefit to be accomplished under the proposed rule will far outweigh the increased burdens, if any, associated with the reporting requirement; thus, APGA urges the Commission to move ahead as promptly as possible.”

The proposal to require certain gas buyers and sellers to report transactions in an annual filing is not enough, stated the APGA. FERC “could and should go further…and while it has some questions about the content of the proposal…APGA strongly supports what the Commission is proposing as an important first step in the journey toward full transparency in the physical market.” The proposed revisions offer “substantial benefits that will advance the cause of market transparency.”

FERC “seems to recognize that mandatory reporting of fixed-price transactions would provide considerable benefits, a conclusion with which APGA heartily agrees.” The APGA also scolded FERC for not requiring mandatory reporting at this time. FERC’s reasons “are without basis,” it said.

APGA recommended that the survey form in the NOPR be enhanced to clarify what fixed-price volumes are reported to price index developers. For those volumes not reported, the APGA recommended the participant indicate why volumes were not reported.

“This seems like the logical place to gather the information that shows what relative percentage of all fixed-price transactions are reported and thus become part of the index pricing data,” the APGA stated. It said it “has always been concerned that, because less (perhaps far less) than all fixed-price transactions are reported, the price indices may not be an accurate reflection of underlying fixed-price trading. Collecting this data, therefore, could be of substantial assistance to the Commission and the market participants on a go-forward basis.”

In its filing, the AGA stressed that “at the outset,” FERC should “temper any rules adopted in this proceeding to avoid unfairly penalizing market participants for inadvertent errors that may occur in the course of good faith compliance with the posting and reporting requirements.” Consistent with precedent, the AGA said the Commission “should explicitly state as part of the final rule that it will not prosecute, penalize or otherwise impose remedies on parties for inadvertent errors in posting or reporting in compliance with the final rules in this proceeding.”

AGA noted that in its prior proceedings involving price discovery, FERC presumed that parties submitted information in good faith.

“The Commission should provide market participants with the same assurance of a safe harbor for good faith compliance with the posting and reporting obligations in the final rule,” the AGA filing stated. “Moreover, AGA recommends that the Commission require that the flow information required to be posted represent a best estimate of actual flows. In that way, new potential liability for errors in posting will be lessened, and all market participants will understand and base their trading decisions on the fact that the posted data reflect a best estimate.”

The AGA also recommended that the proposed rule to post daily flow information be limited to intrastate pipelines and not apply to Hinshaw pipes, local distribution companies or distribution companies with FERC-approved service area determinations.

“These entities are separate and distinct from a statutory and regulatory standpoint from intrastate pipelines, and proposed new Section 284.14 should not apply to them,” stated AGA. “Moreover, broadening the posting requirement to include such entities would not provide additional information of sufficient value to justify the burdens on such entities. These entities operate in downstream markets served by interstate pipelines, and, with few exceptions, there are no market centers on these systems that would provide information needed to assess the natural gas supply and demand picture beyond what could be and is currently being obtained from the interstate pipelines or is available from other sources of contemporaneous data.”

The AGA said its members support efforts to obtain information regarding the availability of competitively priced natural gas supplies that would inform market participants’ decision-making. It generally supported FERC’s proposed annual reporting requirement for transaction data from market participants “because it could provide valuable information regarding the size of the physical natural gas markets.”

However, like the APGA, the AGA said FERC should clarify the scope of the annual transaction data and limit the data to physical natural gas transactions at wholesale and in interstate commerce and not include retail sales or volumes transported for others under retail choice programs.”

Finally, the AGA recommended that FERC allow transaction data to be filed on May 1 of each year instead of Feb. 15 to allow companies to complete invoices and collections and resolve any billing disputes or discrepancies. It also supported the Commission’s proposal to require blanket certificate holders to report their price reporting status on an annual basis.

The APGA posted its filing at www.apga.org/testimony-filings/071107APGAFERCComments.pdf. The AGA filing may be found at www.aga.org under “AGA Initial Comments RM07-10-000-1.”

FERC has scheduled an informal staff workshop on the NOPR beginning at 9:30 a.m. EDT on July 24 at the Commission’s offices in Washington, DC. For information, send an email to Lee-Ken.Choo@ferc.gov.

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