In anticipation of FERC’s Friday technical conference on market transparency, the American Gas Association (AGA) has recommended that the federal regulatory agency take steps to improve the public confidence in the markets by establishing a system that would mandate the reporting of fixed-price trades by all market participants to publishers of price indexes.

“AGA believes it is time for the FERC to develop a system that mandates reporting of fixed-price trades by all market participants,” Jane Lewis-Raymond, vice president and general counsel of Piedmont Natural Gas of Charlotte, NC, is expected to say during the technical conference at FERC’s headquarters in Washington, DC. The conference is intended to help the Federal Energy Regulatory Commission develop ideas to implement provisions of The Energy Policy Act of 2005 that are designed to prevent market manipulation by improving transparency.

“Voluntary reporting has been helpful, but [it] does not appear to go far enough in ensuring greater market confidence today. We believe that a mandatory price reporting program would improve the overall understanding of the natural gas marketplace by increasing the transparency of the volumes bought and sold at fixed daily or monthly prices,” she said on behalf of the gas utility group.

“We also believe…that counterparty identification (on a confidential basis) would help with the verification and calculation of accurate market prices,” Lewis-Raymond noted. “AGA does not make these recommendations lightly and is very sensitive to the reporting burdens that could arise under an ill-conceived mandatory reporting system. AGA urges the Commission to move carefully and with detailed participant insight in constructing a mandatory reporting system,” she said. A large part of trading by AGA’s member LDCs is either indexed or is done outside of the stated time periods, and so would be exempt from the mandatory reporting.

Lewis-Raymond proposed that FERC take the following actions:

In contrast, the Natural Gas Supply Association, which also will be represented at the technical conference, is opposed to mandatory reporting of prices. The producer group earlier this week released the results of a study by Peter Locke, associate professor at the M.J. Neeley School of Business at Texas Christian University, that found the current natural gas market to be sufficiently transparent (see Daily GPI, Oct. 12). It also found that because LDCs index heavily rather than do fixed price trading, the index prices are missing input from an important element of the market, and that creates an inefficient market.

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