Echoing the sentiments of interstate natural gas pipelines and investor-owned utilities, the American Gas Association (AGA) has called on FERC to tone down its proposed rule to impose quarterly financial reporting requirements on jurisdictional companies, saying the agency is demanding far more information than what is needed for it to effectively oversee energy markets.

The notice of proposed rulemaking (NOPR), which FERC issued in late June, would require natural gas, electric and oil pipeline companies to provide quarterly financial reports, on top of the annual reports already being submitted, to the Commission so that it can “achieve the goal of vigilant oversight” of the industry. The quarterly reports would provide basic financial statements, including a management discussion and analysis of financial conditions and results of operation. Companies that already file annual reports (Forms 1, 1-F, 1 or 2-A, or 6) would be subject to the quarterly filing requirements under the proposed rule [RM03-8].

The proposed rule is “beyond what is necessary to achieve [FERC’s] stated goals” of keeping closer tabs on the energy market and identifying and evaluating emerging financial trends, the AGA told FERC.

AGA contends companies that now file annual Form 1-A or 2-A “should not be further burdened by the quarterly reporting obligations imposed by the proposed Form 3-Q.” It noted this issue was “most germane” to its local distribution company (LDC) members. The NOPR calls for the Commission to seek the expanded quarterly financial information from “major participants in the energy market,” the LDC trade group said, adding that requiring quarterly reports from “non-major entities does not further the Commission’s objective” to be more vigil.

Some LDCs must file the annual Form 2-A because they own small FERC jurisdictional pipelines, or they are required to submit Form 1 or 2 because of their ownership of electric transmission facilities or interstate pipelines. Other LDCs will be “indirectly affected” by the proposed rule because most state regulatory commissions, which currently require Form 2s, often incorporate reporting changes enacted by FERC, the AGA said. The LDCs also are concerned the proposed quarterly reporting requirement on interstate gas pipelines will result in higher rates to customers, which include LDCs.

Seeking to further narrow the scope of the NOPR, AGA asked FERC to clarify that the quarterly reporting requirements would only apply to those parties who currently file annual financial reports at the agency. “Particularly, the Commission should clarify that holders of limited jurisdiction certificates…are not required to adhere to these reporting requirements by virtue of the regulatory text that expresses the certificates are of a limited nature and do not subject the holder to the Natural Gas Act jurisdiction of the Commission.”

The AGA said it “[was] troubled that the proposal may blur previously well-defined lines between financial disclosure to the Securities and Exchange Commission (SEC) for investor purposes and financial disclosure to FERC for consumer purposes.” The worst result would be “increased and largely duplicative reporting obligations on companies that only create chaos and confusion for analysts, investors and consumers.”

To avoid this, the LDC group advised the Commission to “closely scrutinize what information may be filed already with the SEC and what information is necessary for FERC itself to have in hand to serve…its jurisdictional ends.” While the SEC does not demand that companies submit “jurisdictional entity level data,” it does require them to file reports by business segment, the AGA noted.

“The Commission should reconsider whether the SEC filings are a meaningful substitute to the additional detailed reporting requirements it seeks to impose by this proposed rule.”

Lastly, the AGA noted that the schedule for filing annual and quarterly financial reports at FERC would overlap with energy companies’ deadline for filing 10-K and 10Q reports at the SEC. “By all accounts, preparing both the SEC and the FERC filings simultaneously will require staffing increases in order to meet this peak workload…The Commission can easily address this deficiency, however, by adjusting its filing requirements.”

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