FERC last week voted out a final rule that imposes a monthly (price and volume) reporting requirement on natural gas transporters and sellers to California until September 2002 in an attempt to bring gas prices there in line with other major markets around the country.

The reporting requirements, which the Commission proposed in late May, will target all sellers of natural gas along with interstate pipelines and local distribution companies (LDCs) that serve the California market [RM01-9]. This applies to intrastate and Hinshaw pipelines as well, the agency said. FERC plans to collect the data on a monthly basis for the period between Aug. 1-Jan. 31, 2002, and then extend it to Sept. 30, 2002 upon approval by the Office of Management and Budget.

FERC said the individual purchase and sales transactions reported to the agency will be exempt from public disclosure under the Freedom of Information Act (FOIA), and also noted that respondents will be able to request privileged treatment of other information supplied. “There is no overriding interest in disclosure of information about individual sales transactions,” the Commission order said, adding that its goal is “to understand the operation of the market for gas sales into California, not to investigate the conduct of particular participants in that market.”

But the data involving “transportation contracts with pipelines, such as capacity-release transactions, would not be entitled to privileged treatment because pipelines are required to post that type of information on their web sites,” it noted.

While a number of sellers and pipelines questioned the Commission’s authority to gather this data, FERC affirmed last week that it has broad powers under the Natural Gas Act (NGA) to require the reporting of deliveries, sales and purchases — both jurisdictional and otherwise — to find out why gas prices in California have been higher than those in other major markets, and for the purpose of possibly recommending legislation to Congress.

“The Commission needs the information it is seeking through this reporting requirement to determine what actions it can and should take with respect to the current problem involving the high prices of natural gas in California,” last week’s order said. It rejected suggestions that market participants be permitted to submit aggregated data, rather than information on individual transactions.

FERC noted that it doesn’t plan to expand the reporting requirement to sellers, pipelines and LDCs in other parts of the country. “While there have been natural gas price increases in the rest of the country, it is only in California that prices have been significantly different from prices elsewhere.”

The level and detailed nature of the market data that the Commission is seeking from gas market participants “is not insubstantial,” acknowledged Commissioner Pat Wood III. “I wish we had not been in this situation. But until we [get] a real clear understanding for why there’s substantial price differential between the selling hubs in those production areas and the consuming hubs in southern California that we do not see elsewhere in the country, I think we’re going to have to keep pushing and prodding with every regulatory tool in our chest,” he said during FERC’s regular meeting, which was the last before its August break.

“I hope to see really this problem resolve itself through either market information, such as is being disclosed here, …or through enhanced investment and construction…or something else.”

The reporting requirement “is probably considered a burden by the interstate pipelines, the LDCs and other sellers of natural gas in California,” Commissioner Linda Breathitt said, but the information garnered “I believe will provide invaluable insight into transactions on the natural gas side.” The Commission opted to keep the requirement in effect until Sept. 30, 2002 because that’s when the price mitigation for power markets in California expires.

Breathitt believes the new rule “strikes the appropriate balance between our need to monitor high prices of natural gas versus any burden associated with the reporting requirement.”

Chairman Curt Hebert Jr. said FERC was not trying to make things difficult for California market participants, but rather it was “just trying to understand and monitor markets” in an appropriate fashion. “I would invite the industry…to try and provide as much information as possible to get to transparency, while we’re trying to understand better [the] markets.”

Under the reporting requirement, the Commission plans to elicit very detailed data relating to all delivered volumes and sales (including names of buyers) into the California market, such as transportation rates, the daily operational capacity of pipelines to and in the California market, the actual volumes flowing to and in California, and the gas sales and the transportation requirements of LDCs.

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