More Energy Firms Than Not Say They Are Reporting Data on Trades to Index Publishers
More high-profile, FERC-regulated energy companies are continuing to report data on natural gas and power trades to index publishers -- or plan to resume the practice soon -- than those who have opted to discontinue the practice, according to a review of the filings on the Commission's website.
Jurisdictional energy companies, which hold natural gas blanket marketing certificates or electric market-based rate authority, were required to notify the Commission of their price-reporting status in compliance with a final rule governing their behavior that was approved by FERC in November and took effect in December (see Daily GPI, Nov. 14).
A review of the agency filings showed 12 major energy companies so far have told FERC that one or more of their subsidiaries are reporting data on gas and power trades to index publishers, or have plans to resume the practice soon. Two other major energy corporations notified the agency that certain subsidiaries were not reporting data on trades, but index publishers are receiving trade data from the companies through other affiliates.
High-profile players who told FERC they are reporting include American Electric Power (AEP) affiliates, KeySpan subsidiaries, Southern California Gas, Coral Energy Resources, PSEG Energy Resources & Trade LLC, Duke Energy affiliates, Puget Sound Energy, Consolidated Edison Co. of New York Inc. (and affiliates), Tractebel Energy Marketing Inc., Mirant Americas Energy Marketing LP and Northern Illinois Gas Co.
AEP cited the "commercial significance to the natural gas industry...of using published indices to price transactions" as the basis for continuing to report prices to indexes that are compiled by gas publications, such as Natural Gas Intelligence (NGI), Natural Gas Week, and Platt's Inside FERC's Gas Market Report and Gas Daily.
Both El Paso Merchant Energy LP and Reliant Resources' affiliates alerted the Commission that while they do not report gas or power prices now, they hope to return to the practice soon.
"A precursor to any resumption of trade data reporting must include the establishment of appropriate protocols and procedures in conformance with...regulatory requirements and policy statements," El Paso Merchant said. It said it hopes to have the procedures in place in early 2004.
Likewise, Reliant Resources said it "is now working to create processes through which it would resume such reporting in the near future," and will notify FERC within 15 days of the change in its reporting status.
A slightly lesser number of high-profile, jurisdictional companies (10) said they were not presently reporting prices on gas or power sales to index publishers. None of the firms indicated they had any plans to start or return to the activity in the near term.
Key non-reporting companies are Enron's Portland General Electric, PacifiCorp, Constellation Power Source, Entergy-Koch Trading LP, Amerada Hess Corp., Avista Corp., Peoples Energy affiliates (North Shore Gas Co. and Peoples Energy Resources Corp), MidAmerican Energy and NiSource Inc. affiliates. Canada's Powerex Corp. was half and half -- "no" on gas price reporting, but "yes" to reporting of data on power transactions to index publishers in the United States.
Many believe the Commission's new price-reporting standards, which govern the behavior of the data providers and index publishers, have had a "chilling effect" on the energy industry, causing companies to quit reporting prices out of fear of enforcement action by either the FERC or Commodity Futures Trading Commission (CFTC).
FERC Chairman Pat Wood conceded as much earlier this week. "I'm under no illusion that everybody is just thrilled to death about...the basic standards that FERC set forth," he told reporters. In addition to the new standards, the CFTC's enforcement actions against several energy companies for the reporting of fake pricing information "are probably sobering to a number of CEOs [who] are saying that the risks of getting swept up into this [price reporting] are not attractive."
Since December 2003, the CFTC has entered into eight settlements with energy companies for supplying fake data to index publishers to skew prices, collecting $130 million in civil penalties. Last fall, it also filed a complaint in federal district court in Ohio against AEP for manipulating gas prices.
But not everything can be blamed on the CFTC enforcement actions or FERC's tough standards. The fallout from the Enron Corp. bankruptcy knocked out a number of major marketers and traders, who prior to the Enron implosion had supplied the bulk of the data on natural gas trades to index publishers.
As the number of mega-marketers that traditionally reported trade data to index publishers has receded, more and more producers have taken over gas sales and most are supplying trade data to index publishers.
"We have come a long way from the nightmare market of 2002," Ellen Beswick, NGI publisher said, advising that NGI's list of major survey holdouts has narrowed considerably. "Achieving a robust market and reporting system is going to take time. We made major progress in 2003 and we believe that given the right environment we can make significant achievements in 2004. There are only a few really key companies critical to the survey that we don't have contributing. Now, if we could just get the industry to do more fixed price trading..."
The key question now is -- will FERC mandate what is now a voluntary system for the reporting of data on gas and power transactions to index publishers. The Commission last year gave the industry a short-term window of opportunity -- through the winter -- to get the kinks out of the price-reporting system and report greater volumes of transactions to ensure market liquidity. Absent widespread participation by energy companies in price reporting, the agency warned it would consider mandatory reporting.
Wood indicated this week that the Commission would revisit the issue in March. At that time, the agency plans a second survey of companies that supply data on gas and power trades to indexes.
Asked by a reporter if mandatory price reporting was "inevitable" in light of the apparent tepid energy company participation in the indexes, Wood quipped, "I don't know that it's inevitable." But he also didn't rule it out.
Beswick pointed out that in its regular operations with regulated companies the Commission exerts pressure and makes every effort to have the parties achieve settlements that are in their own best interests. "This strategy has been working in the case of voluntary price surveys as well, and given the progress so far, we hope the Commission will continue on this course."