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Justice Dept. Warns Against Publishing Transaction-Specific Data

There is such a thing as too much transparency, the U.S. Justice Department told FERC in comments on the Commission's consideration of how to use its new responsibility to ensure market transparency under the Energy Policy Act of 2005. Justice advised that dissemination of company-specific or transaction-specific information could harm consumers by allowing companies to coordinate activities and drive prices up [AD06-11].

Information on market conditions and prices is available commercially and on FERC's web site and it contributes to efficient markets, both for trading and investment. However, providing too much detail will simply aid companies in "coordinating" or dividing up markets, the Justice Department (DOJ) said. While an agreement to coordinate markets would be an antitrust violation, companies can achieve the same end without an overt agreement -- and without an antitrust violation -- if they are able to see the transactions of their supposed competitors.

The agency directed its comments to the electricity market, but said they could apply as well to natural gas. The Federal Energy Regulatory Commission's transparency initiative applies to both markets.

Markets where there is a high concentration, such as in certain wholesale electricity markets when transmission constraints leave only a few generators capable of supplying energy to the constrained area, are particularly vulnerable, Justice said.

"Given that electricity and related markets may have characteristics that make them susceptible to coordination, the Commission in general should beware of increasing transparency by mandating rapid disclosure of highly-detailed, firm-or transaction-specific information. In particular, the Commission should be particularly wary of mandating disclosure of such information in spot markets for electricity and forward markets for standard block electricity products, both of which have many of the characteristics that may render a market susceptible to coordination," DOJ said.

The Justice Department recommended three safeguards against too much information: aggregation, masking and lagging. Aggregation, and masking the names of parties to a transaction both make it difficult for companies to monitor specifically what other companies are doing. Releasing information with a time lag makes the information less valuable since it cannot be immediately acted upon.

DOJ also noted there is market information already available in electricity and related markets, and advised FERC to "avoid unnecessarily increasing the likelihood of coordination in them."

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