FERC Thursday issued proposed rules that seek to revise existing agency regulations to improve the transparency of transportation and sale of wholesale natural gas in the United States.

The notice of proposed rulemaking (NOPR) would require intrastate gas pipelines to post on the Internet the daily capacities and volumes of natural gas flowing through their major receipt and delivery points. It also would require buyers and sellers of more than de minimus amounts of natural gas to report the numbers and volumes of relevant transactions for the previous calendar year. FERC is seeking comments on whether the reporting requirement should be shorter (monthly, for example) rather than annually.

The Federal Energy Regulatory Commission further would require each holder of blanket marketing certificate authority or blanket unbundled sales services certificate authority to notify the Commission annually as to whether it reports its transactions to publishers of electricity or natural gas price indexes and whether the reporting conforms to certain standards [RM07-10, AD06-11].

The proposed rule would allow FERC to annually estimate for the first time the size of the physical natural gas market in the U.S., to assess the importance of index pricing in that market and to determine the size of the fixed-price trading market, which forms price indexes, FERC said. This will make it easier for the Commission to assess market forces and detect market manipulation, it noted.

The proposed rule would implement expanded FERC authority under Section 23 of the Natural Gas Act, which was added by Congress in the Energy Policy Act of 2005.

"I think these are important orders" that will "improve confidence" in the current natural gas markets, said FERC Chairman Joseph Kelliher. "The proposed rule would significantly increase the transparency of wholesale natural gas markets by providing greater information regarding wholesale trading and physical gas flows," he noted.

"The transparency proposed rule would apply to entities [intrastate pipes] beyond our traditional jurisdiction. That is because we interpret the transparency provisions of the Energy Policy Act to authorize us to require disclosure of market information from otherwise nonjurisdictional entities," Kelliher said.

The proposed rule does not call for mandatory reporting of gas prices to published indexes. "In my view the record does not support mandatory price reporting. In fact, the record suggests that there may be less liquidity at gas price indices if we mandated price reporting, as the number of fixed-price transactions decline in favor of index pricing."

Commissioner Suedeen Kelly agreed that the proposed rule would provide a fuller picture of the wholesale gas market, thus increasing transparency for customers and regulators. "Interstates are already required under Order 637 to post capacity and scheduled volume information with the intention of allowing shippers to monitor capacity availability. But this information does not provide a complete picture of gas flows in the U.S. or even those flows directly relevant to the pricing of natural gas flowing in interstate commerce," she said.

"Natural gas sold or destined to be sold at wholesale in the interstate market is frequently exchanged or the transaction's consummated at market hubs, where interstate and intrastate pipelines are interconnected." A key hub is Henry Hub in Louisiana, the location for delivery of natural gas under the Nymex futures contracts, Kelly noted. Henry Hub is important for "determining a variety of monthly index prices used to set...prices in a variety of natural gas transactions, some in interstate commerce, particularly along the East Coast and Gulf Coast," she said.

"So you can see that supply and demand in intrastate markets also [have] a direct effect on prices of gas destined for interstate markets because intrastate and interstate both draw on the same sources of supply," Kelly noted.

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