It probably will be another two weeks before the Committee of Chief Risk Officers (CCRO) releases its standards for energy price submission by companies and price indexing by publications, a CCRO spokesman said on Thursday.

The committee, which represents 33 energy companies, said in December that it expected to release the guidelines in January but the date was pushed back to this Friday (see Daily GPI, Dec. 6). However, after sharing a working draft with the staffs of FERC and the Commodities Futures Trading Commission (CFTC) and some investment banks, there was so much “feedback” that the committee decided to rework some elements of its recommendations, said CCRO spokesman Jim Pierobon.

“The rework process is going to require us to produce a new draft document that will be brought before the full committee for a vote sometime in the next week to 10 days,” said Pierobon. “We basically are working around the business clock to accomplish this. Assuming that the committee affirms the work of this group, which includes about six individuals who are doing the real heavy lifting, then soon after that we will go public and have something with ‘real teeth in it.'”

Pierobon noted that during a conference on energy clearing services Wednesday, FERC Commissioner Nora Brownell requested that the industry come up with standards “with real teeth” and do it quickly. FERC is planning to hold a technical conference on the issue in April. It is unclear if any regulatory action will be taken on the issue.

At a meeting with financial, journalistic and academic institutions in Houston earlier in the week, Commission Chairman Pat Wood indicated that current price indexes appear to function well. A straw vote cast at the meeting revealed a majority preference for having multiple academic, independent and government agencies collecting and reporting energy price information (see Daily GPI, Feb. 4).

Wood said the current method of independent publications handling the duty appears to be “what works the best.” When asked whether FERC might soon seek quarterly natural gas data in the same way as it now collects quarterly power data, he all but admitted that his agency has more work than it can effectively handle.

However, FERC staff recently proposed that the Commission require that natural gas indexes meet certain standards if they are to be used in any regulatory proceedings or in pipeline tariffs, penalty provisions, negotiated rate calculations or cash-out mechanisms. Among the standards, staff said, should be an indication of liquidity at the given pricing point and the adequacy of market coverage. There also should be a provision for “verifiability,” or the ability to assure integrity of the data and the index calculation process — the latter possibly through an independent review by a trustworthy third party, “preferably not by a government entity.”

Concerns about price indexes grew out of questions regarding possible market manipulation during the energy crisis in California in 2000-01 and following reports that several companies had submitted false information to publications hoping to sway the indexes in their favor.

Two natural gas traders, Todd Geiger, formerly of El Paso, and Michelle Maria Valencia, formerly of Dynegy, have been charged with submitting false trading data and more indictments are expected.

There has not been any proof, however, showing that the traditional method of calculating indices failed to weed out the false data. There also have been no final determinations of natural gas market manipulation in California or elsewhere. Nevertheless the industry and the publications, including NGI, that print gas prices are working to improve the submission and calculation process.

The CCRO does not have any enforcement authority so its “guidelines” will have to be adopted solely on the force of its intellectual case that something should be done on energy price indices. Pierobon also said that the committee has not proposed including any “enforcement mechanism” in its guidelines.

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