The Committee of Chief Risk Officers (CCRO) says it expects to have new guidelines in place by the end of January for companies submitting data to energy pricing publications and for the publications themselves. At a meeting last Wednesday in Houston, a technical working group made up of members of CCRO companies and representatives of pricing publications “moved in the right direction,” according to Mike Smith, the CCRO’s executive director.

Smith characterized Wednesday’s meeting as an early effort where there was “good dialogue.” He added that the committee expects to have frequent meetings to nail down “best practices” for data submission and the compilation of published energy prices. “All interests are aligned,” Smith said. “The companies want to see accurate indices” and the publishers want to report accurate indices. He said the group has a sense of urgency.

When questioned about the closed door meeting, Smith confirmed that two of the discussion items within the group were accountability and auditability. He said the meeting had brought about a “healthy exchange.”

In addition to the committee, which is made up of representatives from 31 energy companies, participants in the meeting included Bloomberg, Dow Jones Energy News Service, Energy Argus, Energy Brokers Association, Energy Intelligence, IntercontinentalExchange, IO Energy, Intelligence Press Inc., Natural Gas Exchange, New York Independent System Operator, NYMEX, Powerdex and Reuters. Platts, one of the primary index publishers, was kept away from the meeting by its lawyers because of legal challenges, which the company has labeled baseless and without merit.

Companies represented include a who’s who of major U.S. merchant energy companies, large gas and power utilities across the country and Coral Energy, Tractebel, Tennessee Valley Authority and Ontario Power Generation.

CCRO’s Smith said he could not discuss the items under consideration in detail until they had been finally formulated and approved by the member companies that constitute the CCRO. Among other criteria, the data submitted and the methodology used by index publishers to compute price indices would have to be reliable, accountable, independent, objective, clear, transparent, documented, accepted, timely, regular and auditable.

“Market price indices have significant economic impact both inside and outside the energy trading and marketing industry,” said Smith. “It was important for us as an industry to meet with the developers of the indices so we can mutually strive towards recommending best practices which ensure indices are transparent, timely and accurate.”

Last month the committee issued its recommended best practices for the governance, valuation, credit risk management and disclosure of merchant energy activities (see Daily GPI, Nov. 20). The committee said it is adhering to the process in developing those best practices in providing guidance for credible market indices.

Initiatives of the CCRO, which was formed last spring, are aimed at restoring confidence in the market, that has been hit with charges and investigations over alleged market manipulations stemming from the western power crisis, which was characterized by high price spikes in both natural gas and power. The ensuing collapse of Enron and admissions by traders in some companies that they had attempted to influence prices by giving bad quotes to the price indexing publications also has shaken consumer and government confidence.

The publications have maintained that robust market liquidity during the time period in question, and their internal methods of vetting and aggregating prices would have eliminated or dampened the impact of any false quotes.

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