While there are potential benefits to be gained from increased transparency in the wholesale natural gas market currently being contemplated by FERC, the likelihood that it could result in higher consumer prices makes releasing only limited information about trades preferable, according to the U.S. Department of Justice (DOJ).

Transparency could increase efficiencies, thereby lowering prices for consumers, and could facilitate market monitoring, but it may also “increase the likelihood of an exercise of market power by facilitating coordination among suppliers, thereby raising prices for consumers,” DOJ said in a Feb. 1 filing with the Federal Energy Regulatory Commission (FERC). “In general, the risks of coordination are greater when transparency involves the dissemination of detailed transaction-specific information, as is contemplated by the Commission in this proceeding.

“If the Commission chooses to issue new rules requiring that market participants report information concerning natural gas transactions, it can reduce the likelihood of anticompetitive effects by maintaining the confidentiality of any reported firm- or transaction-specific information. Alternately, the Commission may be able to achieve some of the benefits of transparency while reducing the likelihood of anticompetitive effects by releasing firm- or transaction-specific information only in limited circumstances, or by aggregating, masking or lagging the release of such information.”

DOJ’s comments were filed in response to a notice of inquiry (NOI) FERC issued last year, which would for the first time require buyers and sellers to report, on a quarterly basis, the prices of individual transactions (see Daily GPI, Nov. 16, 2012). Currently, a lot of the market information available to the Commission is in aggregate form and therefore does not provide full market visibility.

Under the Commission’s Order 552, first issued in 2007, traders in the wholesale market voluntarily report aggregated totals of various types of transactions annually (see Daily GPI, Dec. 19, 2008). The initial effort was directed at assessing the extent and viability of the industry’s use of published prices, such as those published by Natural Gas Intelligence, for indexing its transactions.

The NOI is based on Section 23 of the Natural Gas Act, which Congress in the Energy Policy Act of 2005 used to direct FERC to “facilitate price transparency.” FERC has said it has identified additional areas of the natural gas market “where increased transparency may be helpful for market participants to better understand the market activities that produce the prices that are reported to indices and to assist the Commission in detecting, and ultimately deterring, market manipulation.”

Several energy trade associations have questioned FERC’s jurisdiction over the collection of natural gas sales data from sales that are not firm sales, and asked why additional data is needed by the regulators (see Daily GPI, Jan. 30).

The deadline for comments on the NOI is next Tuesday (Feb. 12).

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