FERC Chairman Pat Wood would like to see confidence in published gas price indices restored, but he is open to suggestions as to how that should be accomplished, he told reporters recently.

“We want to have the most accurate numbers possible, and we will support private sector doing whatever the private sector does better than government,” but “issues about efficacy of indexes [are] coming up more and more often.” Wood indicated he clearly didn’t like the fact that publications are using free press protections under the First Amendment to the Constitution to resist disclosing the data they collect, saying that “whether that is something a court would countenance or not is sort of beside the point. There are other things coming to the fore, there are other external benchmarks that exist today that have very little cloud over them.”

“I’ve heard everything from ‘do absolutely nothing’ to ‘you guys ought to be doing this yourselves.’ A lot of people are walking in our doors on this. I’m pretty open to suggestions, but I think it is important to make sure that people have confidence in these indices,” Wood said. “If it went anywhere in government, [the Energy Information Administration] probably fits,” but that probably would require an act of Congress. “I’m open-minded, but I do think we need to keep that issue front and center and find out what’s the best answer. I’ve not really heard of a great proposal yet from the industry.”

Commissioner Nora Brownell, also speaking at a press briefing following Wednesday’s FERC meeting, said “publishers have said they have taken steps to assure better integrity of the surveys.” Whether false information which several companies have admitted submitting to the publishers “was used in all cases has yet to be determined. She believes FERC should remain “balanced and not rush to judgment. I know the industry relying on [the indices is] concerned and [has] been aware of problems for quite some time. We should not rush to change a system to put it in public domain, when it can be more appropriately done in the private domain.”

At the Energy Bar Association’s mid-year meeting Thursday, Brownell was asked to comment on the idea of using other benchmarks to look at gas prices in the wake of the price reporting anomalies.

“I think you have to consider it from this perspective,” she told reporters. “OK, we’ve had a number of people stand up and say ‘One of our traders reported information that probably wasn’t correct.'” Brownell said “First, you have to determine what that information was. Secondly, you have to determine whether in fact the indices actually used the information because what I’ve also been told is that Platts, for example, is pretty sophisticated about knowing whose information was good and whose information was bad. So I think you have to know that and then you have to look at, very carefully, how did that track with the market at the other hubs? When were the anomalies present?”

Brownell said FERC staff is “evaluating what really happened and then they’re going to offer their kind of best thinking in terms of options. That’s kind of the way we work and then we kind of debate back and forth, poke each other in the eye a few times and come to the conclusion, and we’re going to try and do that soon.”

Price surveys by independent publishers came under scrutiny when FERC staff proposed discarding California gas indices as the basis of a power price refund formula because those indices did not correlate with the Nymex Henry Hub price. More recently some companies charged with various forms of price manipulation, admitted that some of their traders submitted false price reports to publications. The publications have resisted being blamed for the California crisis, saying their methodologies and market expertise screen out most false quotes.

After the questions arose, some companies stopped sending in reports of their transactions for a time. Most have returned to submitting reports, but with signatures of their chief risk officers attached. Some also have switched over to a system of sending the price quotes from the back office rather than allowing the traders to send them. Others have said they also will be changing over as soon as they can get a system in place.

Several of the publications, Natural Gas Intelligence included, are cooperating with the Committee of Chief Risk Officers of 31 gas and power suppliers and traders in setting guidelines for upgrading the process of submitting data and setting standards as to what pricing points should be included in the surveys. Those should be ready in several weeks.

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