A “Staff Paper on Price Formation Issues” issued Friday by the Federal Energy Regulatory Commission lays out proposals for standardizing the reporting of natural gas and electric prices, and asks for industry comments by June 20, if possible, in advance of FERC’s scheduled June 24 conference on the issue.

The paper notes “a crisis of confidence over the reliability of energy price indices and the uncertainty over industry expectations and government regulatory guidelines” is crippling energy markets. Long-term solutions are needed.

Criteria for standardizing price reporting are key, the staff paper said, in asking for comments on the following:

Primary among the questions to be answered is whether FERC and the Commodity Futures Trading Commission (CFTC) should have access to the data. Noting the agencies’ current limited ability to investigate allegations of manipulation, FERC asks if there are “near or long-term changes that can be made to achieve sufficient verifiability and transparency other than allowing for regulatory review?”

Also key is whether reporting should be mandatory and how that could be effected. “How can sufficient completeness be achieved without some form of mandate to report?” Would mandated reporting require legislation? The paper notes FERC could condition marketing certificates or require price reporting in order to gain access to interstate transportation.

Counterparty information is another critical issue. “Is there a way to achieve sufficient verifiability without a buy/sell indicator and counterparty information? If there were a requirement to report counterparty data, what protections could the Commission or an index developer provide for commercially sensitive information?”

An audit process is “central to restoring confidence in price indices,” the staff paper said. “Parties should comment on the type of audits and reports best suited to achieving verifiability.”

FERC staff questions whether it should authorize price reporting entities and set minimum standards or delegate regulatory functions to a self-regulating organization (SRO). It requests “comments on the steps that would be necessary for the Commission to sponsor or validate an SRO-type entity for price formation in the energy industry. SROs also raise significant questions of cost, governance and oversight.” Would legislation be necessary to set up an SRO?

Representatives from various segments of the industry are holding a private meeting June 17 to seek a consensus on the issues.

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