The Republican-crafted draft energy bill would require the Federal Energy Regulatory Commission to gather data on natural gas and electricity prices, according to Republican aides on Capitol Hill.

Details of the proposal, which is being drafted by Rep. Joe Barton (R-TX), have not been disclosed yet. Barton spokeswoman Samantha Jordan was unable to say how often — quarterly or daily — energy companies would be required to report prices to FERC. The proposal, when released, will be incorporated into the “Oil and Gas” title of the comprehensive energy bill.

Questioned about the possibility that the energy bill might mandate FERC to be data collectors, Chairman Pat Wood last Wednesday said “our druthers are for [that role] to be given to the current providers of the [price] indices,” as stated in the Commission’s policy statement that was issued in late July. FERC Commissioner Nora Brownell responded that the “role of FERC is ensuring the integrity and transparency of data,” as opposed to “us getting into the data collection business.”

The energy bill proposal is a response to the fraudulent price reporting activities of gas and electric companies. The Commodity Futures Trading Commission (CFTC) has imposed $96 million in civil penalties on six energy companies so far for reporting fake information on gas and power trades in an attempt to skew prices in published indexes. The agency has open investigations on 32 other energy companies, some for illegal price-reporting practices. Producers and large gas users, such as industrials, tie their supply contracts to these index prices. They also are used by pipelines in their cash-out mechanisms.

Since price-reporting abuses were first uncovered last year, FERC and the gas industry have taken a number of steps to try to clean up price reporting in the industry. FERC has endorsed voluntary reporting of prices to published indexes. Companies that choose to report prices are required to do so fully and accurately in compliance with codes of conduct (see NGI, July 28). They also must retain transaction records and records of their submissions to index developers for at least three years. Penalties for violators would be disgorgement of unjust profits and possible suspension or revocation of marketing certificates.

The July policy statement directed gas companies to develop a clear code of conduct for employees to follow when reporting data to published price indexes. It also recommended that information on energy trades be reported to indexes by a company department that is independent of and not responsible for trading.

In addition, FERC told companies that they should report their data on an individual transaction basis and in accordance with confidentiality agreements with index publishers.

The Commission has given the natural gas market a short-term window of opportunity — through the winter — to straighten out the market’s private and confidential price reporting and index-setting system on a voluntary basis or face more the onerous government-mandated price reporting requirements. Meanwhile, FERC’s Wood has urged industry to “get back in [price] reporting business so we get more of the volumes that are actually being transacted reported to existing price collectors.”

FERC has begun surveying the price-reporting practices of market participants in order to judge progress. Responses from its initial survey of 266 companies are due on Oct. 15. The agency said it expects to conduct a follow-up survey next March.

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