“Confidence in the energy markets is essential,” FERC’s director of the Office of Market Oversight and Investigations (OMOI) told a Houston audience Monday. “Price reporting on a voluntary basis is an important element of good citizenship in energy markets…and FERC will be paying attention to who is acting responsibly.”

Bill Hederman said self-auditing and improved price reporting have done a lot to enhance the energy industry’s integrity, but a lot more still needs to be done.

Hederman opened the two-day Ziff North America Gas Strategies Conference in Houston Monday. Appointed in April 2002 to head up the Federal Energy Regulatory Commission’s office to provide oversight on the energy markets, he said the biggest ongoing problem for both industry and regulators is to continue to get across the message that the energy markets are not flawed, and companies are operating ethically.

“Skepticism needs to change from the public’s perspective,” said Hederman. “The public has to be comfortable” with the energy markets. “There is a luring temptation to return to command-and-control” and away from deregulated markets, and the outcome rests with industry.

Reminding that FERC still carries a big stick, Hederman said “I urge all of you to report prices because mandated [reporting] remains a real possibility.” Information from the price-reporting surveys has been “encouraging,” and there had been a “marked increase” in reporting. Still, the OMOI director said more remains to be done.

In March, the 30-member Market Price Reporting Action Committee, composed of energy companies, industrial customers, publishers, exchanges and industry trade associations, cited data that showed increased reporting to index publishers as “evidence of increased transparency in the nation’s natural gas markets” (see Daily GPI, March 11). FERC has not issued its final report, and Hederman said an energy industry ethics conference is tentatively set for October.

North American natural gas markets still “face several challenges,” said Hederman. Price discovery, infrastructure investment and inter-market coordination remain priorities. “Confidence in the formation of price discovery is essential,” he said. And infrastructure investment “is critical.

In just the past year, the energy industry infrastructure has undergone dramatic changes. Among other things, Hederman said the growing import of liquefied natural gas and open access issues, “have led us to make some changes in the rules.”

But the priorities to ensure market integrity are still at the top of the list. So far, FERC has been encouraged by the voluntary steps undertaken in the energy industry, Hederman said.

“We are headed in the right direction now,” he said, but it will take “continuous improvement” by regulators and industry to enhance the energy market’s overall integrity.

FERC continues to develop a definition of “market power and abuse,” and the agency is becoming “much more proactive.” OMOI now conducts market surveillance with the Commodity Futures Exchange Commission and holds regular oversight meetings. OMOI also has established an enhanced auditing system, with targeted and random audits to ensure compliance.

More intense scrutiny on the less transparent markets also is part of OMOI’s action plan. And he said OMOI has expanded its “teaming” to allow states, other federal agencies, Canada and Mexico to share concerns.

©Copyright 2004 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.