A Houston-based consulting company, International Gas Consulting (IGC), has proposed a way for government and the market to monitor price surveys by publications without interrupting the current process or disrupting the market.

The system also could be easier to manage and cost less than other, more “draconian policing suggestions,” Kenneth L. Beckman, IGC president said in a letter to the Federal Energy Regulatory Commission (FERC). The letter responded to the Commission’s call for ways to improve the price reporting function and market transparency (AD03-7). A technical conference on the issue last week turned up a number of suggestions (see Daily GPI, April 25).

IGC’s proposal calls for the pricing publications to continue to gather and aggregate prices as they do currently. The difference would be that those providing the raw data on physical trades to the publications would submit transaction data on all physical trades in a report format obtained from the firm’s trading system to an independent third party repository, possibly delivering the data to the repository on a weekly basis. The repository would log receipt of the data, respond with an acknowledgement to the provider that the data was received and file the information electronically and time and date stamp hard copy.

Then, if any published index comes into question, the repository operator would review the appropriate data, and provide the redacted results of the audit of the pricing data for review by the publication, FERC’s Office of Oversight & Market Investigations, or a designated third party. If there is a disparity in the reported gas trades, the repository operator would then identify to the investigator in a confidential manner the identities for comparison with the trade publications’ daily reports.

The fact that the oversight mechanism exists would work to discourage attempts to falsify data, IGC said. It would require minimal work, since the data would only be reviewed if an index was contested. This also means the “data would not be sifted for any party’s benefit, and the separation of the trade publication function, the repository operator, and any governmental body would be discernable to all parties. Confidentiality would be maintained with minimal effort.”

“The discovery of a fraudulent price report would be fairly certain,” Beckman said, which should give confidence in the system. He pointed out that the price reporting system already is in place, and it would merely mean sending the data to an additional party. “The use of a repository with a confidential dispute resolution process will provide comfort” to parties that their data will not be made public, “as well as assure the industry that no other ‘uses’ for the data will evolve.”

IGC has performed a similar function for an interstate pipeline, banking the data from its storage and transportation auctions. Since the system started a year ago, “IGC has not been called on to verify a rejected bid,” and therefore has incurred no added cost.

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