Reversing the old saying, “if it ain’t broke, don’t fix it,” Ben Schlesinger of Benjamin Schlesinger and Associates said last week that unfortunately the energy market is broken and desperately needs to be fixed soon.
“Priority one is to restore confidence,” Schlesinger said, speaking at Platts Day of the Trader conference in New Orleans. Then the industry needs to create a positive financial and political climate to foster growth. And it should also prosecute market offenders.
Schlesinger spent most of his presentation rehashing the industry’s ills over the past year and then offered that one way to restore confidence is by allowing the federal government to step in and collect transactional data. “Gas and electricity market transactions need a public paper trail… sunlight cleanses.” He added that there should be deal-by-deal public data with a short time lag. The information provided would likely include the following:
In effect, Schlesinger said the industry basically needs to recreate the reporting of individual contracts and prices submitted by pipelines which were the primary buyers of gas at the wellhead before the Federal Energy Regulatory Commission’s Order 436 started separating pipelines from the merchant function in 1985. As merchants pipelines submitted the data every six months. “The reality is that [the order] was a good thing at the time, I think,” but there is a downside to not having the information.
In creating a favorable financial and political climate, Schlesinger said the industry needs to police itself. He suggested there be one strong unified trade association instead of the numerous divisional ones in place now. “[The American Gas Association] is kind of broken up now; it’s just the distributors. And you’ve got [The Interstate Natural Gas Association of America]. You’ve got the shadow of a thousand voices out there.” Other gas industry trade associations include the Natural Gas Supply Association and the American Public Gas Association, the Independent Petroleum Association and various state oil and gas groups.
He added the market has “gotten too distant, complicated and formidable,” but it doesn’t have to be that way. Schlesinger said regulators and other people are “not going to warm up to what they don’t understand.”
Citing Michael Douglas’ Gordon Gecko character in the 1987 movie Wall Street, Schlesinger said, “Gecko is wrong; greed isn’t good.” He emphasized that prosecution is necessary. “I can’t feel sorry for those who messed up and darned nearly destroyed a beautiful thing we created.”
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