The imposition of mandatory reporting of natural gas prices would cause producers and end-users to cut their fixed price trading, undermining liquidity and the price indexes that are relied on by 92% of the market, industry leaders told FERC Friday.

Scott Nauman, manager of Americas Gas Marketing for Exxon Mobil, said large producer members of the Natural Gas Supply Association, which have a significant share of the market, would scale back their fixed-price trading if FERC installed a mandatory reporting system or demanded counterparty information.

Alex Strawn, chief buyer for Procter and Gamble Co. and chairman of the Process Gas Consumers Group (PSC), said PGC members were “vehemently opposed” to a mandatory system and would do less fixed price trading and reporting, and would rely more on indexes. “They would become free riders.”

Nauman and Strawn’s remarks came during a day-long FERC workshop on price discovery in natural gas and electric markets (PL03-3). It was the fourth such workshop that the Commission has held on market liquidity and price indexes.

Earlier in the day, several panelists urged the Commission not to mandate any abrupt changes in the index-based formulas in pipeline tariffs used to price cash-outs. Donald Santa, president of the Interstate Natural Gas Association of America, pointed out there have been no complaints about cash-outs. He said the Commission was using the tariff as a jurisdictional hook to investigate the overall price situation.

“Tariffs are not the problem.” Santa and several others suggested that standards could be set for tariffs and applied in the event there is a complaint or if a new tariff is submitted, but they said there was no justification for across-the board revisions of all cash-out formulas, saying that could cause market disruption.

The majority of the panelists appearing Friday argued against any Commission action that would tend to upset the market. “Anything that heightens volatility is what we’re worried about,” Strawn said.

The Procter & Gamble buyer pointed to FERC’s most recent survey which showed that three-fourths of the industrials users responding had confidence in the indexes. The FERC survey further showed 92% of the respondents used indexes at some time. And that indexes were used to price 62% of all volumes transacted by the respondents. The overall confidence level was at about 7 on a scale of 1 to 10.

Bruce Henning of Energy and Environmental Analysis, who spoke on behalf of the American Gas Association, said a 70% confidence level was very good. “That’s a B or B+.”

Nauman noted that FERC’s questionnaire asked about confidence in market as whole. He believes “the level would have been higher if they had just asked about the top 10 or 20 pricing points.”

Nauman said from his experience in global markets, “the U.S. market is the most dynamic and most liquid market there is.” He said he encourages Exxon Mobil marketers to do fixed price deals and report then, not for commercial gain but to support the voluntary pricing system.

Witnesses on whole praised FERC for its policy statement and guidelines, which they said have inspired major improvements in gas price discovery during the past year.

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