The Market Price Reporting Action Committee (MPRAC), an ad hoc group of about 40 gas and power industry companies, exchanges, trade associations and price index developers, told FERC last week that it is disbanding because it has completed its mission of analyzing the current gas and power price reporting system and reporting the results to the Commission.

“MPRAC members believe — and a recent staff report to the Commission echoes our view — that price reporting is improving,” the group told William Hederman, FERC’s director of the Office of Market Oversight and Investigations, in a letter on May 21. “And while the members who came together to form MPRAC will continue to work together and with the Commission to address important issues related to price formation, we consider the collective mission of MPRAC itself to be successfully completed.”

Earlier this month, MPRAC told FERC that, according to its estimates, natural gas price index publishers captured nearly 75% of total reportable fixed-price transactions in the marketplace during the February 2004 bidweek and 70% of daily transactions during January.

However, FERC staff’s own estimates were somewhat lower. As a result, Commission staff asked MPRAC members to analyze the FERC survey results and comment on the differences.

MPRAC responded to that request with a follow-up analysis attached to its May 21 letter, finding that the differences stemmed mainly from the different methodologies used.

The analysis revealed that MPRAC and FERC basically were asking two different questions. While the FERC survey calculated the probability of both “sides” of a transaction (buys and sells) being reported to index publishers, the MPRAC survey calculated the probability that a “deal” (either one of the “sides” to a transaction) was reported. If the calculations are adjusted, however, the two survey results end up being quite similar, MPRAC concluded.

“When adjusted to be measuring the same concept, the [FERC] survey results for the daily natural gas market are slightly higher than MPRAC estimated… For the natural gas bidweek market, the [FERC] survey results are lower than the MPRAC estimate…”

MPRAC also told the Commission the metric FERC staff used that is based on “sides” rather than “deals” may even be misleading. The group also found other methodological peculiarities that accounted for the differences to a lesser degree.

Regardless of the differences, however, both the FERC survey and the MPRAC estimates “show that a quite high percentage of deals was being captured in the reporting process during the period studied.”

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