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 this 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 Friday. “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 it estimated that natural gas price index publishers captured nearly 75% of total reportable fixed price transactions in the marketplace for the February 2004 bidweek and 70% of daily transactions during January (see Daily GPI, May 3). However, its findings appeared to differ somewhat from FERC staff’s own estimates (see Daily GPI, May 6).

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 on Friday that shows the differences stem mainly from the two distinct methodologies used.

The analysis reveals that the MPRAC estimate and FERC survey 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.

“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 told the Commission the metric 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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