The Committee of Chief Risk Officers (CCRO) Thursday published its “Best Practices” recommendations for the natural gas and power industry and price publishers to follow to restore credibility and liquidity to published price indices and head off attempts by government agencies to regulate the collection of price information.

The goal is to produce “verified, complete and accurate data” and ensure the processing integrity of the data to engender the most confidence, the CCRO said.

The recommendations include the specific data to be provided by buyers and sellers, such as the price, volume and location, the date of the transaction and flow date(s), a buy/sell indicator and the name of any exchange or clearinghouse involved. The CCRO also recommended that counterparty information be provided, but acknowledged that “for many industry participants this goes too far,” and it would take time to implement this last provision.

However, providing the counterparty information would help to “eliminate double counting and wash trades,” CCRO member Jeff Walker, senior vice president of ACES Power, said in a press briefing announcing the recommendations. Companies, or data providers, would first have to amend their contracts with parties they trade with to allow them to pass on the information. They then would have to have strict confidentiality agreements in place with the pricing publications to protect the information. The CCRO provided samples of the two types of legal agreements, which are available, along with their “Recommended Best Practices for Achieving Robust Energy Market Price Indices,” on their website at

Companies should provide the data electronically from a middle or back office, with an official of that office as a signatory. While traders may talk to publishing personnel about market conditions, the traders would be bypassed in the data collection. Likewise the CCRO recommended that there be a Chinese wall in the price publishers’ operations between those who collect and process the data and editorial employees who report on the market. This particularly would be necessary if counterparty information is supplied.

Both price publishers and data providers should implement “robust IT and security protections against data misuse by employees.” Encryption would be necessary for data shipped over the Internet.

Price publishers should publish their survey methodologies, specifying sufficient sample size for normal creation of an index and the process for determining an index value where there is insufficient data. It was suggested that companies and price index developers should annually audit their processes.

Citing the large amount of work to get the various agreements in place between companies and their counterparties and the price publishers, Laurie Brooks, vice president and chief risk officer at PSEG, said all of the above are not likely to be implemented “in a matter of days or even weeks.” The work involved is necessary, however, “to restore confidence in the industry as a whole.”

The Best Practices paper also suggests timelines for data reporting and processing. For instance, transactions that occurred between 6 a.m. and noon would be checked by the companies in the afternoon and submitted to the index publishers by evening. Personnel would remain available through the evening to respond to questions from the publishers.

Responding to questions as to whether there had been objections to some of the recommendations, particularly regarding counterparties, Mike Smith, CCRO executive director, said the committee was aiming for “best practices, not the lowest common denominator of what’s most convenient for everybody to do. We’re principalists. We’re looking for ‘what’s the best practice’ and the information needed to help restore confidence around calculation of the indexes.”

It will require “a tremendous amount of legal and contractual change,” Smith said, adding that he is looking forward to a promised technical conference on price indices by the Federal Energy Regulatory Commission to air the CCRO recommendations.

CCRO is open to the possibility of an independent third party, such as a university, to receive the confidential information, process it and pass aggregated data on to index publishers. “It is an intriguing idea,” which would need to be addressed by a broader industry group, Smith suggested.

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