FERC should “take the lead” in establishing a “new system” for gathering, preparing and reporting data on natural gas trades to either a government-run or government-sanctioned price index developer, said a national group of consumer advocate agencies.

The collector of gas index information should be either a “government agency or an independent entity under contract” with the Federal Energy Regulatory Commission, noted the National Association of State Utility Consumer Advocates (NASUCA), which represents state consumer agencies in 41 states and the District of Columbia.

Energy companies that buy or sell natural gas should be required to submit pricing, volume and other information to an index developer, the group told the agency in comments filed Friday [AD03-7]. “Any system that relies upon voluntary reporting is likely to fail.”

The remarks of NASUCA, as well as those of other companies and organizations, are expected to serve as the basis for FERC’s second technical conference on price indexes on Tuesday. A variety of comments have been filed with the Commission, ranging from setting standards and bolstering the current published indexes to NASUCA’s proposal for mandatory reporting to an agency under FERC surveillance (see related stories, this issue).

“The data collector should calculate price indices for each trading hub where a sufficient level of liquidity exists to establish an accurate price,” the group said. “Each price index should contain: the weighted average price of reported trades, the number of trades, the volume of gas traded, and the highest and lowest price at which gas was traded.”

FERC would be responsible for oversight of the data collector’s activities and would perform periodic audits, it noted. This would require the Commission having access to all of the collected data — a position that is strongly opposed by energy trade publishers that presently compile gas price indexes, and the energy companies that submit prices to the published indexes.

The NASUCA proposed that FERC “broadly interpret its existing statutory authority” to mandate the reporting of prices and other information. It believes the Commission’s authority extends far beyond transportation by interstate gas pipelines and wholesale power transaction by public utilities.

Specifically, it said the Commission could require intrastate pipelines as a condition to granting Section 311 authority to provide affidavits that would give the following information: the point of delivery for the gas off the interstate pipeline, the estimated total and daily volumes of gas subject to such sale; the price or prices for the volumes; and any other information FERC may require by rule.

Moreover, while the Wellhead Decontrol Act of 1989 repealed FERC regulation of gas prices, the NASUCA contends it left intact the Commission’s authority to review contracts for gas sales. FERC “could use this authority to require the filing of much of the information required to ascertain the accuracy of reported prices,” it said.

The group also suggested that the Commission use its investigatory powers under the Natural Gas Act to require price reporting. “The Commission could initiate an investigation of natural gas prices for a sufficiently long period (e.g. two years) to obtain enough data to thoroughly investigate the accuracy of published natural gas price indices.”

It called on FERC to “use all the authority it currently has over jurisdictional and non-jurisdictional entities to encourage compliance with new [price-reporting] requirements.”

The group, however, said it was opposed to the Commission encouraging market participants to do more fixed-price contracts, rather than rely on index-based contracts, in an effort to enhance market liquidity. “While NASUCA understands the Commission’s concern with the potential for over-reliance on index-based contracts, many of the entities purchasing natural gas supplies are regulated local distribution companies subject to state regulatory commission oversight of natural gas purchasing practices for the prudence of those actions. The Commission must be carefully not to intrude on state jurisdiction…Such matters are purely local in nature and should reside within the purview of state regulation.”

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