Western Gas Resources revealed that it has discovered within its energy trading operation instances of false gas price reporting to index publishing companies.

The company said the problems were discovered during a review that was prompted by a subpoena by the Commodity Futures Trading Commission (CFTC).

“Certain company employees have identified inaccuracies associated with reporting of natural gas transactions primarily related to points in Texas,” Western Gas said in a statement. “The company’s review of this and other regions is continuing.”

Western Gas is one of several companies that have admitted engaging in false price reporting. Duke Energy Trading, Dynegy, El Paso, Williams, Enserco and EnCana all paid millions to settle CFTC charges of false price reporting. The CFTC also settled with Enron concerning an actual manipulation of the gas market (see Daily GPI, Sept. 18; Aug. 1).

Western Gas said it is “one of many energy industry participants who routinely provided trade data to industry publications; consequently, the company cannot determine whether the inaccurate data had any impact on the published indices. The company has discontinued the practice of reporting pricing information to the industry publications and will determine any further appropriate actions to be taken.”

Since price reporting abuses were first revealed last year, the gas industry has gone through a process of standards creation in order to thwart future abuses. The Federal Energy Regulatory Commission also has proposed amendments to blanket sales certificates that would, among other things, require certificate holders to notify the Commission if they participate in price surveys or not and require those who report prices to publications to do so fully and accurately in compliance with codes of conduct (see Daily GPI, June 26). Companies would have to retain transaction records and records of their submissions to index developers for at least three years. Penalties for failing would be disgorgement of unjust profits and possible suspension or revoking of marketing certificates.

FERC also issued a set of recommendations to be instituted voluntarily in a policy statement in July. The statement told gas companies to develop a clear code of conduct for employees to follow when reporting data to publications. It also recommended that trade data reporting duties be assigned to a department that is independent of and not responsible for trading.

In addition, FERC told companies that they should report their data on an individual transaction basis and in accordance with confidentiality agreements with index publishers. FERC and the CFTC also issued a joint safe harbor statement to “make absolutely clear” that neither “has or will bring false-reporting cases against energy market participants where the false report is inadvertent or based solely on human error” (see Daily GPI, July 24).

The Commission has given the natural gas market a short-term window of opportunity — through the winter — to straighten out the market’s private and confidential price reporting and index-setting system on a voluntary basis or face more the onerous government-mandated price reporting requirements, including those outlined in its proposed blanket certificate amendments . Meanwhile, FERC Chairman Pat Wood has urged industry to “get back in [price] reporting business so we get more of the volumes that are actually being transacted reported to existing price collectors.”

FERC has set two surveys of the price reporting practices of market participants in order to judge progress. One is currently going on with responses due in Oct. 1 and the second with responses due March 1 (see Daily GPI, Sept. 9).

©Copyright 2003 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.