US natgas groups clash at FERC on price reporting

WASHINGTON -- A coalition of U.S. natural gas producers, shippers, industrial users and power producers said recently it failed to agree on key steps to shore up confidence in natural gas price indices that underlie billions of dollars in supply contracts.

The lack of agreement means the Federal Energy Regulatory Commission will have to step in and decide whether gas traders should be required to report deals to a single entity and to disclose their trading partners.

FERC, which regulates utilities and interstate natural gas pipelines, has prodded the industry to propose ways to retool natural gas indices amid investigations of price manipulation by El Paso Corp., Dynegy Inc., and Williams Cos. Inc..

A coalition which includes the American Gas Association, the American Public Power Association, the Natural Gas Supply Association, the Interstate Natural Gas Association of America, and large industrial users such as paper mills said it could not agree on mandatory reporting or counterparty disclosure.

"There are differences in opinion in those areas that would not allow us to reach consensus," said Gerald Ballinger, a Kentucky utility commissioner speaking for the coalition.

The meeting was held by FERC's three commissioners.

Consumer groups, on the other hand, want FERC to require trading data such as price, volume and counterparties submitted to a single entity each day to ensure accurate price indices. Some groups have suggested that a government arm, such as the Energy Information Administration, could take over the price gathering role.

Currently, private publishers such as McGraw-Hill Inc.'s Platts and Energy Intelligence Inc. prepare indices based on trading data gathered from companies on a voluntary basis. The indices are used to price long-term supply contracts to utilities and other buyers.

Some firms have flatly refused to disclose their trading partners.

"Why is that information necessary?" asked Dena Wiggins, representing the Independent Petroleum Association of America. Some member firms would have to be dragged "kicking and screaming" into disclosing their partners, she said.

Other executives questioned whether the current situation qualifies as a crisis. "We don't think we're in a crisis," said Skip Horvath, president of the Natural Gas Supply Association. "It's somewhere between a paper cut and outpatient surgery."

But William Hederman, head of FERC's office of market oversight, stood by his previous statement that gas indices were "mortally wounded."

"There is a need for a lot of change," Hederman told Reuters in an interview. "There are still some tough calls here," he said, referring to mandatory price reporting and disclosure of counterparties.

FERC was presented with a variety of suggestions for collecting and disseminating price data.

For example, the University of Houston wants to collect raw market data, check it for accuracy and disseminate it through a computer terminal system operated by Reuters Group Plc, the global information provider.

"We believe at the end of the day there will be one dominant data hub even if you start out with several," said Craig Pirrong, a University of Houston professor.

Platts told FERC it opposed creating a single entity, or self-regulating organization, to gather prices. If necessary, FERC could order traders to report data to both independent publishers and the agency itself, Platts said.

Some half-dozen vendors have submitted proposals for natural gas price index reporting to FERC.

Reuters