The Federal Energy Regulatory Commission (FERC) today acted on two proposals to revise its policy that guides price indices referenced in natural gas and electric tariffs. Natural gas price indices play a vital role in the energy industry since they are used to price billions of dollars of natural gas and electricity transactions annually in both the physical and financial energy markets.
A natural gas price index is a weighted average price derived from a set of fixed-price natural gas transactions within distinct geographical boundaries that market participants voluntarily report to a price index developer.
Today’s first proposal (PL20-3-000) aims to increase confidence in the accuracy and reliability of wholesale natural gas prices by revising FERC’s Policy Statement on Natural Gas and Electric Price Indices to encourage market participants to report transactions to price index developers and to provide greater transparency into the natural gas price formation process.
Specifically, the Commission proposes to allow data providers (market participants that report transaction data to price index developers) to report either or both of their non-index based next-day natural gas transactions and non-index based next-month natural gas transactions to price index developers. The proposal also would encourage data providers to report to all available Commission approved price index developers and allow those data providers to self-audit on a biennial basis.
Today’s second proposal is a Notice of Proposed Rulemaking (RM20-7-000) in which the Commission proposes to amend its regulations to codify the Safe Harbor Policy established in the Commission’s Policy Statement on Natural Gas and Electric Price Indices.
Under the Safe Harbor Policy, data providers that report transactions to natural gas and electric price index developers consistent with the procedures set forth in the Policy Statement are afforded a rebuttable presumption that their transaction data is accurate, timely and submitted in good faith.
The proposed change does not modify the existing policy. It is intended to promote voluntary reporting of wholesale natural gas and electricity transactions to price index developers by alleviating market participant concerns that the Safe Harbor Policy is not binding on the Commission.
Comments on both proposals are due 90 days after publication in the Federal Register.