US FERC completes policy changes aimed at encouraging gas price reporting

The US Federal Energy Regulatory Commission April 21 finalized a policy aimed at bolstering physical natural gas price indexes and improving transparency.

During its monthly open meeting April 21, all five commissioners voted to tweak standards for price index publishers and adjust requirements for those reporting data to index developers to spur more participation.

The commission said it largely adopted the policy it proposed in December 2020, which drew general support from an array of stakeholders -- although some market players sought more steps to encourage price reporting.

The commission at the time of the proposal emphasized the key role indexes play in energy markets, and highlighted a 54% decline in fixed-price reporting from 2010 to 2019, even as reliance on indices had increased.

To entice more participation in the price formation and to ease the burden on market participants reporting data, FERC said it would allow them to report either next-day or next-month transactions, rather than mandating both be reported.

The new policy goes into effect Dec. 31, 2022. The order, on which Commissioner James Danly issued a concurring statement, was not immediately available.

To further ease burdens on market participants, the policy would also let those reporting data self-audit on a biennial basis, rather than on an annual basis as currently required.

Some aspects of the policy targeted the transparency of the indexes.

"The policy statement will now require that price index developers seeking certification should indicate whether a published index price is calculated using market information other than the trades at the index's specified location in their published price indices and data distributions," the commission said in a press release.

Further, it required indexes to be reapproved once every seven years, in order to be included in FERC-jurisdictional tariffs. And, it changed the review period for assessing liquidity of gas price indexes to 180 continuous days out of the most recent 365 days.

The policy applies to gas, but not electricity prices.

Policy feedback

In March 2021 comments, the Natural Gas Supply Association supported the proposal. It said allowing data providers to report either daily or monthly transactions would likely enhance the level of reporting. But it urged FERC to take a more targeted approach to its audits, limiting their scope and duration.

Some gas consumers, on the other hand, had pushed FERC to go further to encourage participation by major natural gas marketers, or suggested FERC consider the possibility of a nonprofit or government-maintained source of data or else weigh a minimum threshold number of developers that would trigger an investigation of adequate competition.

Index publishers, in comments in 2021, were mostly supportive or neutral on FERC 's proposal, while calling attention to steps they had already taken to boost liquidity or transparency.

S&P Global Commodity Insights is among the price reporting agencies publishing gas price indexes.

S&P Global Commodity Insights, filing as Platts, supported FERC 's proposal to require index developers to obtain recertification every seven years. It suggested integrity of the process would be strengthened if price-reporting agencies demonstrated adherence to the International Organization of Securities Commission's principles for oil price-reporting agencies.

S&P Global Commodity Insights was unavailable for immediate comment.