FERC Filings
Comments of EPSA re: Price Discovery in Natural Gas and Electric Markets; Natural Gas Price Formation
Filing
Price Discovery in Natural Gas and Electric Markets
Docket No. PL03-3-000
Natural Gas Price Formation
Docket No. AD03-7-000
On March 5, 2004, the Commission issued a Staff Notice of Request for Comments, seeking comments on the current state of natural gas and electricity price formation and evaluating developments since the issuance of the Policy Statement on Natural Gas and Electric Price Indices in the above-captioned proceedings. The Electric Power Supply Association (EPSA) welcomes this opportunity and hereby files these comments. As large buyers of natural gas and large sellers of electricity, EPSA members use indices for price discovery and risk management, and have supported the Commission’s efforts to encourage voluntary price reporting. Attached to these comments is a recent EPSA “Bare Essentials” on price transparency.
The Staff Notice documents the Commission’s efforts to improve price reporting and confidence in published indices. The Commission has held technical conferences and provided guidance to data providers and index publishers through issuance of the Policy Statement on reporting and index development and the Market Behavior Rules and has sought to evaluate the state of current price reporting practices through two surveys. The industry has responded to the Commission’s actions and, significantly, has initiated actions of its own to improve the quality of published indices and market transparency and to increase the market’s confidence in the price reporting process.
Most recently, EPSA, along with industry representatives from all along the natural gas and electricity value chains, including brokers and index publishers, have formed the Market Price Reporting Action Committee (MPRAC) to assist with the Commission’s efforts. As a member of the MPRAC, EPSA is committed to working with the Commission to help boost public and market participant confidence in energy price reporting. MPRAC, which brings together an unprecedented group of industry resources, has been working to determine whether there continue to be meaningful impediments to, or deficiencies in price reporting, and if so, has committed as a broad industry coalition to promptly address them in a demonstrable manner.
After forming last month, the MPRAC has acted quickly to provide the Commission with preliminary information that shows increased reporting. The MPRAC’s March 10 press release noted that both Platts and Natural Gas Intelligence have reported steady increases in volume and transactions since the markets November 2002 low point.
The press release also documented market participants’ positive responses to the new publisher data. For example, Process Gas Consumers Group (PGC) spoke of its industrial end-use consumer members’ confidence in the natural gas indices published today, and their belief that the “indices are robust, functional, and improving, and definitely meet the needs of industrial users, today.” The Natural Gas Council (NGC), which comprises the major natural gas trade associations, made comments which clearly showed that the major natural gas marketing companies, including suppliers, were also encouraged by index improvements and increased volumes. EPSA is encouraged by both the data and the positive industry responses quoted in the MPRAC press release. As Joe Blount, president of Unocal Midstream & Trade and the Chairman of NGC summed up so well, “Industry heard FERC’s message that this is a problem we need to solve. We took that message to heart and we are delivering. There are challenges that remain, but the solution has been set in motion and rapid progress will continue.”
EPSA has recently developed a “Bare Essentials” on natural gas and electricity price transparency. In that statement, EPSA confirms its shared commitment with the Commission to improve price reporting and market transparency and endorses the Commission’s actions on voluntary reporting.
We believe that the Commission, through its actions to date, has made significant contributions towards increasing price transparency and promoting voluntary price reporting. Allowing industry initiatives such as the MPRAC to contribute to these goals, is commendable and should be continued. EPSA appreciates this opportunity to comment on the Commission’s efforts and looks forward to the documentation of continued progress through the latest survey.
March 26, 2004
Respectfully Submitted,
____________________________
Julie Simon, Vice President of Policy
Jack Cashin, Senior Manager of Policy
Electric Power Supply Association
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