FERC Should Manage Energy Price Data, Says Draft Energy Bill

The pending national energy legislation would require federal regulators to gather and distribute price data collected from electricity and natural gas traders, under revisions announced October 1. U.S. House of Representatives member Joe Barton (R-Texas) said Wednesday that a ?central government agency? must be involved in collecting transaction data that are currently reported to price index publishers. The Federal Energy Regulatory Commission, however, continues to recommend that index publishers rather than the government carry out this task, despite Barton?s amendment. The development followed the issuance of a voluntary survey last week in which FERC asked energy companies around the country to detail how they report electricity and gas-trade data. That move came only days before the U.S. Commodity Futures Trading Commission (CFTC) filed a complaint in the U.S. District Court in Ohio alleging that American Electric Power (AEP) tried to manipulate gas price indices with bogus data. According to FERC spokesperson Bryan Lee, the agency?s September 26 survey sent to 266 power firms will help regulators determine industry compliance with the commission?s price-reporting wishes. ?The point is to take the pulse? of energy companies? reporting habits in the wake of FERC?s policy guidelines issued this past summer, Lee said. ?Our expectation is that with the safe harbor we provided? to protect companies from prosecution over accidental errors made in submitting price data, ?reporting should increase.? Survey results should also address FERC concerns that power markets may be suffering from a lack of liquidity. Since revelations last year that numerous gas-trading outfits fudged their data, many trading desks no longer take part in such transactions, and the dearth of market players could lead to more volatile electricity and gas prices. Lee said FERC would conduct another industry survey between now and March 2004. In the meantime, the commission has no remedial actions in mind to prompt changes in price data reporting, though it may take such steps if warranted. In its September 30 suit against AEP and subsidiary AEP Energy Services, the CFTC charged that between November 2000 and October 2002, company traders gave falsified gas-trade data to index publishers, including Platts, a McGraw-Hill company. Platts has repeatedly asserted that data submitted to its price reporters are thoroughly reviewed for accuracy. The trade commission also held that an electronic spreadsheet file at one of AEP?s trading desks?named ?IFERC Bogus? in reference to Platts publication Inside FERC Gas Market Report?was routinely used to submit phony data to Platts. The CFTC said that of the 3,600 gas trades reported by AEP to Platts over that period, about 2,800 of the transaction reports were misleading or ?knowingly inaccurate.? Thousands of other such deals reported to another index publisher were also tainted, according to the commission?s complaint. AEP appeared miffed by the CFTC?s behavior. ?We self-discovered and reported these activities? to federal regulators, said Jeffrey Cross, AEP general counsel. The company maintained it has fired the five employees believed to have been passing the manipulated data to index publishers. ?We are surprised the CFTC chose to file at this time. We still believe that a settlement is possible and we are open to that possibility,? Cross added. Trade regulators are asking that AEP pay up to $120,000 for each alleged violation of the Commodity Exchange Act. Reported estimates of the potential sum of penalties range from $330 million to $355 million. During the past 10 months, the CFTC has exacted a total of $96 million in fines resulting from settlements with six energy companies, including Duke, Dynegy, El Paso Energy, and Williams. FERC plans to host a ?state of the gas market? conference on October 14, the day before surveys are due back to regulators? offices. The Natural Gas Supply Association will host a meeting on market liquidity issues on November 6. FERC dockets #PL03-3 and #PL03-5

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FERC Should Manage Energy Price Data, Says Draft Energy Bill

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