On Thursday, November 15, 2012, FERC announced it is considering whether or not it should require all market participants “engaged in sales of wholesale physical natural gas in interstate commerce to report quarterly to the Commission every natural gas transaction within the Commission’s jurisdiction that entails physical delivery for the next day (i.e., next day gas) or for the next month (i.e., next month gas).”  In doing so, FERC issued a Notice of Inquiry (“NOI”) seeking comments regarding the usefulness of such quarterly reports.  FERC also requested input regarding the type of information that should be included and the subsequent treatment of such information and data.

FERC states in the NOI that regular reporting of such natural gas transactions would facilitate price transparency in the natural gas market because it would enable buyers and sellers of natural gas to better understand the trading and prices that contribute to daily and monthly indices.  The Commission explains that it would be authorized to require such reports under the transparency provisions of Section 23 of the Natural Gas Act, which were added by the Energy Policy Act of 2005.  FERC claims that greater transparency will assure market participants that prices are the result of market supply and demand, and are not the result of abusive market conduct.  Additionally, FERC believes that this same information will assist the Commission in identifying market manipulation in the natural gas markets.

FERC is considering requiring that market participants engaging in certain jurisdictional transactions that entail physical delivery for next day gas or for next month gas file quarterly reports in a standardized, electronic format.  The quarterly reports would include various pieces of information detailing such transactions, including: market participant’s name and address, contact information of the trading company involved in the transaction, name and location of market participant’s holding company, the specific product traded, trade execution method and settlement type, volume of natural gas traded, location, price, date and time of the transaction, name of the counterparty, and the name of any index publisher to which each transaction was reported.

In the NOI, FERC also recognizes that some data is already available to market participants to help them assess the validity of price signals to the market.  However, FERC states that the data does not contain the detail of information necessary to provide full market and price transparency because most of that data is limited in scope and highly aggregated.  Thus, FERC is seeking comments on the best way to enhance transparency and FERC’s surveillance of the natural gas market.  FERC specifically requests feedback on several aspects related to potential reporting requirements, including:

• If FERC were to require changes to reporting, what types of transactions should be tracked, how often should this data be collected, and what specific data should FERC require?
• Should FERC publicly disseminate the data?  If so, which data elements should be made public, and should the data be masked, aggregated, modified or released on a delayed schedule?
• Will limiting the data requirements to FERC jurisdictional sales limit the benefits of the reporting?  Should FERC consider expanding the data requirements beyond sales that are under FERC jurisdiction?
• What would be the burden on market participants to adapt to the new reporting requirements?  Should FERC establish a de minimis market presence threshold that would be exempt from reporting requirements, and if so, what would be a reasonable threshold?
• Generally, would market transparency be enhanced, and by how much, if FERC required market participants to report the transactional data?

Comments responding to FERC’s NOI are due sixty days after the NOI is published in the Federal Register.  To access the full text of the NOI, please click here.