On February 3, 2014, FERC’s Office of Enforcement issued several letters to various gas marketers in order to inform them that the Division of Audits and Accounting (“DAA”) has initiated audits regarding the companies’ natural gas transactions reported under FERC Form No. 522. These companies include: Cargill, Oneok Energy Services Company, L.P., Occidental Energy Marketing Inc. and Natural Gas Exchange Inc. While the audits will review Form No. 552 compliance, DAA’s ultimate audit reports, once released, should generally highlight the types of information DAA staff is reviewing, as well as Form No. 552 errors and corrective actions (see January 26, 2012 edition of the WER).
Under FERC’s Form No. 552, market participants must report their physical natural gas transactions that either (a) use an index price, (b) contribute to an index price, or (c) could contribute to an index price. The information provided through From No. 552 is used by FERC to determine the overall size of the gas market and to track day-ahead and month-ahead physical gas volumes, giving a measurement of the market’s reliance on spot indexes. FERC also previously stated in Order No. 704-C that it “will focus any enforcement efforts on instances of intentional submission of false, incomplete, or misleading information to the Commission, of failure to report in the first instance, or of failure to exercise due diligence in compiling and reporting data.”
In March of 2011, FERC initiated similar Form No. 552 compliance audits on four different companies. In January 2012, DAA released the resulting audit reports which identified the auditors’ findings and methodology. Going forward, DAA will determine if the various companies it is auditing have any errors submitted on their Form No. 552 reports. Ultimately, DAA may conclude in their ultimate audit reports no errors that require any corrections, or provide various recommended corrections and changes going forward for the audited companies.