BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION PETITION FOR CLARIFICATION OF THE NATIONAL ENERGY MARKETERS ASSOCIATION

Transcription

1 BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION Transparency Provisions of Section 23 of the Natural Gas Act Docket No. RM PETITION FOR CLARIFICATION OF THE NATIONAL ENERGY MARKETERS ASSOCIATION The National Energy Marketers Association (NEM) 1 hereby submits this petition for clarification, pursuant to Rule 713, of the Commission s Order No. 704 and related reporting Form 552 issued on December 26, Order 704 and corresponding Form 552 require annual reporting of wholesale natural gas transactions. Form 552 is due on an annual basis commencing May 1, 2009, for the 2008 reporting year. NEM appreciates the Commission s careful consideration of all of the stakeholder comments received on the proposed rule, in particular NEM s recommendation for a retail transaction exclusion from the reporting requirement. NEM s instant petition is not submitted to challenge the substance of the Commission s final rule but rather to request clarification of issues associated with properly reporting information on Form 552. Indeed, NEM submits that as stakeholders continue to familiarize themselves with the new wholesale gas reporting requirement and design and/or modify information systems to capture the data necessary to complete the form that there may be a continued need for Commission clarification and guidance with regard to the reporting requirement. Accordingly, NEM requests that 1 NEM is a national, non-profit trade association representing wholesale and retail marketers of natural gas, electricity, as well as energy and financial related products, services, information and advanced technologies throughout the United States, Canada and the European Union. NEM's membership includes independent power producers, advanced metering, demand and load management firms, billing, back office, customer service and related information technology providers. NEM members are global leaders in the development of enterprise solution software for energy, advanced metering, information services, finance, risk management and the trading of commodities and financial instruments. NEM members also include inventors, patent holders, systems integrators, and developers of advanced power line surveillance and grid reliability technology with advanced uses in Power Line Communications (PLC) technologies as well as new and innovative electrical applications known as Smart Electricity. TM 1

2 an on-going technical compliance forum be instituted through which stakeholders can submit reporting-related questions and obtain prompt and consistent direction from the Commission staff on such questions. I. On-Going Commission Guidance on Form 552 is Needed to Ensure that Price Transparency Goals are Achieved The Commission adopted the final rule in Order 704 requiring wholesale natural gas reporting in order to facilitate transparency of the price formation process in natural gas markets by collecting information to understand in broad terms the size of the natural gas market and the use of fixed prices and indexed prices. (Order para. 5). NEM submits this petition for clarification in furtherance of the Commission s goal of promoting price transparency, in order to request guidance that will ensure the accuracy and consistency of the underlying data collected on Form 552. Of course, if the industry is suffering from a lack of clarity as to how to appropriately report transactions on Form 552 it will diminish the value of the information ultimately received by this Commission. In the course of setting up systems to comply with the Commission s new reporting requirements, our members have encountered difficulties in assessing the appropriate reporting categories for certain transactions under Form 552. The following is an illustrative list of examples for which Commission clarification is requested. However, NEM submits that additional areas of clarification may continue to be identified throughout the reporting year. 2

3 A) How Should a NYMEX Plus Priced Contract be Categorized Under Form 552? Using a NYMEX plus priced contract an entity purchases or sells a volume of gas on a wholesale basis at a reportable location for a month or a series of months (often a winter or summer strip of months), with the price determined by reference to the monthly settlement price of a NYMEX futures contract plus an adder (which is typically representative of locational basis). NEM requests clarification as to whether such arrangements should properly be reported on Line No. 5 as "prices that refer to published next-month gas price indices" or on Line No. 6 (essentially the "all other" category). Although page 41 of Order 704, Section (g) briefly discusses Prices that Refer to (Daily or Monthly) Price Indices, it does not clarify whether volumes contracted with reference to NYMEX monthly settlement prices could be viewed as either "prices... that reference directly a... monthly index price published by a "Price Index Publisher" (hence included with Line 5) or as "a price that refers directly to some other benchmark," i.e. the NYMEX (and hence not included with Line No. 5). A source of particular confusion is the fact that at least one Price Index Publisher, Platts Gas Daily, does include NYMEX monthly settlement prices in its publication. It is not clear how this type of purchase arrangement, if made for a series of months in advance (e.g., in January a contract is signed for February, March and April gas for delivery in each respective month), should appropriately be reported. NEM requests clarification as to whether the reporting entity should include only the volumes of the February gas on Line No. 5, with the remaining volumes (for March and April) on Line 6, or whether all of the volumes (February, March and April) should be included on Line No. 5. Additionally, what if a two-year contract was purchased with usage going until 3

4 the end of January Would only the volumes purchased for all of 2008 be reported, and would they be reported for each individual month or all in January 2008? B) How is Pricing Reported on Form 552 When an Initial Contract is Priced at NYMEX Plus with the Option for a Buyer to Trigger a Fixed Price at a Future Date? It is also unclear how pricing is to be reported when an initial contract is priced at NYMEX plus with the option for a buyer to trigger a fixed price at a future date. For instance, a buyer could make a purchase in January of 2008 of a specified volume per day for delivery in February and March, with the option to fix the purchase price at some time in the future. In this example, during February, the buyer purchases "NYMEX plus" gas. At the end of February, however, the buyer could exercise its right to fix all or a portion of its price for the month of March. NEM requests clarification as to whether the volumes should all be reported under Line No. 5, or whether (as in this example) the NYMEX plus gas volumes should be reported under Line No. 5 and the fixed priced gas volumes should be reported under Line No. 4. C) Are Volumes Priced as NYMEX Plus Intended to be Excluded from Reporting on Form 552 as Any Type of Financially-Settled Transaction? Form 552, Definition VII, Physical Natural Gas, section d. excludes from reporting "any type of financially-settled transaction." It is unclear whether this definition was intended to exclude volumes priced as "NYMEX plus." NEM requests clarification as to whether volumes prices as NYMEX plus are excluded from reporting as within the Commission s definition as any type of financially settled transaction. NEM respectfully requests clarification of the different transaction-related reporting scenarios set forth above. Additionally, NEM requests that the Commission consider instituting a technical compliance forum to provide stakeholders with a more flexible 4

5 means of raising questions about the new reporting requirements. It seems reasonable to assume that reporting questions will continue to be encountered throughout the reporting year. The Commission would significantly enhance stakeholders ability to accurately report on Form 552 if such a technical compliance forum were available. This is perhaps more important in this case because the universe of reporting entities extends beyond those that are traditionally FERC-jurisdictional. The Commission could do much to allay fears and confusion on the part of these entities by providing an open forum to answer reporting questions. The proposed technical compliance forum could take the form of a combination of measures such as a FERC hotline, a designated page on the FERC website for Order 704 and Form 552 including frequently asked questions (that could be posted anonymously with a FERC response), a designated FERC contact person, periodic technical conferences, and a document of technical clarifications. Any or all of these measures would contribute to improving the quality of the data assembled. Commission guidance given to stakeholders through the technical compliance forum process could be maintained on a central place on the Commission s website as a continual resource for consultation. While it may be possible that we are over thinking the reporting requirement, it does appear that Form 552 may require daily entries and thorough tracking and compilation of trades for the additional purpose of properly reporting them on Form 552. This would seem to require much more time than the four hours the Commission has estimated that entities would need to properly fill out and submit Form 552. To facilitate the industry s full compliance with Order 704 and Rule 552, a further dialog with additional details would be greatly appreciated to help ensure that FERC is getting the information needed 5

6 and the effort involved is commensurate with the amount of work envisioned by this Commission. As a result, the accuracy and consistency of the ultimate data collected will be maximized and transparency of the price formation process will be facilitated. II. Conclusion NEM requests Commission clarification of the specific issues identified above associated with reporting to Form 552. NEM also requests that the Commission consider instituting a technical compliance forum as an on-going industry resource available for consultation on the new reporting requirement to maximize the usefulness of the data that is collected from Form 552. Respectfully submitted, Craig G. Goodman President Stacey L. Rantala Director, Regulatory Services National Energy Marketers Association 3333 K Street, NW, Suite 110 Washington, DC Tel: (202) Fax: (202) cgoodman@energymarketers.com; srantala@energymarketers.com Website- Dated: January 24,

7 CERTIFICATE OF SERVICE I hereby certify that I have served the foregoing document upon each person designated on the official service list compiled by the Secretary in this proceeding. Dated at Washington, D.C. this 24th day of January Stacey L. Rantala Director, Regulatory Services National Energy Marketers Association 3333 K Street, NW, Suite 110 Washington, DC Tel: (202) Fax: (202) srantala@energymarketers.com 7