On December 17, 2020, the FERC acted on two proposals to revise its policy that guides price indices referenced in natural gas and electric tariffs. Natural gas price indices are weighted average prices derived from sets of fixed-price natural gas transactions within distinct geographical boundaries. Market participants voluntarily report these prices to a price index developer. In both the physical and financial energy markets, natural gas price indices are essential as they help price billions of dollars of natural gas and electricity transactions annually.
The first proposal the FERC released (PL20-3-000) should increase confidence in the accuracy and reliability of wholesale natural gas prices through revising the FERC’s Policy Statement on Natural Gas and Electric Price Indices. The revision should encourage market participants to report transactions to price index developers as well as provide greater transparency into the natural gas price formation process. The proposal will permit data providers (market participants that report transaction data to price index developers) to report to price index developers either or both of their non-index based next-day natural gas transactions and non-index based next-month natural gas transactions. In addition, data providers would be encouraged to report to all available FERC-approved price index developers and allow those data providers to self-audit on a biennial basis.
The second proposed change is a Notice of Proposed Rulemaking (RM20-7-000). In this, the FERC suggests amending its regulations to codify the Safe Harbor Policy. This policy was established in the FERC’s Policy Statement on Natural Gas and Electric Price Indices. The Safe Harbor Policy states that data providers that report transactions to natural gas and electric price index developers consistent with the procedures detailed in the Policy Statement are afforded a rebuttable presumption that their transaction data is accurate, timely, and submitted in good faith. The proposed change does not modify the existing policy. Instead, it should promote voluntary reporting of wholesale natural gas and electricity transactions to price index developers through ameliorating market participant concerns that the Safe Harbor Policy is not binding on the FERC.
Comments on both proposals are due 90 days after publication in the Federal Register. Identify comments by docket number and submit them electronically on the FERC’s website in acceptable native applications and print-to-PDF. For those unable to file electronically, comments may be mailed to: Federal Energy Regulatory Commission, Secretary of the Commission, 888 First Street, N.E., Washington, DC 20426. Hand-delivered comments must be delivered to: Federal Energy Regulatory Commission, 12225 Wilkins Avenue, Rockville, Maryland 20852.