The Enron Corp. scandal continues to create regulatory hangovers for energy companies. But as painful as the process has been, there are signs that government reforms coupled with industry-led actions are slowly reassuring investors that marketers can play by the rules.
A group of price index publishers, exchanges, and energy trade associations Mar. 10 released industry data that they said show a significant increase in reporting natural gas price transactions to publishers and exchanges.
"While it is not possible to know precisely at this point how much of this increased volume is a result of higher trading volumes, and how much is a result of increased reporting of transactions to the index publishers, these latest data should go a long way toward demonstrating the quality of ongoing market price quotes. It is becoming increasingly clear that the indices are more about the fundamentals of energy supply and demand than a lack of competition or choice," said Joe Blount, president of Unocal Corp. unit Unocal Midstream & Trade and a member of the Market Price Reporting Action Committee (MPRAC).
Publishers' data
MPRAC said the two main publishers of natural gas price indices, McGraw-Hill Co.'s Platts and Intelligence Press Inc.'s Natural Gas Intelligence, both reported continuing increases in volumes, transactions, and the number of companies reporting based on data from the March "bid week," which reflect transactions in the monthly baseload market.
Daily trade volumes appear to be increasing too, MPRAC said, although bid week accounts for most wholesale natural gas transactions.
Meanwhile, the 10X/IntercontinentalExchange trading system set a monthly record for the amount of bid-week gas trading. Similarly, the New York Mercantile Exchange said that the number of its natural gas basis contracts has risen more than fourfold during November 2002-February 2004. Their findings came the day before the US Federal Energy Regulatory Commission called on energy market participants to complete a trading and reporting practices survey by Mar. 31.
FERC will use the survey to help decide whether the current price-reporting system works or not. The agency has largely left it to industry and price publishers to decide how to improve transparency, although FERC has not ruled out taking a more aggressive role. The US Congress also is following the situation, and a pending energy bill could include measures that force FERC to demand companies furnish more specific trading data.
More needed
Industry consensus on FERC's role remains elusive.
The Coalition for Energy Market Integrity & Transparency (EMIT), a group of independent producers, local utilities, and consumers, said more transparency is needed.
"We would agree that there have been improvements, but we're not sure it is enough," said Arthur Corbin, EMIT president.
EMIT advocates that both daily and monthly price data be reported to FERC. Companies associated with MPRAC argue the voluntary system works and that the monthly numbers cited in the group's release are what is used for most bilateral deals.