Open markets

Feb. 25, 2002
As policy-makers look to avoid another Enron Corp. mess, the regulatory spotlight could turn toward improving energy market transparency.

As policy-makers look to avoid another Enron Corp. mess, the regulatory spotlight could turn toward improving energy market transparency.

Regulators say gas and electric markets continued to function despite Enron's financial woes. But to ensure that fair and effective wholesale competition continues, Chairman Pat Wood Feb. 13 urged a House Energy and Commerce subcommittee to move forward with legislation that clarifies the commission's authority over utility participation in regional transmission organizations (RTOs).

FERC also wants greater disclosure and transparency of market information in the still-emerging competitive electricity and gas markets.

"Greater price transparency will help improve the efficiency of energy markets by providing buyers and sellers with better information about market conditions," Wood said. But even if Congress does not move forward, FERC said it plans to ensure price transparency improves significantly once it gets RTOs established over broad regional markets.

Oil focus

Enron was not a big world oil trader. Nevertheless, the Enron aftermath could help accelerate government interest toward making oil market data more reliable and accessible.

Among the less well-known recommendations from the White House's energy blueprint in May 2001 was for the Department of Energy to continue working with producer and consumer-country allies and the International Energy Agency "to craft a more comprehensive and timely world oil data reporting system (OGJ Online, May 28, p31).

"A lack of timely and accurate data relating to both oil production and inventory levels has contributed to the price volatility witnessed in 2000," report authors said.

Congress may also step in to expand disclosure. Some lawmakers want Congress to undo the exemptions used by EnronOnline through the Commodity Futures Modernization Act. That law allows internet-based trading platforms such as Enron and the Intercontinental Exchange to avoid the same government reporting requirements the New York Mercantile Exchange must follow.

Downstream issues

Lawmakers may also take a harder look at ways to improve price transparency in fuel ethanol and methyl tertiary butyl ether markets, two clean fuel additives that refiners use to meet federal reformulated gasoline rules.

Neither additive is traded on an exchange because the market size isn't large enough; according to the Energy Information Administration, US ethanol producers made 115,000 b/d of fuel in 2001; US MTBE production was 212,000 b/d.

Capacity for both additives is dominated by a few market players. In the case of ethanol, agriprocessing giant Archer Daniels Midland Co. controls about 35% of capacity, according to Wall Street analysts; Lyondell Chemical Co. has about 11% of the MTBE market.

A pending proposal in a Senate energy bill could double the ethanol market through a mandated renewable fuel standard in gasoline. The fuel standard is only one controversial piece of a very politically volatile energy bill.

But if the mandate survives Congress, it is possible both ethanol and MTBE producers may face tighter reporting requirements than the broad monthly data they now give EIA.