Urging the Federal Energy Regulatory Commission to Investigate the Accuracy of Natural Gas Price Indices Used in Pipeline Tariffs and Negotiated Rate Contracts

WHEREAS, Natural gas price indices published in trade publications are widely used in interstate pipeline tariffs in the calculation of balancing cash-outs, penalties and negotiated transportation rate contracts,

WHEREAS, On August 13, 2002 the Staff of the Federal Energy Regulatory Commission (FERC) issued an initial report in Docket No. PA02-2, in which the Staff found significant problems with the published price indices for the California market,

WHEREAS, Since the issuance of the Staff report, there have been five major natural gas trading companies that have admitted providing false data to the publishers of natural gas price indices,

WHEREAS, Widespread use of published natural gas price indices in federal regulatory proceedings makes it imperative that the indices are accurate and are not subject to manipulation,

WHEREAS, The Commodities Futures Trading Commission (CFTC) and the FERC have instigated investigations and engaged in enforcement actions involving the trading companies that have provided false data,

WHEREAS, Neither the CFTC nor the FERC have revealed the geographic hubs affected by the false reporting,

WHEREAS, Disclosure of the geographic hubs involved in the CFTC and FERC investigations and enforcement actions will provide state regulatory authorities and other natural gas market participants with valuable information regarding the scope of the impact of the false data reporting,

THEREFORE BE IT RESOLVED that the National Association of State Utility Consumer Advocates (NASUCA) calls upon the FERC to establish a technical conference to investigate the accuracy of published price indices for natural gas markets and assess the merit of the following potential responses if inaccuracies are found to persist:

1. Adoption of a minimum standard for the design of natural gas price indices to ensure their accuracy before the indices are used in interstate pipeline tariff provisions and/or negotiated rate contracts;2. Requirement that certain parties, such as natural gas producers and marketers, to provide pricing and volumetric information on an ongoing basis,

3. Establishment of an auditing program for the review of natural gas market data to ensure that price indices are developed and verified in a manner that adheres to any standards FERC may develop,

BE IT FURTHER RESOLVED, that NASUCA authorizes the Executive Committee to develop positions and take further actions consistent with the contents of this resolution. The Executive Committee shall inform the membership of such positions and actions prior to proceeding with them, if at all possible. In any event, the Executive Committee will advise the membership of any actions taken consistent with the recommendations contained herein.

Approved by NASUCA:
March 6, 2003

Submitted by:
NASUCA Gas Committee