FERC Staff Lays Out Energy Index Reporting Options

Federal Energy Regulatory Commission (FERC) staff has laid out ways to shore up the accuracy of natural gas and electric deals that energy companies report to index publishers, including possible agency-mandated efforts.

Xcel Energy Inc.'s Denver-based trading arm on Friday joined a growing list of large power trading firms under scrutiny for reporting bogus deals to index publishers. The firm said it fired or accepted resignations from four of its traders for reporting "inaccurate" information to publishers.

Conceding to a "crisis of confidence" in published price indices, used to peg billions of dollars worth of commodity prices, FERC staff on Friday published an "options paper."

FERC staff in March found "epidemic false reporting" of price information, with evidence of manipulation by firms such as El Paso Corp., Dynegy Inc. and Williams Cos. Inc..

Several government agencies are investigating the allegations, including FERC and Commodity Futures Trading Commission.

In the 11-page paper, FERC posed a series of questions on indices to the industry, but indicated no preferences. The agency will hold a conference on June 24 to discuss options.

One question the paper posed was whether FERC should "require entities holding blanket market-based rate authority to report specified trade information to one or more index developers."

FERC said anti-trust law could prevent industry from cobbling together a solution on its own, despite ongoing efforts by a group of 30 energy trading firms.

The paper also asked whether FERC or CFTC should have access to the data to investigate possible manipulation, and whether firms should be required to disclose deal counterparties to help verify trades.

Fearing legal reprisal, many energy firms have ceased providing price information to index publishers like McGraw-Hill Cos Inc. ((MHP.N)) unit Platts and Natural Gas Intelligence.

Two firms have recently ceased price-reporting activities -- Dynegy and Entergy-Koch Trading LP, a joint venture between Entergy Corp. ((ETR.N)) and a subsidiary of privately held Koch Industries Inc.

"The reluctance of some companies to report trade information voluntarily raises the question of whether trade reporting should be mandatory," FERC staff said.