content top

FERC Sets Agenda for Technical Conference on Natural Gas Index Liquidity and Transparency

On June 29, 2017, the Federal Energy Regulatory Commission (FERC) will hold a technical conference to discuss liquidity in the natural gas markets and what, if anything, the industry or FERC can do to increase transparency and robustness in natural gas price formation.

The day-long conference will feature three stakeholder panels. The first panel, featuring publishers of natural gas newsletters, will examine the current state of natural gas indices, the degree of industry reliance on index-based contracts rather than fixed-price contracts, and whether natural gas indices accurately reflect market conditions. Since 2008, there has been a steady decrease in fixed price transaction reporting, which the Commission believes may be affecting natural gas price robustness.

The second panel, featuring representatives from industry trade associations and Regional Transmission Organizations and Independent System Operators (RTOs/ISOs), will examine the various uses of natural gas indices, potential concerns with their robustness and liquidity, whether the standards for indices referenced in jurisdictional tariffs accurately capture liquidity, and whether improvements are necessary to ensure that the indices function properly and efficiently.

The technical conference will conclude with a panel of various stakeholders discussing whether FERC or the industry should take action to improve pricing information and, if so, what those improvements should be.

The last time FERC substantively addressed natural gas index liquidity was in its 2004 order, Price Discovery in Natural Gas and Electric Markets, 109 FERC ¶ 61,184. That order adopted minimum criteria for the use of an index point in a jurisdictional tariff that would test liquidity. Several years later, in 2007, FERC issued Order No. 704, which required buyers or sellers of natural gas to file Form 552 with FERC, containing information about the amount of daily or monthly fixed-price trading eligible to be reported to price index publishers. Since then, U.S. natural gas markets have undergone significant changes. Natural gas demand has significantly increased. In 2015, for the first time, natural gas was the primary source of electric generation output. In response to this increased demand, FERC issued Order No. 809, which instituted changes to its regulations relating to the natural gas nomination timeline in an effort to ensure more efficient coordination between the natural gas and electric industries. The June 29 technical conference will be another step towards addressing the challenges presented by the changing natural gas markets.

For more information about the issues discussed in this post, please contact us.

Legal Disclaimer

Please note that the materials contained within this web site have been prepared by Jennings, Strouss & Salmon, P.L.C. for informational purposes only so that readers may learn more about the firm, the services it provides the background of its attorneys, and recent developments in the law. These materials do not constitute, and should not be considered, legal advice, and you are urged to consult with an attorney on your own specific legal matters. Transmission of the information contained in the Jennings, Strouss & Salmon web site is not intended to create, and receipt by the reader does not constitute, an attorney-client relationship with Jennings, Strouss & Salmon or any of its individual attorneys. While we would certainly like to hear from you, we cannot represent you until we know that doing so will not create a conflict of interest. Please do not send us any information about a matter that may involve you until you receive written authorization to do so from one of our attorneys. Unless otherwise indicated in individual attorney biographies, attorneys resident in the firm's various offices are not certified by the Board of Legal Specialization or a similar body of any State. This site may contain hyperlinks to Web sites operated by parties' independent from Jennings, Strouss & Salmon. Such hyperlinks are provided for your reference only. Jennings, Strouss & Salmon does not control such Web sites, and is not responsible for their content. Jennings, Strouss & Salmon's inclusion of hyperlinks to such Web sites does not imply any endorsement of the material on such Web sites or any association with their content. Your access and use of such sites, including information, material, products, and services therein, shall be solely at your own risk. Further, because the privacy policy of this Site is applicable only when you are on this Site, once linked to another Web site, you should read that site's privacy policy before disclosing any personal information.