NGI's Daily Gas Price Index 
published : June 21, 2001
Marketers: FERC Data-Collection Effort in CA a Fishing Expedition 
A proposed initiative by FERC to collect an inordinate amount of price and 
volume information from transporters and sellers of natural gas into the 
California market is nothing more than a fishing expedition by the agency, 
marketers charge. The Commission proposed the reporting requirement last 
month in response to mounting pressure from Capitol Hill for regulatory 
action in the volatile gas market. 
The Electric Power Supply Association (EPSA), Occidental Energy Marketing 
Inc. and Tractebel Energy Marketing Inc. contend that FERC's effort would 
duplicate ongoing state investigations into gas prices, impose an "extremely 
burdensome" requirement on pipelines, marketers and local distribution 
companies (LDCs) for information, and force companies to turn over 
"proprietary and confidential" data that could expose them to "potential 
financial harm." They urged the Commission to narrow the scope of its 
proposed information-collection effort considerably. Moreover, the marketers 
questioned whether FERC had the authority under the Natural Gas Act (NGA) to 
demand data from companies over which it lacked jurisdiction, and to 
investigate natural gas prices. 
But the American Public Gas Association (APGA), which represents municipal 
gas distributors, is fully behind the Commission's effort. "In California, 
natural gas prices have been consistently and substantially higher than the 
national average... The Commission has correctly noted that market forces 
have not alleviated the high natural gas prices in California in a timely or 
predictable manner. This suggests, among other things, that the fundamental 
marketplace principle of supply invariably increasing to meet demand is being 
frustrated," the group said [RM01-9]. 
President Bush has said the California gas market warranted further review, 
and designated new Commissioner Pat Wood last month to head up the effort, 
the APGA noted. Wood and Commissioner Nora M. Brownell will travel to 
California next week to confer with Gov. Gray Davis about the state's gas 
market. Wood on at least two occasions has acknowledged that something 
doesn't appear to be quite right with the market, and Commissioner William 
Massey this week told a Senate committee that FERC needed to do a lot more 
work with the California gas market. FERC currently is exploring allegations 
that El Paso Natural Gas and its merchant power generation affiliates engaged 
in illegal practices to drive up gas prices at the Southern California border 
during 2000 (see Daily GPI, June 12). 
Occidental Energy Marketing Inc., which markets gas produced by its 
affiliates within California, doesn't dispute that a price investigation may 
be warranted. Its objection primarily is with the manner in which FERC 
proposes to gather information. "Not only does the Commission take a 
'shotgun' approach to data gathering, it has admitted that it may not have 
the authority to do anything about the information it receives," Occidental 
said. Moreover, while "much of the information it may receive under this rule 
may provide guidance as to 'what' is happening," it may not give FERC any 
clue about "why." 
Occidental suggested that the Commission take a "more limited approach" and 
focus on examining issues that are subject to its jurisdiction, such as 
capacity-release transactions on interstate pipelines that serve the 
California market. "Not only would such an inquiry clearly be within the 
purview of the Commission's jurisdiction, it would also lend itself to a much 
more focused approach." FERC already has proposed re-instituting the rate cap 
on capacity-release transportation to the state border (see Daily GPI, May 
24). The Commission's decision to remove the cap as part of Order 637 last 
year contributed at least in part to the significant runup in gas prices in 
California last year, critics claim. 
The EPSA, which represents independent energy marketers, also recommended 
that FERC limit its actions in California to those that are within its 
jurisdiction, such as approving new interstate pipeline projects. "The 
addition of new pipeline capacity and improvements in the natural gas 
transmission system will often limit or alleviate existing higher 
prices...Since these factors are under the jurisdiction of the Commission, a 
continued examination of these issues would better prepare the Commission to 
respond to any future price volatility." 
Also, the group proposed that FERC, rather than initiate its own 
information-collection effort, use the data from the California 
investigations that are already in progress. If FERC should decide that it 
needs to "pursue additional data through a reporting requirement, it should 
provide for a more narrowly focused set of data and specify a sunset date for 
market participants," the EPSA noted. 
Companies are reluctant to turn over such an enormous amount of information 
to FERC since it has not provided any "specific guarantees of 
confidentiality," the EPSA said. The "politically charged California 
environment heightens the potential for abuse of this information by way of 
manipulation and misrepresentation." 
Tractebel Energy objected to a reporting requirement for marketers that are 
unaffiliated with interstate pipelines, as well as other non-jurisdictional 
companies. Unaffiliated gas marketers in California "move prices closer to 
competitive levels. Moreover, these marketers serve a positive role in 
enhancing liquidity and competitiveness through their arbitrage role. 
Accordingly, there is no basis on policy or analytical grounds to collect 
data from unaffiliated gas marketers," it said. 
If FERC should decide otherwise, Tractebel Energy called for it to establish 
a volume threshold for reporting, "under which only large sellers would 
report." 
The reporting requirements, as proposed by FERC in late May, would target all 
sellers of natural gas, and interstate pipelines and LDCs that serve the 
California market. FERC is seeking to gauge what percentage of the volumes 
destined for California is domestically produced gas sold by marketing 
affiliates of pipelines and LDCs in sale-for-resale transactions. These are 
the only sales over which FERC has jurisdiction under the NGA (see Daily GPI, 
May 22). 
Although LDCs and other sellers are not directly subject to FERC's NGA 
authority, the Commission noted that the law does give it "extensive 
authority" to collect information from all parties to determine whether there 
has been a violation of the NGA and to serve as a basis for proposing 
legislation to Congress. 
The Commission proposes to collect the data on a quarterly basis (30 days 
after the end of a quarter) in a "standardized format." It then "[will] 
aggregate the data submitted and analyze it promptly" to "determine what 
action, if any, is warranted" with respect to the California gas prices. 
Prices in Southern California have been especially volatile in the last 
couple of weeks, falling to below the $4/MMBtu mark in early June from 
$15/MMBtu at the start of April. They have since rebounded to more than 
$7/MMBtu. 
In addition to getting a handle on the level of gas sales by pipe marketing 
affiliates and LDCs in California, FERC is seeking to obtain "an accurate 
picture of the overall average gas costs being incurred by all purchases of 
natural gas moving into the California market," as well as "the extent to 
which the cost of interstate transportation...affects the price for the gas 
commodity at the California border."