FERC on Thursday proposed revisions to its policy statement on natural gas price indices, and a new rule, to improve the participation in and formation of the indices.

The policy statement revisions would affect natural gas index developers and those who report prices to them (PL20-3). FERC staff said the changes are meant to bring stability and transparency to the indices, which are used as a locational cost proxy in the daily and monthly trading markets.

“Natural gas price indices play a vital role in the energy industry, as they are used to price billions of dollars of natural gas and electricity transactions annually in both the physical and financial markets,” Eric Primosch, of FERC’s Office of Energy Policy and Innovation, told commissioners during their monthly open meeting. “Natural gas markets depend on robust and accurate indices in order to ensure just and reasonable prices.” He noted that along with gas pipelines and utilities, RTOs and ISOs also reference the indices in their tariffs for various terms and conditions.

Staff said the changes are meant to reduce “perceived reporting burdens” and “increase confidence in the accuracy and reliability of wholesale natural gas prices.”

The commission created the policy statement in 2003 to encourage market participants’ reporting of their fixed-priced natural gas transactions to index developers. Since 2010, FERC said, voluntary reporting of transactions has declined 54%, even though the percentage of transactions referencing a price index in the U.S. physical natural gas market increased to 82% in 2019.

FERC proposed allowing market participants sending transaction data to report either their non-index-based next-day natural gas transactions or their non-index-based next-month natural gas transactions, or both, to price index developers. It would also allow market participants to self-audit the transactions they provide to price index developers on a biennial basis, instead of an annual basis.

The commission also proposed requiring index developers to re-up commission approval for their indices to continue to be included in tariffs.

The policy statement covers both natural gas and electricity price indices; FERC’s proposed changes only apply to those for natural gas, but staff said they will “conduct outreach to explore the need for, and scope of, any potential policy updates for the electric industry.”

Safe Harbor NOPR

FERC also issued a Notice of Proposed Rulemaking that seeks to add a safe harbor provision to its regulations to protect those who report natural gas trades to price index developers (RM20-7).

Max Multer, of the Office of Enforcement, told commissioners that a market participant who reports transactions would be “afforded a rebuttable presumption that its transaction data is accurate, timely and submitted in good faith,” provided it followed the reporting standards in the policy statement. Multer said that “inadvertent reporting errors by such data providers will not constitute violations of those regulations.”

The provision is already spelled out in the policy statement, but the proposal would make it legally part of the commission’s regulations.

“The proposed change does not modify the existing policy. It is intended to promote voluntary reporting of wholesale natural gas and electricity transactions to price index developers by alleviating market participant concerns that the safe harbor policy is not binding on the commission,” staff said.

Comments on both proposals are due 90 days after their publication in the Federal Register.