Natural gas association reiterates market participant confidence in indices in comments to FERC

The Natural Gas Supply Association (NGSA) recently filed comments with the Federal Energy Regulatory Commission (FERC) to reiterate its confidence on the strength and health of the natural gas market regarding natural gas index liquidity and transparency.

“NGSA has confidence both in the indices by which its members buy and sell natural gas
in the United States and in the mechanisms that the market provides to ensure that the indices continue to be robust,” the organization said.

In its comments, the NGSA stated that indices accurately represented the price that sellers and buyers agree to, and thus the market value of the natural gas traded, noting that indices were one of many tools that contributed to natural gas market transparency and facilitating sound decision making.

Regarding a recent industry trend toward declining levels of price reporting, the association said the decline had not dissuaded market participants, who have increasingly relied on indices.

“Increased reliance on the indices suggests continued market participant confidence in the indices,” the NGSA said. “Participants have vast, almost real-time information on which to base sound transaction decisions.”

Individual companies have a voluntary choice to price-report based on weighing regulatory risk vs. commercial risk. The decision to price report, the NGSA said, remained voluntary because so that a regulatory distortion could be avoided.

To address issues related to market participation confidence and price reporting, the NGSA offered a number of suggestions to FERC including permitting companies to report either monthly or daily market transactions without a retirement to report on both markets, making the FERC audit process less onerous and more efficient by conducting them every other year, and having FERC staff rely on a company’s price reporting audit reports to improve efficiency and limit duplication of the commission’s price reporting audits.