On December 17, 2020, the Federal Energy Regulatory Committee (“FERC”) acted to revise its long-standing policy and guidelines pertaining to the reporting of natural gas transaction prices to price index publishers by issuing two items to encourage an increased level of voluntary reporting of natural gas transaction pricing. First, it issued a Notice of Proposed Rulemaking (Docket No. RM20-7) in which FERC proposes to amend its regulations to codify the Safe Harbor Policy so that it will be binding on FERC in favor of market participants. Second, it issued a Proposed Revised Policy Statement on Natural Gas and Electric Price Indices (Docket No. PL20-3). Therein FERC proposes several revisions to its policy to encourage more reporting of natural gas transaction prices to index publishers; for example, by allowing data providers (market participants that report transaction data) to report either their non-index based next-day natural gas transactions, their non-index based next-month natural gas transactions, or both. In addition, FERC proposes to modify its standards applicable for one to remain an approved natural gas price index publisher.
Whether or not to report natural gas transaction prices remains a voluntary – not mandatory – activity. However, please note that if your company reports natural gas transaction prices to price index publishers, it must comply with certain FERC-prescribed requirements before doing so. If you require advice or counsel as to those requirements, please contact us.
As background, FERC has broad authority to obtain price information from market participants, including required reporting of transaction pricing. However, under FERC’s existing Policy Statement, market participant reporting is on a voluntary basis. Although reporting is voluntary, under the existing Policy Statement, if a market participant chooses to report, it must comply with certain FERC criteria (e.g., a code of conduct and other criteria) to ensure the accuracy and veracity of reported data. If the market participant adheres to such requirements, it would historically receive the benefit of a rebuttable presumption that it has submitted data accurately, timely, and in good faith, thereby insulating it from certain liability (the “Safe Harbor Policy”). However, the Safe Harbor Policy is presently only memorialized in FERC’s existing Policy Statement. As such, the Safe Harbor Policy is not binding on FERC – an issue that has caused concern among market participants providing pricing data to price index developers.
If you have any questions regarding FERC’s price index reporting policy, or how it could impact you, please contact one of the authors of this Client Alert.