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pdf20080918-3099 FERC PDF (Unofficial) 09/18/2008
124 FERC ¶ 61,269
UNITED STATES OF AMERICA
FEDERAL ENERGY REGULATORY COMMISSION
18 CFR Parts 260, 284 and 385
(Docket No. RM07-10-001; Order No. 704-A)
Transparency Provisions of Section 23 of the Natural Gas Act
(Issued September 18, 2008)
AGENCY: Federal Energy Regulatory Commission.
ACTION: Order on Rehearing and Clarification.
SUMMARY: The Federal Energy Regulatory Commission affirms its basic
determinations in Order No. 704, while granting rehearing in part and clarification
regarding requirements that certain natural gas market participants report information
regarding their reporting of transactions to price index publishers and their blanket sales
certificate status. These natural gas market participants must report annually certain
information regarding their physical natural gas transactions for the previous calendar
year. As clarified in the Order on Rehearing and Clarification, certain market
participants engaged in a de minimis volume of transactions will not be required to report
information regarding their transactions for the calendar year. The reported information
will make it possible to assess the formation of index prices and the use of index pricing
in natural gas markets. These regulations facilitate price transparency in markets for the
wholesale sale of physical natural gas in interstate commerce as contemplated by section
23 of the Natural Gas Act, 15 U.S.C. § 717t-2.
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EFFECTIVE DATE: This rule will become effective [insert date 30 days after
publication in the FEDERAL REGISTER]. The revisions to FERC Form No. 552 are
applicable for the reporting of transactions occurring in calendar year 2008.
FOR FURTHER INFORMATION CONTACT:
Matthew L. Hunter (Technical)
Office of Enforcement
Federal Energy Regulatory Commission
888 First Street NE
Washington, D.C. 20426
(202) 502-6409
[email protected]
Christopher J. Peterson (Technical)
Office of Enforcement
Federal Energy Regulatory Commission
888 First Street NE
Washington, D.C. 20426
(202) 502-8933
[email protected]
Gabe S. Sterling (Legal)
Office of Enforcement
Federal Energy Regulatory Commission
888 First Street NE
Washington, D.C. 20426
(202) 502-8891
[email protected]
SUPPLEMENTARY INFORMATION:
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124 FERC ¶ 61,269
UNITED STATES OF AMERICA
FEDERAL ENERGY REGULATORY COMMISSION
Before Commissioners: Joseph T. Kelliher, Chairman;
Suedeen G. Kelly, Marc Spitzer,
Philip D. Moeller, and Jon Wellinghoff.
Transparency Provisions of Section 23 of
the Natural Gas Act
Docket No. RM07-10-001
ORDER NO. 704-A
ORDER ON REHEARING AND CLARIFICATION
(Issued September 18, 2008)
I.
Introduction
1.
On December 26, 2007, the Commission issued Order No. 704, which imposed an
annual reporting requirement on certain natural gas market participants. 1 The order
requires certain natural gas buyers and sellers to file annually FERC Form No. 552 and
report summary information about physical natural gas transactions for each calendar
year.
2.
Order No. 704 has its genesis in the Energy Policy Act of 2005 (EPAct 2005).2
EPAct 2005 added section 23 of the Natural Gas Act (NGA), 15 U.S.C. §717t-2 (2000 &
Supp. V 2005) to authorize the Commission “to facilitate price transparency in markets
1
Transparency Provisions of Section 23 of the Natural Gas Act, Order No. 704,
74 FR 1014 (Jan. 4, 2008), FERC Stats. & Regs. ¶ 31,260.
2
Energy Policy Act of 2005, Pub. L. No. 109-58, 119 Stat. 594 (2005).
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for the sale or transportation of physical natural gas in interstate commerce, having due
regard for the public interest, the integrity of those markets, and the protection of
consumers.” Section 23 further provides that the Commission may issue such rules as it
deems necessary and appropriate to “provide for the dissemination, on a timely basis, of
information about the availability and prices of natural gas sold at wholesale and
interstate commerce to the Commission, State commissions, buyers and sellers of
wholesale natural gas, and the public.”
3.
Section 23 of the NGA enhances the Commission’s authority to ensure confidence
in the nation’s natural gas markets. The Commission's market-oriented policies for the
wholesale natural gas industry require that interested persons have broad confidence that
reported market prices accurately reflect the interplay of legitimate market forces.
Without confidence in the fairness of price formation, the true value of transactions is
very difficult to determine. Further, price transparency makes it easier for us to ensure
that jurisdictional prices are "just and reasonable."3
4.
The performance of Western electric and natural gas markets early in the decade
shook confidence in posted market prices for energy. In examining these markets, the
Commission's staff found that some companies submitted false information to the
publishers of natural gas price indices, so that the resulting reported prices were
3
See sections 4 and 5 of the Natural Gas Act, 15 U.S.C. sections 717c and 717d.
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inaccurate and untrustworthy.4 As a result, questions arose about the legitimacy of
published price indices, remaining even after the immediate crisis passed. Moreover,
market participants feared that the indices might have become even more unreliable,
since reporting (which has always been voluntary) declined to historically low levels in
late 2002.
5.
One of the Commission’s responses to these developments was the issuance, on
July 24, 2003, of a Policy Statement on Electric and Natural Gas Price Indices (Policy
Statement) that explained our expectations of natural gas and electricity price index
developers and the companies that report transaction data to them.5 The Policy
Statement, among other things, directed the Commission’s staff to continue to monitor
price formation in wholesale markets, including the level of reporting to index developers
and the amount of adherence to the Policy Statement standards by price index developers
and by those who provide data to them.6 In adhering to this directive, Commission staff
documented improvements in the number of companies reporting prices from back
4
See Initial Report on Company-Specific Separate Proceedings and Generic
Reevaluations; Published Natural Gas Price Data; and Enron Trading Strategies - Fact
Finding Investigation of Potential Manipulation of Electric and Natural Gas Prices,
Docket No. PA02-2-000 (August 2003).
5
Price Discovery in Natural Gas and Electric Markets, 104 FERC ¶ 61,121
(2003).
6
Id. P 43.
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offices, adopting codes of conduct, and auditing their price reporting practices.7 These
efforts resulted in significant progress in the amount and quality of both price reporting
and the information provided to market participants by price indices.8 It is against this
backdrop that Congress passed EPAct 2005 and provided us with expanded authority to
mandate additional reporting and improve market confidence through greater price
transparency.
6.
In an April 19, 2007 Notice of Proposed Rulemaking, the Commission proposed
regulations consistent with these new responsibilities.9 The April 2007 NOPR contained
both an annual transaction reporting requirement for market participants as well as a daily
posting requirement for pipelines. On December 26, 2007, the Commission issued Order
No. 704 regarding the annual reporting requirement. The daily pipeline posting
requirement proposal was separated from the annual filing requirement and a new Notice
7
Federal Energy Regulatory Commission, Report on Natural Gas and Electricity
Price Indices, at 2, Docket Nos. PL03-3-004 et al. (2004).
8
See, e.g., GENERAL ACCOUNTING OFFICE, NATURAL GAS AND
ELECTRICITY MARKETS: FEDERAL GOVERNMENT ACTIONS TO IMPROVE
PRIVATE PRICE INDICES AND STAKEHOLDER REACTION (December 2005).
9
Transparency Provisions of Section 23 of the Natural Gas Act, 72 FR 20791
(Apr. 26, 2007), FERC Stats. and Regs. ¶ 32,614 (2007) (April 2007 NOPR).
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of Proposed Rulemaking regarding the pipeline posting requirement was issued
concurrently in Docket No. RM08-2-000.10
7.
Order No. 704 required natural gas wholesale market participants, including a
number of entities that may not otherwise be subject to the Commission’s traditional
NGA jurisdiction, to identify themselves and report summary information about their
physical natural gas transactions on an annual, calendar year basis. To facilitate such
reporting, Order No. 704 created FERC Transaction Report FERC Form No. 552:
Annual Report of Natural Gas Transactions (Form No. 552) and various implementing
regulations. Form No. 552 is to be filed by May 1, 2009, for transactions occurring in
calendar year 2008 and by May 1 of each year thereafter for each previous calendar year.
8.
Thirteen requests for rehearing or clarification of Order No. 704 were timely filed.
No request for rehearing or clarification argues that the rule is unnecessary or should not
have been issued. Rather, the requests seek modification or clarification of specific
aspects of Order No. 704. Commission staff held two technical conferences during
which potential filers of Form No. 552 and other industry stakeholders discussed the
form. Stakeholders at these two technical conferences represented a broad spectrum of
market participants and observers, including producers, interstate pipelines, intrastate
10
Pipeline Posting Requirements under Section 23 of the Natural Gas Act, 73 FR
1116 (Jan. 7, 2008), FERC Stats. and Regs. ¶ 32,626 (2007). A technical conference has
been held in Docket No. RM08-2-000 and the pipeline posting requirement is pending
further action by the Commission.
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pipelines, natural gas marketers, commodities traders, local distribution companies
(LDCs), electric generation end-users, industrial end-users, and natural gas price index
developers. Many conference participants filed comments following one or both of these
conferences.
9.
As discussed below, we largely affirm Order No. 704, granting a limited number
of rehearing requests and clarifying the order.
II.
Discussion
A.
10.
The Value of Aggregated Annual Data Regarding Volumes that Utilize,
Contribute to, or Could Contribute to the Development of Price
Indices
Order No. 704 focused primarily on “price formation in spot markets” and
accordingly sought information about the “amount of daily or monthly fixed-price trading
that [is] eligible to be reported to price index publishers as compared to the amount of
trading that uses or refers to price indices.”11 As we stated in the order, the “information
collected under this requirement is focused specifically on daily and monthly physical
spot or ‘cash’ market activity and the contracting based on the prices developed in those
markets.”12 The rationale for this focus is that a “[b]etter understanding of the role and
functioning of wholesale natural gas spot markets can increase confidence that posted
11
Order No. 704 at P 3. See also id. P 13.
12
Id. P 67.
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market prices of natural gas accurately reflect the interplay of legitimate market forces.”13
Additionally, information on price index utilization and formation would greatly enhance
the Commission’s efforts to monitor price formation in the wholesale markets in support
of the Commission’s market-oriented policies.14 As we explained, “without confidence
in the basic processes of price formation, market participants cannot have faith in the
value of their transactions, the public cannot believe that the prices they see are fair, and
it is more difficult for the Commission to ensure that jurisdictional prices are ‘just and
reasonable.’”15
11.
Our recognition of the importance of price formation on market confidence is, of
course, not new. The Commission has often remarked on the need to ensure price
transparency and accurate price reporting, including, for example, our 2003 Policy
Statement on price reporting to index developers. As we there recognized:
Price indices are widely used in bilateral natural gas and
electric commodity markets to track spot and forward prices.
They are often referenced in contracts as a price term; they
are related to futures markets and used when futures contracts
go to delivery; basis differentials in indices are used to hedge
natural gas transportation costs; indices are used in many
gas pipeline tariffs to settle imbalances or determine penalties;
and state commissions use indices as benchmarks in
reviewing the prudence of gas or electricity purchases. Since
13
Id.
14
Id. P 7 and 62.
15
Id. P 66 (citing sections 4 and 5 of the NGA, 15 U.S.C. sections 717c and 717d).
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index dependencies permeate the energy industry, the indices
must be robust and accurate and have the confidence of
market participants for such markets to function properly and
efficiently.16
We continue to believe that ensuring price transparency is a vital policy goal, especially
as it relates to transactions that utilize, contribute, or could contribute to a price index.
12.
Section 23(a)(4) of the NGA requires us to “consider the degree of transparency
provided by existing price publishers and providers of trade processing services, and []
rely on such publishers and services to the maximum extent possible.” We have
reviewed existing price index publications and, while the Commission recognizes the
substantial value that these publications have enhancing market transparency, we
determine that the additional data required on Form No. 552 is necessary. Section 23 is
consistent with our belief that transparency is furthered by shedding light on price indices
and their formation.
13.
The Commission reiterates that the focus of Form No. 552’s data collection is
transactions that utilize an index price, contribute to index price formation, or could
contribute to index price formation. Specifically, the Commission finds that volumes
reportable on Form No. 552 should include volumes that utilize next-day or next-month
price indices, volumes that are reported to any price index publisher, and any volumes
that could be reported to an index publisher even if the respondent has chosen not to
16
Policy Statement at P 6.
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report to a publisher. By “could be reported to an index publisher,” we mean bilateral,
arms-length, fixed price, physical natural gas transactions between non-affiliated
companies at all trading locations.17 Transactions that do not occur at a specific location
currently designated by an index developer as a reporting location are nonetheless
reportable on Form No. 552.
14.
This focus on index price-related transactions will increase market participant
confidence by providing greater transparency in the use of index prices and how well
index prices reflect market forces. This data will also allow the Commission’s staff, state
commissions, and all other industry observers to evaluate the level of index price usage at
both a company level and nationally.18 Data on index development and use would be of
substantial value in the Commission’s transparency and market monitoring missions.
15.
We also clarify that Form No. 552 does not seek the broader range of transaction
data necessary to evaluate the size of the national physical natural gas market. While
Order No. 704 mentioned such a calculation as one result of the data to be collected,19 we
17
We note that this understanding tracks closely with our discussion of
transactions that are reportable to index developers in the Policy Statement. See Policy
Statement at P 34.
18
Further, as discussed in greater detail below, observers will be able to parse data
to compare activities of purchasers and sellers in the market.
19
Order No. 704 at PP 18 and 69. Similarly, P 5 of the order indicates that an
understanding “in broad terms” of the extent of the natural gas market is a goal of the
rule.
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elect not to craft Form No. 552 to capture the data necessary to calculate a national
market. At this time, we do not believe that such data would further the transparency of
the natural gas markets other than determining an aggregate approximation of the entirety
of physical gas transactions. Further, unless volumes that utilize price indices or that
could contribute to such indices were separately reported on Form No. 552 (with an
additional, substantial reporting burden), the analytical benefits noted above would be
lost. Lastly, any attempt to rationally estimate the size of the physical gas market on a
national level would require reporting from a substantially larger group of respondents
than the narrower focus adopted in Order No. 704. Respondents would necessarily
include smaller market participants for whom the reporting burden would be undue. For
these reasons, we reiterate and emphasize our determination that data provided on Form
No. 552 should be limited to transactions that utilize, contribute to, or could contribute to
index price formation. However, the Commission understands that the natural gas market
is ever evolving and dynamic. At a future date we may elect to amend Form No. 552 to
obtain additional information necessary to facilitate transparency of the market.
B.
16.
Both Sales and Purchase Data are to be Included on Form No. 552
Order No. 704 required the annual reporting both of relevant natural gas sales and
purchases. We explained that purchase information was the opposing side of a sale
transaction and, thus, was as relevant to the Commission’s transparency mission as the
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reporting of sales.20 Further, we noted that we have often found the reporting of purchase
information beneficial both independent of sales figures and as a cross-check on such
volumes.21
17.
Although we understand that some participants in the technical conferences
objected to the collection of purchase data in various contexts, we continue to believe that
purchase data is a vital component to Form No. 552 and the Commission’s transparency
goals. Not only is purchase information important as a cross-check on reported sales
volumes, but it has independent value. If only sales were reported on Form No. 552,
Commission staff, state commissions, and other market observers would be unable to
discern, for example, whether significant numbers of gas purchasers were transacting
under contracts referencing an index price. Analysis of Form No. 552 purchase
information will also provide trend data regarding purchase activity, which would be very
useful for those charged with monitoring the natural gas markets. With purchase data,
the public will be able to discern which purchasers are utilizing index-based contracts,
whether there is geographic disparity regarding use of price indices among purchasers,
the overall reliance upon gas price indices by purchasers, and other information relevant
to market analysis and market confidence. While we acknowledge that removing
20
Id. P 86.
21
Id. PP 85-86.
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purchases from volumes that must be reported on Form No. 552 would somewhat reduce
the reporting burden on certain market participants, we continue to believe that the
substantial benefits of having such data publicly available outweigh this burden.
C.
18.
The De Minimis Reporting Threshold
Section 23(d)(2) of the NGA requires the Commission to exempt from new
transparency reporting requirements “natural gas producers, processors or users who have
a de minimis market presence.”22 Consistent with this directive, Order No. 704 provided
that most buyers or sellers of less than a de minimis volume of natural gas are not
required to submit Form No. 552.23 The order set the de minimis threshold at 2.2 million
MMBtus; that is, annual sales plus annual purchases of more than 2.2 million MMBtus
required a market participant to report transaction information. In setting this threshold,
the Commission “sought to require reporting from a sufficient number of significant
market participants to ensure, in the aggregate, an accurate picture of the physical natural
gas market as a whole.”24 The Commission explained that:
22
15 U.S.C. section 717t-2(d)(2).
23
Form No. 552 must be submitted by any section 204.402 or section 284.284
blanket certificate holder even if the entity has aggregate purchases and sales less than the
de minimis threshold. Such an entity must provide identification information on Form
No. 552 and must answer questions regarding price reporting to price index publishers,
but need not submit Form No. 552’s aggregate volume data. Order No. 704 at P 60.
24
Id. P 78.
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[T]he [2.2 million MMBtu] figure was based on the simple
calculation of one-ten thousandth (1/10,000th) of the annual
physical volumes consumed in the United States, which is
approximately 22 trillion cubic feet (Tcf) (or roughly 22
billion MMBtus). Looked at another way, a de minimis
market participant would trade the equivalent of less than one
standard NYMEX futures contract per day. Although a
market participant that contracts for 1/10,000th of the nation’s
annual physical volume may appear to have little effect on
natural gas prices, that participant may be transacting only at
one location and, thus, have a much greater pricing effect
there.
Requests for Clarification or Rehearing
19.
Copano Energy L.L.C. (Copano) requests rehearing of the de minimis threshold
and argues that 2.2 million MMBtu is such a low threshold so as to render meaningless
the NGA’s directive that the Commission exempt from annual reporting requirements
market participants that have a de minimis market presence.25 Copano argues that the
Congressional purpose behind the de minimis threshold was to exclude entities that are
too small to have an impact on market prices in the interstate, wholesale gas market.
Copano states that a threshold one-hundred times as large (i.e., 220 million MMBtu/year)
would represent less than 1 percent of annual physical volumes of gas consumed in the
country and “would therefore have no ability to impact prices in the wholesale, interstate
natural gas market.”26 Copano notes that Order No. 704 justifies the selected threshold
25
Copano comments at 8.
26
Id. 5.
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by noting that even small amounts of gas purchases can have a price effect at certain
locations.27 Copano believes that this reinforces its conclusion that a threshold should be
established that measures market presence at market hubs.28 Instead of a single-number
de minimis threshold, Copano suggests a two-pronged approach that considers both the
impact of a market participant’s transactions on the overall wholesale gas market (a
twenty-two million MMBtu threshold) and the impact of a market participant’s
transactions at market hubs (5 percent of the total jurisdictional sales at the hub).29
20.
American Public Gas Association (APGA) requests clarification of section
260.401(b) of the Commission’s regulations. As currently written, the regulation
exempts an entity that does not hold a blanket sales or marketing certificate from the
reporting requirement if the entity either made fewer than 2.2 million Dth of wholesale
sales or 2.2 million Dth of wholesale purchases. APGA proposes that the Commission
clarify this language so as to ensure that an entity with fewer than 2.2 million MMBtu of
purchases is exempted from reporting purchases and an entity with fewer than 2.2 million
MMBtu of sales is exempted from reporting sales.30
27
Id. at 6.
28
Id. at 7.
29
Id. at 7-8.
30
APGA comments at 2.
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21.
15
Shell requests that the Commission clarify whether purchases and sales should be
aggregated for purposes of calculating an entity’s total reportable volumes.31
Additionally, Shell seeks guidance regarding how market participants are to determine
whether they fall into the de minimis exception when part of the relevant total sales or
purchases are to an affiliate or under other circumstances.32 Shell also requests
clarification as to whether volumes that total exactly 2.2 TBtu fall into or out of the de
minimis exception as the rule references amounts above and below the threshold, but not
precisely at the threshold.33
Commission Determination
22.
Regarding the appropriate de minimis threshold, we affirm our findings in Order
No. 704 and retain the 2.2 million MMBtu level. As the Commission stated in Order No.
704, even market participants with total reportable volumes slightly above the threshold
may have a significant effect on local wholesale markets.34 While it is possible that a
respondent that exceeds the de minimis threshold exemption does not actually contribute
to price formation, it is certain that some do and, in any event, market observers cannot
31
Shell is, collectively, Shell Gulf of Mexico, Shell Offshore, Inc., Shell Rocky
Mountain Production LLC, and SWEPI LP. Shell comments at 28.
32
Id. at 28-29.
33
Id. at 29.
34
Order No. 704 at P 81.
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yet know with any degree of assuredness which market participants have or do not have
local price relevance. Likewise, these entities may rely upon price indices for a sizeable
portion of their natural gas transactions. Form No. 552 seeks data only for volumes that
either reference price indices or could contribute to the formation of price indices. A
number of transactions are not reportable (as identified on Form No. 552, as discussed in
Order No. 407, and as clarified in this order). Market participants should bear in mind
that the Commission is not seeking data on all gas sales and purchases made by an entity,
but rather a subset of these transactions.35
23.
Nothing in Copano’s request for rehearing provides new information regarding the
establishment of a proper de minimis threshold. While we acknowledge that there are a
number of rational ways to establish a de minimis threshold consistent with our
Congressional mandate, we continue to believe that 2.2 million MMBtu is an appropriate
threshold for the reasons expressed herein and in Order No. 704.
24.
Regarding APGA and Shell’s requests involving how volumes are to be calculated
to determine whether an entity meets or exceeds the de minimis threshold, the
Commission clarifies that an entity that has 2.2 million MMBtu of reportable sales or
purchases must file Form No. 552. That is, a potential respondent with either reportable
35
For example, we clarify below that a bundled retail transaction made at a stateapproved tariff rate is not reportable. We anticipate that this clarification will
significantly limit the reporting obligation on smaller market participants.
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purchases equal to or greater than 2.2 million MMBtu or reportable sales36 equal to or
greater than 2.2 million MMBtu must submit the form. The following table, regarding
reportable purchase and sale volumes, explains how the de minimis threshold will apply:
Reportable Sales
Volumes
2.2 million MMBtu
2.2 million MMBtu
< 2.2 million MMBtu
< 2.2 million MMBtu
25.
Reportable Purchase
Volumes
2.2 million MMBtu
< 2.2 million MMBtu
2.2 million MMBtu
< 2.2 million MMBtu
Does the Entity Report?
Yes, both sales and purchases
Yes, both sales and purchases
Yes, both sales and purchases
No (unless the entity has a
blanket certificate, in which case
it will provide non-volume
information only)
We also clarify that sales and purchase volumes do not “net each other out” for
purposes of determining whether an entity meets or exceeds the de minimis threshold.
Additionally, an entity that must file Form No. 552 must report both reportable sales and
reportable purchases regardless of the total volumes associated with each component
volume. For example, if a potential respondent has annual reportable sales of 2.0 million
MMBtu and reportable purchases of 3.0 million MMBtu, then it must file Form No. 552
as its purchases exceed the de minimis threshold of 2.2 million MMBtu. Further, it
would report both its sales and purchases on the form.37
36
Reportable sales include off-system, balancing, and other assorted reportable
sales as discussed elsewhere in this order.
37
APGA’s request for clarification on this point is therefore denied.
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26.
18
We further clarify that, if a transaction is reportable on Form No. 552, then
volumes associated with the transaction should be counted towards the threshold. The
converse is also true: if a transaction volume would not be included on the form, then
volumes associated with it should not be counted towards the threshold. We emphasize
that not all physical natural gas purchases and sales count towards the threshold.38
27.
If a company chooses to aggregate volumes from affiliates, then such volumes are
aggregated for purposes of determining whether the corporation meets or exceeds the de
minimis threshold. In response to Shell’s requested clarification, Order No. 704 already
makes clear that “a company with multiple affiliates may choose to report separately or in
aggregate, as best meets its needs.”39 A company with multiple affiliates that chooses to
aggregate must, however, aggregate all of its affiliates’ data (i.e., it may not choose to
aggregate some affiliates but not others). Consistent with Shell’s other requests, we have
modified Form No. 552 to make clear that entities that meet or exceed the de minimis
volume must submit the form.
38
As detailed herein, physical transactions of companies that fall below the
de minimis threshold are excluded from the data collected by Form No. 552. Physical
transactions need not be reported if they are not Next-Day or Next-Month transactions as
those terms are defined in Form No. 552. In this same vein, financial transactions,
transactions between affiliates, and traditional retail transactions (as discussed below), are
not reportable on Form No. 552.
39
Order No. 704 at PP 60 and 97.
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28.
19
Regarding the format of amounts reported on Form No. 552, the Commission will
require that volumetric entries on Form No. 552 be rounded to the nearest tenth of a
TBtu. We understand that there was some confusion among participants at the technical
conferences regarding the rounding of volume figures on Form No. 552. Form No. 552
currently requests reporting of volumes to the nearest TBtu (i.e., a reportable volume of
2.499 TBtu would be reported as 2.0 TBtu). We direct respondents to round volumes up
or down, as appropriate, to the nearest tenth of a TBtu. Rounding to the nearest tenth of a
TBtu will make the reporting obligation consistent with the proposed de minimis
threshold volume calculation, which is measured to the nearest tenth of a TBtu. Further,
more precise reporting of data would allow for a more accurate review of market activity
and we believe that aggregating volumes to the nearest tenth of a TBtu would be no more
burdensome for respondents than the rounding currently required in the form.
D.
29.
Certain End-Use Transactions Should be Reported on Form No. 552
Several commenters to the April 2007 NOPR objected to the inclusion of end-use
transactions in the annual report.40 Order No. 704 addressed these concerns by
exempting certain types of transactions from the reporting requirement. The order states
that the rule “focuses the reporting requirement solely on wholesale buyers and sellers by
40
These commenters included American Forest & Paper Association (AF&PA),
Industrial Energy Consumers of America (IECA), and Natural Gas Supply Association
(NGSA).
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excluding retail transactions.”41 The order did not require “end-use customers or retail
buyers” to report transaction information unless those entities also made wholesale sales
or purchases that were greater than the de minimis threshold.42 Likewise, the order stated
that “a transaction made to an end-user is not to be included in the volumes reported on
the form.”43
30.
However, the order did not adequately distinguish between two distinct types of
end-use transactions (i.e. transactions that utilize or could contribute to a price index and
transactions to customers as part of a bundled retail sale). The American Gas Association
(AGA) and the National Energy Marketers Association (NEM), for example, specifically
argued in comments on the April 2007 NOPR that end-use sales at retail should be
excluded from the reporting requirement.44 These types of end-use transactions involved
retail service provided by a LDC to consumers subject to the LDC’s state commissionapproved tariff. Other commenters argued for a broader exemption, including all end-use
transactions.45 These types of transactions would include not only bundled retail service
41
Order No. 704 at P 3.
42
Id. P 90.
43
Id.
44
AGA NOPR comments at 3; NEM NOPR comments at 5. See also NGSA
NOPR comments at 12.
45
AF&PA NOPR comments at 5.
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subject to traditional state jurisdiction, but also direct end-use deliveries by interstate
pipelines (an activity traditionally subject to the Commission’s jurisdiction).
31.
Order No. 704 correctly, though summarily, describes these participants’
comments,46 but then proceeded to utilize the term “retail” interchangeably with “enduse” when describing transactions that would be exempt from the reporting
requirement.47 For example, under a section entitled, “Exclusion of Retail Transactions,”
the order states that “[a]lthough some transactions reported to indices may include
purchases by large end-users, the Commission is generally interested in wholesale
prices.”48 Our exclusion in Order No. 704 is aimed at traditional retail transactions (i.e.,
those that are in markets functionally separate from the wholesale markets) rather than
other end-use transactions involving volumes in the wholesale market -- although the
language of the rule’s exclusion could easily be read so as to reach to all end-use
transactions.
Requests for Clarification or Rehearing
32.
NGSA requests clarification or rehearing regarding a seller’s obligation to exclude
end-use volumes from volumes reported on Form No. 552. NGSA quotes paragraph 90
46
Order No. 704 at PP 39-40.
47
See, e.g., Order No. 704 at PP 60, 89, and 90.
48
Id. P 90.
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of Order No. 704 indicating that “a transaction made to an end-user is not to be included
in the volumes reported on the form.”49 NGSA argues that requiring the seller to
delineate between end-use and non-end-use customers is unduly burdensome and that
requiring such disclosure to sellers from purchasers would limit market liquidity.50
NGSA requests that the Commission clarify that, when in doubt, it is acceptable for a
seller to include end-use volumes in Form No. 552.51 Any exclusion of end-use
transactions should be applied from the buyers’ perspective, argues NGSA.52
33.
We understand that a number of participants at the technical conference (including
AGA, Encana,53 and others) had both substantive and technical questions regarding Order
No. 704’s references to “end-use” transactions and “retail” transactions. There was
significant confusion regarding whether certain types of transactions to consumers of
natural gas were reportable. AGA filed supplemental comments in the docket requesting
49
NGSA comments at 3.
50
Id. 4.
51
Id.
52
Id. 5.
53
Encana Marketing (USA) Inc. (distinct from its joint rehearing request as part of
the Canadian Suppliers).
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various clarifications regarding an LDC’s responsibility to report sales to end-users,
among other transactions.54
Commission Determination
34.
The Commission clarifies here that there will be no categorical exclusion of end-
use transactions from Form No. 552. Nevertheless, Form No. 552 will collect only
information regarding that subset of end-use transactions that relies upon price indices or
that could be utilized to form a price index. Accordingly, as we explain below, reporting
of traditional, bundled retail transactions made by an LDC at a state-approved tariff rate
(i.e., the majority of transactions to retail customers) would not contribute to the
Commission’s transparency mission and are not subject to reporting. We believe that this
is a “bright-line” rule easily understood by potential respondents.55
35.
While Order No. 704 utilized the phrase “retail” transactions interchangeably with
“end-use” transactions,56 the overall thrust of our order was that transactions that are
typically perceived to be at retail are not reportable while transactions that utilize,
contribute to, or may contribute to price indices should be reportable. Depending upon
the type of transactions involved, end-use transactions can have a substantial impact on
54
AGA supplemental comments at 3-5.
55
NGSA’s request for rehearing or clarification of this issue is, therefore, denied.
56
See, e.g., Order No. 704 at PP 60, 89, and 90.
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price formation and the functioning of the wholesale markets, particularly in localized
areas.
36.
While precise data is not readily available (indeed, obtaining that data is one of the
goals of Form No. 552), it is our experience and industry common knowledge that many
end-use transactions utilize price indices and/or could be relied upon to form price
indices. End-use transactions, specifically transactions involving large consumers of
natural gas that compete directly with wholesale market participants, are very relevant to
the Commission’s transparency mission. For example, use of natural gas for power
generation has increased markedly since 2000. According to annual figures from the
Energy Information Administration (EIA), natural gas used to produce electric power is
up from 14.2 Bcf/d in 2000 to 18.8 Bcf/d in 2007, an increase of 32 percent. As a result,
natural gas generation’s share of overall gas use is up, too. In 2000, EIA figures indicate
that natural gas used for power generation accounted for 18 percent of total U.S. natural
gas consumption; by the end of 2007 it represented 30 percent.57 On a peak day in the
summer, natural gas generation’s share of gas use can be much higher. According to
EIA, the U.S. delivered a total of 21.3 Tcf of natural gas to consumers in 2007 or on
57
Derived from information provided by EIA on their Natural Gas Navigator
website, http://tonto.eia.doe.gov/dnav/ng/hist/n3045us2a.htm.
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average about 58.3 Bcf per day.58 On August 8, 2007, estimates of gas use for power
generation reached 38 Bcf/d or 65 percent of 2007 average daily gas use.59 Moreover, in
many regional power markets, natural gas is the marginal fuel during the majority of
hours power plants are being dispatched, therefore a better understanding of how natural
gas indices are formed will aid the Commission and the public in understanding power
market dynamics. For these reasons, we conclude that where a transaction could
contribute to the formation of price indices and/or relies upon a price index, the
transaction should be reportable even if the reporting entity is a natural gas end-user.
37.
Requiring end-users to supply transaction data if the transaction utilizes,
contributes to, or could contribute to price index formation is well within EPAct 2005’s
Congressional mandate. The Commission accurately stated in Order No. 704 that price
formation in natural gas markets makes no distinction between transactions that are
traditionally jurisdictional to the Commission and those that are not.60 Congress,
recognizing this fact, gave the Commission expansive jurisdiction under the transparency
provisions of EPAct 2005. The Commission’s traditional jurisdiction under sections 4, 5,
58
Derived from information provided by EIA on their Natural Gas Navigator
website, http://tonto.eia.doe.gov/dnav/ng/ng_sum_lsum_dcu_nus_a.htm.
59
Derived from the “U.S. Power Burn Report”, Bentek Energy, LLC.
60
Order No. 704 at P 6.
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and 7 of the NGA is limited to “natural gas companies.”61 In contrast, section 23(a) of
the NGA directs the Commission “to facilitate price transparency in markets for the sale
or transportation of physical natural gas in interstate commerce”62 including obtaining
information from “any market participant.”63 There is no applicable statutory limitation
on the collection of information that may involve transportation through distribution-level
facilities, as applies to the Commission’s traditional jurisdiction.64
38.
In addition, the first sentence of section 23(a)(2) gives the Commission broad
authority to “prescribe such rules as the Commission determines necessary and
appropriate to carry out the purposes of this section,” i.e. facilitating price transparency.
This broad grant of authority is followed, in the second sentence of the section, with the
requirement that the “rules shall provide for the dissemination on a timely basis of
information about the availability and prices of natural gas sold at wholesale and in
interstate commerce.” The requirement in the second sentence, including the reference to
“gas sold at wholesale,” does not limit the broad authority granted by the first sentence.
Rather, the rules required by the second sentence should be viewed as a subset of the
61
15 U.S.C. section 717b-717i.
62
15 U.S.C. section 717t-2(a)(1).
63
15 U.S.C. section 717t-2(a)(3)(A).
64
Section 1(b) of the NGA, 15 U.S.C. section717(b), provides in part that the
Commission’s jurisdiction generally does not apply to “the local distribution of natural
gas.”
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rules the first sentence of section 23(a)(2) authorizes the Commission to adopt. Put
another way, section 23(a)(2) should be interpreted as providing that the Commission
may adopt rules collecting information about any transactions, including non-wholesale
end-use transactions, if necessary to facilitate price transparency, but such rules must
include the collection of information about wholesale transactions in interstate
commerce.
39.
This interpretation is buttressed by the fact that section 23(a)(3)(A) expressly
permits the Commission to obtain “the information described in paragraph (2) from any
market participant,” a term which includes end-users. EPAct 2005’s de minimis
threshold requirement in section 23(d)(2) provides further support for this position. That
provision states:
The Commission shall not require natural gas producers,
processors, or users who have a de minimis market presence
to comply with the reporting requirements of this section.65
The logical corollary to this Congressional directive is that a user that has greater than de
minimis market presence could be made subject to the reporting requirement. By
establishing a de minimis threshold volume of 2.2 million MMBtu (and, as further
explained herein, exempting traditional retail transactions from reporting), the
Commission appropriately limits reporting by end-users only to those users with a more
65
15 U.S.C. section 717t-2(d)(2) (emphasis added).
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than a de minimis market presence and only to those end-use transactions that utilize,
contribute to, or could contribute to price index formation.
40.
While a large industrial end-user may not be a customer “at wholesale,” it is
doubtless a “market participant” in the interstate wholesale energy market and its actions
may have a direct impact on the wholesale market or market indices, especially in a
localized area. We also note that the collection of information on an annual basis is
qualitatively different than our customary regulation of rates, terms, and conditions
applicable to natural gas companies. Requiring reporting from large end-users that
engage in 2.2 million MMBtu of annual sales or purchase transactions (other than
transactions associated with bundled retail tariff service) is a conservative outcome
compared to the broad authority granted to us by Congress in section 23 of the NGA.
Our approach strikes a balance between the data that the Commission requires to meet its
transparency-related obligations and the burden placed upon market participants to
provide this data.
41.
However, not all end-use transactions have the potential to contribute to the
formation of price indices or rely upon price indices. For example, traditional retail
transactions, even those involving annual volumes greater than the de minimis threshold,
neither utilize an index for a price nor contribute to index price formation. These retail
transactions are not relevant to the Commission’s transparency goals. A bundled retail
transaction through an LDC at a state-approved tariff rate is properly excluded from
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purchase and sales volumes to be reported on Form No. 552.66 The reporting burden on
retail consumers would greatly outweigh any minimal transparency benefit. To the
extent that a potential respondent purchases or sells gas at a bundled retail tariff rate, it
should not count those volumes towards the de minimis threshold and, if required to
submit Form No. 552, it would not include those volumes in its report.67 We note that
this “bright-line” clarification would also resolve NGSA’s concerns regarding a selling
entity’s ability to identify what purchasers are consuming gas – if gas is sold by an LDC
under a bundled retail tariff rate, then it need not be reported.
42.
This proposed approach is similar, though not identical, to the Commission’s
jurisdictional reach over natural gas transportation service to end-users. FERC exerts its
customary jurisdiction over direct transportation of natural gas from an interstate pipeline
66
We have drawn a parallel distinction in the electric context. In Order No. 888,
the Commission exercised its jurisdiction over unbundled transmission to end-users in
interstate commerce, yet declined to exert jurisdiction over bundled retail transmission.
See Promoting Wholesale Competition Through Open Access Non-discriminatory
Transmission Services by Public Utilities; Recovery of Stranded Costs by Public Utilities
and Transmitting Utilities, Order No. 888, 61 FR 21540 (May 10, 1996), FERC Stats. &
Regs. ¶ 31,036, at p. 31,781 (1996). The U.S. Supreme Court approved of this distinction
in New York v. FERC, 535 U.S. 1, 28 (2002). While not a jurisdictional question, in this
rulemaking, we incorporate a similar distinction between unbundled natural gas
transactions to consumers (which are reportable in Form No. 552 if they utilize or
contribute to the formation of a price index) and bundled transactions through an LDC
subject to state-approved tariff rates (which are not reportable).
67
One caveat is that, if the end-user or other market participant holds a blanket
certificate from the Commission, it must, at a minimum, submit the identification and
price reporting data required on Form No. 552.
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to an end-user.68 However, the Commission has traditionally declined to exercise
jurisdiction over transportation to “retail customers in a localized geographical area
behind either a town border station or behind facilities . . . that connect to rural delivery
points outside the boundaries of towns.”69 Where transportation to an end-user occurs in
interstate commerce and not as part of local distribution, the Commission has jurisdiction.
43.
We conclude that exempting from reporting those volumes associated with
bundled retail transactions made at state-approved tariff rates, while including volumes
associated with direct pipeline-to-end-user and other end-user transactions, is appropriate.
This modification regarding the reportability of certain end-use transactions necessitates
changes to the language of Form No. 552.70
E.
44.
Respondents Need Not Distinguish Between Transactions Based upon
Location
Order No. 704 provided that a market participant must categorize transaction
volumes by whether each transaction was made at a “reportable location.” Reportable
68
See, e.g., Public Utilities Commission of the State of California v. FERC,
900 F.2d 269 (D.C. Cir. 1990).
69
Kinder Morgan Interstate Gas Transmission LLC, 99 FERC ¶ 61,186, at n.30
(2002).
70
One such modification is the definition of “Physical Natural Gas Transactions”
in the Definitions portion of current Form No. 552. The definition clearly indicates that
reportable volumes are only those that utilize, contribute to, or may contribute to the
formation of price indices. The definition also explicitly excludes volumes associated
with bundled retail sales and purchases at state-approved tariff rates.
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locations are locations where index developers currently collect fixed-price information
for transactions with Next-Day or Next-Month Delivery obligations, and produce index
prices. Thus, Order No. 704 tied the meaning of “fixed-price” reported volumes to
volumes that may be reported to index developers at specific points. To this end, we
directed our staff to list on the Commission’s website all reportable locations at which
fixed-price volumes were to be reported on Form No. 552.71
Requests for Rehearing and Clarification
45.
NGSA requests rehearing of Order No. 704 so as to require submission of data at
all trading locations rather than limited to specific reportable locations.72 NGSA argues
that this approach would be consistent with the Policy Statement on price reporting.73
Further, NGSA states that designated “reportable locations” will change over time,
hampering the Commission’s long-term analysis of the market.74 NGSA argues that
limiting reported data only to specific reportable locations would be more burdensome to
most respondents than reporting all aggregate, relevant data.75 Lastly, NGSA asserts that
different index developers utilize different means to collect data at the same index point
71
Order No. 704 at PP 60 and 101-102.
72
NGSA comments at 5.
73
Id. at 6 (citing the Policy Statement).
74
Id. at 6-7.
75
Id. at 7.
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and, thus, data collected from market participants for particular reportable points will not
offer a reasonable comparison to reported indices.76
46.
Participants at the technical conferences echoed some of these themes. The
NiSource Companies (NiSource) and Encana, for example, questioned how reporting was
to be accomplished for certain reportable locations given that different reporting services
defined the locations in multiple ways.
Commission Determination
47.
We grant rehearing of Order No. 704 on this issue and provide that respondents
need not categorize volumes based upon whether such volumes relate to transactions at
specific price index locations. We agree with NGSA that: (1) it would be substantially
less burdensome for market participants to provide aggregate data regarding their
transactions than to differentiate between volumes that occur within or outside reportable
locations; (2) defining workable “reportable locations” would be difficult, would require
substantial detail regarding geographic scope and types of transactions at specific
locations, and would unduly complicate respondents’ Form No. 552 responses; and
(3) specific reportable locations would change on a yearly basis, limiting the value of
data collected by location. We also understand that participants at the technical
conferences indicated a substantial preference for this modification.
76
Id.
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33
The Policy Statement provides that the minimum standards for data providers
include a commitment to report “each bilateral, arm’s-length transaction between nonaffiliated companies in the physical (cash) markets at all trading locations.”77
Modification of Form No. 552 to eliminate data collected at specific reporting locations
would make the annual reporting obligation consistent with the Policy Statement.
Consequently, for respondents that already comply with the Policy Statement standards,
data collection and reporting on Form No. 552 would be significantly less burdensome.
In fact, we believe that it would be easier for most entities that do not comply with the
Policy Statement standards to provide aggregate data for all reportable transactions rather
than to segregate data regarding transactions at specific locations.
49.
Further, comments by conference participants and NGSA’s request for rehearing
make clear that it would be administratively difficult to geographically define each
reportable location in a way that would capture all transactions that were eligible for
reporting to the various price indices. This is due to the fact that different data collection
methodologies are used by index developers at the same point as well as the fact that
different index developers accept different transactions from these points to form indices.
50.
For these reasons, we grant rehearing of Order No. 704 and determine that
respondents need only provide aggregated data for reportable transactions at all
77
Policy Statement at P 34 (emphasis added).
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transaction locations. Respondents need not provide data segregated by reportable
location.78
F.
51.
Balancing, Cash-out, Operational, and In-Kind Transactions are
Reportable
In Order No. 704, we required market participants to report sale and purchase
volumes related to cash-outs, imbalance make-ups, and operations.79 We noted that,
while some volumes related to such transactions are not utilized to create price indices,
many volumes do refer to or utilize such indices.80 The Commission concluded that the
data collected from such transactions is useful in assessing how spot prices are being used
commercially. Specifically, the order required market participants to include on Form
No. 552 volumes related to royalty-in-kind transactions and purchases and sales related to
production and gathering functions.81
Requests for Rehearing or Clarification
52.
Regarding transactions on interstate pipelines, Shell and NGSA seek rehearing of
Order No. 704 so as to exclude cash-out, imbalance makeup, and operational volumes
78
Consistent with the determination, we will no longer direct the Commission’s
staff to retain a list of reportable locations on the Commission’s website.
79
Order No. 704 at P 107.
80
Id. P 108.
81
Id.
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from the realm of reportable transactions. Both Shell and NGSA argue that such
transactions do not affect the interstate natural gas market, though they may often rely
upon natural gas indices for their price.82 Shell states that data regarding such
transactions may not reflect actual market activity as prices may vary according to
whether the pipeline or shipper owes gas and there is a one-month lag on the timing of
many makeup transactions.83 For this reason, the use of index prices in makeup
transactions, Shell argues, does not reflect the value of natural gas for purposes of
assessing wholesale natural gas spot markets and will actually distort relevant data
received by the Commission.84 In the alternative, if rehearing on this point is denied,
Shell seeks clarification that, if a pipeline provides imbalance cash-out data, then shippers
need not provide the identical data on Form No. 552.85 NGSA reiterates many of these
arguments, adds that pipeline balancing transactions are governed by the pipeline’s tariff,
82
Shell comments at 14-15; NGSA comments at 11.
83
Shell comments at 14-15.
84
Id. at 15.
85
Id. at 16.
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and argues that balancing should not be considered a purchase or sale in the wholesale
market.86
53.
Regarding intrastate pipelines, Copano seeks clarification or rehearing regarding
whether “non-interstate pipeline” market participants must report, and include for
purposes of meeting the de minimis threshold, volumes related to cash-outs and other
operational activities.87 Copano argues, much as does Shell and NGSA regarding
interstate pipelines, that these sorts of transactions are operational in nature, are not based
on market conditions, and provide no benefit to the Commission’s transparency goals.88
54.
Regarding transactions involving end-users, AF&PA and IECA, in a joint
submittal, seek clarification or rehearing to exempt balancing-type transactions from
reporting. Additionally, these entities request that blanket certificate holders under
section 284.402, that hold such a certificate solely by virtue of their status as a pipeline
customer engaged in balancing or cash out transactions pursuant to a consumer level gas
service contract, be allowed to forego filing of Form No. 552.89 AF&PA and IECA argue
that the benefit of obtaining this information is minimal compared to the burden of
86
NGSA comments at 9-10. NGSA repeats many of these same arguments in its
subsequent supplemental comments at 4-6. See also Shell comments at 15-16 (stating in
passing that imbalance trading transactions should not be considered a purchase or sale).
87
Copano comments at 8-9.
88
Id. at 9-10.
89
AF&PA/IECA comments at 6.
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reporting the data. They contend that: (1) such transactions are often “involuntary” and
that it may be very difficult for end-users to determine whether their balancing activity
exceeds the de minimis threshold; (2) the applicable volumes already likely are reported
at the pipeline level; and (3) balancing transactions that occur pursuant to individual enduse contracts will not factor appreciatively into wholesale price formation.90 They also
state that it is likely that many end-user blanket certificate holders under section 284.402
do not know that they hold such certificate authority or that balancing provisions in
existing contracts with pipelines could trigger the rule’s annual reporting requirement.91
55.
Shell seeks clarification that “in-kind” balancing transactions of all stripes are not
reportable transactions under the rule as such transactions do not involve a “sale” or a
“purchase.”92 Relatedly, NGSA requests clarification or rehearing, as necessary, that the
entity that purchases or sells royalty-in-kind interests is responsible for reporting royaltyin-kind transactions – not well operators.93 NGSA argues that well operators do not
necessarily have knowledge of the contractual relations of royalty interest holders.94
90
Id. at 4-6.
91
Id. at 6-7.
92
Shell comments at 15-16.
93
NGSA comments at 12-13.
94
Id. at 12.
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38
Shell also seeks clarification regarding the location that cash-out, in-kind, or other
imbalance transactions occur for purposes of determining whether the transaction occurs
at a “reportable location.”95 Shell requests further clarification as to whether such
transactions are considered “next-day,” “next-month,” or “other” for purposes of
completing Form No. 552.96 Finally, Shell seeks clarification that all production-related
balancing activities, such as those between producers and working interest owners, are
not to be reported.97 We understand that producers at the technical conferences requested
similar clarification from staff.
57.
In supplemental comments, NGSA suggests that, if the Commission continues to
require the submission of cash-out transaction data (including thermal reduction
volumes), such data should be reported on a separate line on Form No. 552.98
58.
A significant number of commenters at the technical conferences raised questions
regarding balancing transactions of various types. Commenters wished to know whether
balancing transactions were to be reported on a “net” basis for each year or whether
activity in each direction (cash-ins and cash-outs) should be separately accounted.
95
Shell comments at 17.
96
Id.
97
Id.
98
NGSA supplemental comments at 4.
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Commission Determination
59.
We deny the requests for rehearing. Balancing, cash-out, operational, in-kind, and
similar transactions must be reported on Form No. 552 if they rely upon, contribute to, or
could contribute to a price index.
60.
Section 23 of the NGA requires that our data collection have “due regard” for “the
integrity of [the physical natural gas] markets, [and] fair competition.”99 Public
confidence in the reporting of natural gas prices to gas price index developers and the
reasonable use and reliance on such indices in the market is squarely within the
Commission’s purview. This includes not just transactions that directly impact wholesale
price formation, but also transactions that reference indices. As we stated in Order No.
704, one of the goals of Form No. 552 is to allow the Commission to “not only
understand the transactions used to formulate price indices; it is to understand how
influential price indices are in the overall transacting of natural gas in U.S. wholesale
markets.”100 It has been our experience that a significant number of balancing, cash-out,
and similar transactions include references to price indices. Understanding the magnitude
of this reliance on price indices is therefore a legitimate policy goal. Form No. 552 will
99
15 U.S.C. section 717t-2(a)(1).
100
Order No. 704 at P 73.
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provide this information and we can conceive of no less intrusive way to obtain this
relevant data.
61.
In any event, we do not agree with the proposition that balancing transactions, as
described by commenters, could not themselves contribute to the formation of price
indices. The fact that a purchase or sale is made for operational or balancing, rather than
market, reasons is irrelevant. This includes, for example, base or cushion gas purchases
for storage facilities, balancing between pipelines or between a supplier and a customer,
and purchases of gas for compression. Some portion of these transactions could be
utilized to establish index prices. Balancing, cash-out, operational, and in-kind
transactions should therefore be reportable on Form No. 552 to the same extent as other
types of transactions.101
62.
Further, reporting of balancing transactions by all entities subject to the annual
reporting requirement is entirely appropriate. Specifically, balancing transactions
involving end-users are likely a significant total of natural gas contracts that reference
price indices. Understanding the prevalence of such contracts may allow the
101
As with the reporting of purchase and sale transactions, we clarify that
balancing transactions should be reported for both cash-ins and cash-outs and not on a net
basis.
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Commission and other market observers to assess weaknesses in price index
development.102
63.
For all these reasons, we continue to require that reportable sales and purchases on
Form No. 552 include balancing, cash-out, operational, and in-kind transactions that
utilize, contribute to, or could contribute to the formation of a price index.
G.
64.
Safe Harbor
In Order No. 704, we noted our intent not to prosecute or penalize companies for
inadvertent reporting errors on Form No. 552.103 However, we drew a clear distinction
between the safe harbor provided to voluntary reporting to price index publishers in the
Policy Statement and the mandatory annual report required by Order No. 704.104 The
Commission rejected calls to include a similar safe harbor for the submission of Form
No. 552.
102
Technical requests regarding how these types of transactions should be
reported on Form No. 552 are addressed through clarifications discussed elsewhere in
this order. Regarding the request for clarification by AF&PA and IECA on this point, the
Commission declines to clarify the Final Rule in the manner suggested by the
commenters. While AF&PA and IECA did not supply sufficient detail in their request
regarding the transactions of concern to their members for us to offer more specific
guidance, we expect that the clarifications provided in this order will allow these
organizations’ members to determine both whether they must submit Form No. 552 and
the transaction volumes that must be reported therein.
103
Order No. 704 at P 114.
104
Id.
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Requests for Rehearing or Clarification
65.
Shell notes that the Commission stated that it “does not intend to prosecute or
penalize parties for inadvertent errors in reporting,” but did not include a safe harbor
provision for market participants that attempt to comply in good faith with Order No.
704. Shell urges the Commission to adopt an explicit, rebuttable presumption of good
faith as it did in the Policy Statement on price reporting.105
66.
Powerex Corporation (Powerex) notes that, in the April 2007 NOPR, the
Commission responded to queries from “several data providers . . . as to whether they
may report certain classes of products traded, but not others.”106 The April 2007 NOPR
stated that “a data provider remains eligible for the safe harbor provisions if it reports
certain products, but not others, provided that it provides all of the same type of
transactions and that it notifies the Commission which products it will report in its annual
filing or other notification.”107 The Commission stated that it would repeat this safe
harbor clarification in the final rule. However, no such clarification was included in
Order No. 704.
67.
In supplemental comments to the technical conferences, AGA requests that the
Commission institute a “pilot program” for compliance with Order No. 704 for calendar
105
Shell comments at 29-31.
106
Powerex comments at 5.
107
Id.
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year 2008 data.108 AGA suggests that the Commission not penalize market participants
that make good faith efforts to complete Form No. 552 but “make errors” or “include data
that is inconsistent with the way other market participants have completed the form.”109
NGSA, in supplemental comments, requests that the Commission adopt a safe harbor for
2008 calendar-year data, including allowing respondents “to base information . . . on
transaction data collected using existing processes and systems.”110
Commission Determination
68.
The Commission herein adopts a one-year safe harbor, covering transactions
occurring in calendar year 2008 and reported on Form No. 552 on May 1, 2009.
However, we decline to extend this safe harbor for additional calendar year reporting.
69.
The Policy Statement includes a safe harbor provision that grants a data provider
that adopts the Policy Statement standards a rebuttable presumption that data submitted to
index developers is accurate, timely, and submitted in good faith.111 However, a similar
perpetual safe harbor is not warranted regarding the reporting of data on Form No. 552.
The Policy Statement set forth standards that data providers could choose to adopt should
108
AGA supplemental comments at 2-3.
109
Id.
110
NGSA supplemental comments at 3.
111
See Policy Statement at P 37.
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they voluntarily elect to provide data to price index developers. One goal of the Policy
Statement was to “encourage [industry participants] voluntarily to report energy
transactions to the providers of price indices.”112 The safe harbor that we adopted in the
Policy Statement was a direct extension of this policy goal.
70.
Form No. 552 is a mandatory annual filing adopted consistent with EPAct 2005,
not the voluntary reporting of price data to an index developer. There is no policy need
to provide an incentive for the filing of Form No. 552 similar to the encouragement to
reporting price data to index developers. Other mandatory forms, such as FERC Form
No. 2, do not include such a safe harbor. For this reason, we are not persuaded that a
perpetual safe harbor is warranted.
71.
However, a one-year safe harbor (including data collected for calendar year 2008
and reported by May 1, 2009) is appropriate. Market participants have begun data
collection for the current calendar year without the benefit of an order on rehearing of
Order No. 704. We acknowledge that this Order on Rehearing and Clarification is issued
well after respondents’ data collection has been underway for 2008. Further, we herein
offer a number of clarifications of Order No. 704 that may impact such data collection
activities. A one-time safe harbor for the 2009 Form No. 552 is, under these unique
circumstances, reasonable. Consistent with the Policy Statement, the Commission finds
112
Id. P 3.
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that respondents submitting Form No. 552 in 2009 will benefit from a rebuttable
presumption that the data provided is accurate and submitted in good faith. Further, we
do not intend to penalize respondents for errors in reporting on Form No. 552 provided
that respondents use reasonable efforts to comply with the regulations regarding and
instructions for Form No. 552. We emphasize that the Commission expects respondents
submitting Form No. 552 in 2009 to do so in good faith and on a timely basis.
H.
72.
Additional Clarifications
In addition to resolution of the rehearing and clarification issues discussed above,
we clarify a number of minor or technical aspects of Form No. 552.
Some volumes associated with transactions outside the lower 48 states should be
reported
73.
The Canadian Association of Petroleum Producers (CAPP), Canadian Suppliers,113
and Powerex request clarification, or in the alternative, rehearing, that reported data
should include only sales or purchases made inside the geographic boundaries of the
United States.114 Marathon Oil Company (Marathon) and NGSA request clarification or
113
Collectively, Encana Marketing (USA) Inc., Nexen Marketing (USA) Inc.,
Petro-Canada Hydrocarbons Inc., and Talisman Energy Inc.
114
at 6-7.
CAPP comments at 1; Canadian Suppliers comments at 3; Powerex comments
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rehearing regarding the scope of the rule vis-à-vis natural gas production in Alaska.115
AGA, in supplemental comments, also requests that the Commission address this issue.116
74.
Regarding transactions involving possible international transportation, we clarify
that: (1) volumes originating outside the lower 48 states and delivered at locations
outside the lower 48 states are not reportable; (2) volumes originating from inside the
lower 48 states and delivered outside the lower 48 states are reportable; and (3) volumes
delivered inside the lower 48 states are reportable. Thus, any volumes that originate or
are delivered into the lower 48 states should be reported on Form No. 552 to the same
extent as purely domestic volumes. Form No. 552 is designed to capture all transactions
that reference price indices or that could contribute to price indices and these types of
international transactions are not categorically excluded.
Transactions related to exploration activities, production area operations, and
gathering functions are not exempted from reporting
75.
Shell and NGSA request clarification or rehearing of Order No. 704 so as to
categorically exclude exploration activities, production area operations, and gathering
functions from reporting. They argue that the entirety of the Commission’s rationale for
including these transactions is that these transactions often make use of price indices.117
115
Marathon comments at 4-5; NGSA comments at 13-14.
116
AGA supplemental comments at 6-9.
117
Shell comments at 9; NGSA comments at 11-12.
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They also argue that these transactions do not impact the wholesale interstate gas market
and are excluded from traditional NGA regulation under section 1(b) of the Act.118
76.
In Order No. 704, the Commission stated that, “while these transactions may not
affect the formation of price indices in wholesale markets, these transactions often make
use of price indices . . . to the extent that transfers of value take place based on price
indices, it is important that the Commission and other market observers be able to
understand the extent of that transfer and its dependency on price indices as well.”119 As
explained in the order, determining the scope of price index reliance in the market is a
significant goal of this rulemaking. The public availability of this data will increase
market transparency and confidence. Transactions involving exploration activities,
production area operations, and gathering functions that rely upon or could contribute to
the creation of price indices are to be reported in the same manner as other types of
transactions.
Transactions involving unprocessed gas are not reportable
77.
Hess Corporation (Hess) requests rehearing of Order No. 704 so as to exclude
entities engaged in transactions behind a processing plant priced pursuant to a
percentage-of-proceeds contract under which the producer is entitled to receive a
118
Shell comments at 10; NGSA comments at 11.
119
Order No. 704 at P 108.
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percentage of the proceeds realized by the buyer upon resale of the natural gas.120
Similarly, the Oklahoma Independent Petroleum Association (OIPA) seeks rehearing of
Order No. 704 so as to exempt producers of natural gas that sell wellhead gas at the initial
first sales point under a percentage of proceeds contract.121
78.
We agree with Hess and OIPA that transactions regarding unprocessed gas should
not be reported on Form No. 552 and should not be counted when determining whether
an entity falls below the de minimis threshold. Transactions involving unprocessed
natural gas are not relevant to wholesale price formation.
A customer of an asset manager is responsible for reporting volumes managed by
the asset manager
79.
Order No. 704 states that asset managers may not aggregate customer volumes and
report the same on Form No. 552.122 NGSA requests that the Commission clarify that
individual customers of asset managers are responsible for the submission of Form No.
552 and reporting volumes managed by the asset manager as well as any other reportable
sales or purchases.123
120
Hess comments at 1.
121
OIPA comments at 2.
122
Order No. 704 at P 98.
123
NGSA comments at 15.
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49
We clarify the rule in the manner suggested by NGSA. In Order No. 704, we
stated that asset managers may not report aggregated information for their customers.124
However, this statement should not be read so as to relieve customers that hire asset
managers from their obligation to file Form No. 552 if they are required to do so.
Individual customers of asset managers (assuming that their activities do not fall below
the de minimis threshold) are responsible for reporting volumes both as managed by an
asset manager and independently sold and purchased. The Commission also notes that an
asset manager, to the extent that its market activities are not undertaken on behalf of an
asset management client, may itself be required to submit Form No. 552.
A public joint action agency may report an aggregate of members’ volumes
81.
Order No. 704 does not directly address the filing of Form No. 552 by public joint
action agencies. APGA requests clarification that a public joint action agency may
aggregate members’ annual volume data for purposes of the report.125 APGA notes that,
in Order No. 704, aggregation is permitted between privately-owned affiliates.126
82.
We clarify that public joint action agencies, such as certain members of APGA,
will be allowed to report members’ data on an aggregate basis in the same manner as
124
Order No. 704 at P 98.
125
APGA comments at 2-3.
126
Id. at 2 (citing Order No. 704 at P 94).
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corporate affiliates. We see no reason to treat public joint action agencies differently
from private corporate families. Allowing a public joint action agency to report
members’ volumes will significantly reduce the reporting burden on those members. Of
course, members of public joint action agencies and affiliates within a corporate family
remain free to report separately, should they wish. Additionally, we clarify that armslength transactions between members of a public joint action agency may be reportable
transactions.
Physically-settled non-NYMEX options are reportable
83.
Order No. 704 excluded from reporting NYMEX options that physically settle.
The rationale for this exclusion was that data regarding these transactions did not
necessarily relate to fixed-price spot price formation, the data was readily available to the
public through NYMEX, and reporting these volumes on Form No. 552 would be
duplicative and burdensome.127 However, Order No. 704 does not explicitly address nonNYMEX transactions that result in physical flow. When such options are exercised, they
result in physical deliveries in the wholesale market. NGSA requests clarification and, if
needed, rehearing to ensure that physically-settled, non-NYMEX options are included in
reported volumes.128
127
Order No. 704 at P 113.
128
NGSA comments at 14.
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51
We agree with NGSA and grant the requested clarification. A physically-settled
non-NYMEX transaction must be reported on Form No. 552 if it utilizes or could
contribute to the formation of a price index.
Certain “NYMEX Plus” contracts are reportable
85.
Order No. 704 excluded from reporting any type of financially-settled
transaction.129 NEM requests clarification regarding reporting of “NYMEX Plus”
contract volumes. Specifically, NEM requests clarification regarding the definition of
Physical Natural Gas on Form No. 552.130 The form excludes from reporting “any type
of financially-settled transaction.” NEM is uncertain whether NYMEX Plus contracts
fall into this exclusion. NEM explains that under a NYMEX Plus contract an entity
purchases or sells a volume of gas on a wholesale basis at a reportable location for a
month or series of months with the price determined by reference to the monthly
settlement price of a NYMEX futures contract plus an adder.131 NEM is unsure whether
such volumes should be reported on Form No. 552 line 5 as “prices that refer to
published next-month gas price indices” or line 6 (the “other” category).132 NEM is also
129
Order No. 704 at P 111 and Form No. 552, Definition VII, Physical Natural
130
NEM comments at 4-6.
131
Id. at 3.
132
Id. at 3-4.
Gas.
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uncertain as to: (1) the calendar year and months in which contract volumes related to a
multi-month or multi-year NYMEX Plus contract should be reported; and (2) the price
that should be reported on Form No. 552 if a price is to be set at a future date.133
86.
Based upon the facts as detailed by NEM, the Commission believes that only a
subset of NYMEX Plus contracts should be reported. Specifically, we clarify that
NYMEX Plus transactions are reportable only when: (1) executed during bid week and
that can contribute to a next-month price index, or (2) they utilize a NYMEX settlement
price during bid week that can contribute to a next-month index. In that regard, the
Commission is adding a new line between current lines 6 and 7 to page 5 of Form No.
552 for the purpose of reporting data regarding NYMEX Plus and other “triggered”
physical gas transactions.
87.
Further, we clarify that, for all contracts where deliveries occur or may occur over
multiple calendar years and such volumes are reportable, only volumes attributable for
delivery that use or may contribute to the formation of price indices during the subject
calendar year should be reported on Form No. 552. In Order No. 704, the Commission
indicated that transactions are to be reported based upon whether their expected delivery
dates are within the reporting year –contract formation dates are irrelevant.134 For
133
NEM comments at 4-5.
134
Order No. 704 at P 60.
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example, for a contract that could contribute to the formation of a price index and
requires deliveries at times between July of the first year through February of the next,
the respondent should report July-December volumes for the Form No. 552
corresponding to the first year’s volumes and January-February volumes in the next
year’s Form No. 552. For a multi-year contract that relies on a price index to establish a
price, the relevant volumes should be reported in the year in which the index is
referenced.
Bid-week, fixed price differential physical basis transactions tied to the last day of
settlement are reportable
88.
NGSA requests rehearing such that the definition of “Fixed Price” in Form No.
552 includes bid-week fixed price differential physical basis transactions tied to the last
day of settlement.135 NGSA notes that these agreements form a material portion of the
reported transactions at index points.136 AGA, in supplemental comments in the docket,
suggests that physical basis transactions be reported on a separate line on Form No.
552.137 NGSA argues that including these volumes would ease the administrative burden
135
These types of transactions involve transfers of physical natural gas utilizing
basis differentials. The transactions are executed during the bid-week at a fixed
differential to the last day of settlement.
136
NGSA comments at 8.
137
AGA supplemental comments at 5-6.
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on respondents as these volumes would not need to be monitored and removed from
aggregate volume numbers.138
89.
The Commission agrees that Form No. 552 should include bid-week, fixed price
differential physical basis transactions. These transactions are a significant aspect of
wholesale natural gas markets and utilize or could contribute to the formation of price
indices. Consistent with AGA’s recommendation, we will include a new line item in
Form No. 552, requiring the reporting of all physical basis transactions, including fixed
differential basis transactions that can contribute to or rely upon a price index.
All data provided on Form No. 552 will be publicly available
90.
At least one participant at the technical conference requested that the Commission
act to protect allegedly proprietary information contained in completed Form No. 552.
Specifically, the concern was raised by Samson Resources Company (Samson) that, by
requiring submission of data based upon transactions at specific locations, the form
would provide sensitive commercial information to competitors who may already know
the point or points where the respondent transacts. Samson also claimed that the names
of affiliates should be confidential as well.
91.
We reiterate that Form No. 552 data will be publicly available. In Order No. 704,
the Commission addressed requests that data included on Form No. 552 be treated as
138
NGSA comments at 8.
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confidential or proprietary.139 We found that Congress directed the Commission to
provide aggregate information to the public. We balanced this transparency goal with the
asserted need for confidentiality. Among the factors we considered were: (1) data would
be reported in the aggregate; (2) no specific pricing information would be reported;
(3) data would be reported on a national level, not locally or regionally; and (4) data
would not be reported until four months following the reporting year.140 We see no
reason to modify our determination in this regard. We note, however, that our
determination herein to eliminate the reporting of data at specific reportable locations,
further reduces any concerns that reported data is commercially sensitive.
We decline to modify the effective date of the rule
92.
Under Order No. 704, respondents must submit Form No. 552 no later than May 1,
2009 for data collected in calendar year 2008.141 We understand that one participant at
the technical conference requested that the Commission delay reporting of data until 2010
(for calendar year 2009 data). NiSource argued that it did not have the ability to
electronically record data required by Form No. 552 and, given that the Commission had
yet to issue an order on rehearing, it may be very difficult or impossible for some
companies to comply with a 2009 filing date.
139
Order No. 704 at PP 82-84.
140
Id. P 83.
141
Id. P 105.
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56
The Commission declines to modify the effective date of the rule or the date by
which Form No. 552 is first to be filed. We note that no entity raised this issue on
rehearing or a formal request for clarification. We have confidence in respondents’
capabilities to report the general volume data requested on Form No. 552 by the May 1,
2009 filing date. With the adoption of a one-year safe harbor, discussed above, concerns
regarding the difficulty of collecting 2008 data for reporting in 2009 should be mitigated.
We do not at this time establish additional formal procedures to address market
participant questions regarding Form No. 552
94.
NEM requests that the Commission establish ongoing procedures in which staff
may offer informal advice to market participants regarding reporting requirements in
Form No. 552. NEM proposes a “technical compliance forum” to include a combination
of measures such as an additional hotline, a designated interactive webpage for industry
questions regarding Form No. 552 (including a Frequently Asked Questions page),
designation of specific staff members to field questions, and periodic technical
conferences leading up to the May 2009 filing deadline.142 Additionally, AGA and
Merrill Lynch Commodities (Merrill Lynch), during the technical conference process,
suggested that staff complete and distribute a sample Form No. 552 based upon various
types of transactions. AGA also requested in supplemental comments that the
142
NEM comments at 2.
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Commission commit to provide further guidance on the reporting obligation following
submission of annual reports in 2009.143
95.
We do not believe that additional informational or educational outreach regarding
Form No. 552 is necessary at this time. To the extent that additional clarification is
necessary following the issuance of this Order on Rehearing and Clarification, requests
for further clarification and rehearing are permitted and additional technical conferences
may be held at our discretion. Further, we note that, once entities begin to complete
Form No. 552 with calendar year 2008 data, respondents may direct informal questions
through appropriate means, including the new compliance help desk.144
The reach of the safe harbor provision in the Policy Statement on Natural Gas and
Electric Price Indices
96.
Referring to the 2003 Policy Statement, Order No. 704 stated, in passing, that “[a]
market participant that does not hold blanket sales certificates is not required to comply
with the Policy Statement processes, nor does it receive the safe harbor available in the
Policy Statement.”145 Southern Company Services, Inc. (SCS) requests clarification of
this statement. SCS argues that non-jurisdictional entities have engaged in price
reporting while relying on an interpretation of the Policy Statement’s safe harbor
143
AGA supplemental comments at 3.
144
See Obtaining Guidance on Regulatory Requirements, 123 FERC ¶ 61,157
(2008).
145
Order No. 704 at P 96.
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provision. SCS argues that the Policy Statement safe harbor applies to any “data
provider” regardless of whether the provider is a certificate holder.146
97.
SCS’s request is effectively a request to clarify the Policy Statement, not Order
No. 704. The referenced comment was not a prerequisite to our determinations in the
order. SCS’s request is inappropriate as a request for clarification of Order No. 704.
III.
Information Collection Statement
98.
The Office of Management and Budget (OMB) regulations require that OMB
approve certain reporting, recordkeeping, and public disclosure (collections of
information) imposed by an agency.147 The information collection requirements for Form
No. 552 respondents were approved under OMB Control Nos. 1902-0242. This order
further revises these requirements in order to more clearly state the obligations imposed
in Order No. 704, but does not substantively alter those requirements. OMB approval of
this order is therefore unnecessary. However, the Commission will send a copy of this
order to OMB for informational purposes only.
IV.
Environmental Analysis
99.
The Commission is required to prepare an Environmental Assessment or an
Environmental Impact Statement for any action that may have a significant adverse effect
146
SCS comments at 2-3.
147
5 CFR 1320.
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on the human environment.148 The actions taken here fall within categorical exclusions
in the Commission’s regulations for information gathering, analysis, and dissemination,
and for sales, exchange, and transportation of natural gas that requires no construction of
facilities.149 Therefore, an environmental assessment is unnecessary and has not been
prepared in this rulemaking.
V.
Regulatory Flexibility Act
100.
The Regulatory Flexibility Act of 1980 (RFA)150 generally requires a description
and analysis of rules that will have significant economic impact on a substantial number
of small entities. The RFA requires consideration of regulatory alternatives that
accomplish the stated objectives of a proposed rule and that minimize any significant
economic impact on such entities. The RFA does not, however, mandate any particular
outcome in a rulemaking. At a minimum, agencies are to consider the following
alternatives: establishment of different compliance or reporting requirements for small
entities or timetables that take into account the resources available to small entities;
clarification, consolidation, or simplification of compliance and reporting requirements
148
Order No. 486, Regulations Implementing the National Environmental Policy
Act, 52 FR 47897 (Dec. 17, 1987), FERC Stats. & Regs ¶ 30,783 (1987).
149
18 CFR 380.4(a)(5) and (a)(27).
150
5 U.S.C. 601-612.
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for small entities; use of performance rather than design standards; and exemption for
certain or all small entities from coverage of the rule, in whole or in part.
101.
The annual reporting requirement set forth in the Order on Rehearing and
Clarification will not have a significant economic impact on a substantial number of
small entities. The requirement for annual reporting of physical natural gas transactions
will have minimal impact on small entities. By incorporating a de minimis exemption
into the regulations, the Commission has reduced the number of small entities subject to
the requirements: de minimis entities without blanket sales certificates will not be
required to report. This reporting requirement will affect small entities but the burden on
them will be minimal. For each entity, small or otherwise, that is required to comply
with the annual reporting requirement, the Commission estimates that the compliance
would require a one-time cost of approximately $4,000 and an annual cost thereafter of
$400. Although some costs would increase for market participants with a greater number
of transactions, we expect that that increase would be likely offset because such entities
would have already compiled information regarding their transactions in the aggregate.
This amount is not a significant burden on small entities. The de minimis exemption
provides a regulatory alternative that will reduce the economic impact on certain small
entities from coverage of the rule. Accordingly, the Commission certifies that the order
will not have a significant economic impact on a substantial number of small entities.
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VI.
Document Availability
102.
In addition to publishing the full text of this document in the Federal Register, the
Commission provides all interested persons an opportunity to view and/or print the
contents of this document via the Internet through FERC's Home Page
(http://www.ferc.gov) and in FERC's Public Reference Room during normal business
hours (8:30 a.m. to 5 p.m. Eastern time) at 888 First Street, N.E., Room 2A, Washington
DC 20426.
103.
From FERC's Home Page on the Internet, this information is available on
eLibrary. The full text of this document is available on eLibrary in PDF and Microsoft
Word format for viewing, printing, and/or downloading. To access this document in
eLibrary, type the docket number excluding the last three digits of this document in the
docket number field.
104.
User assistance is available for eLibrary and the FERC's Web site during normal
business hours from FERC Online Support at 202-502-6652 (toll free at 1-866-208-3676)
or e-mail at [email protected], or the Public Reference Room at (202) 5028371, TTY (202) 502-8659. E-mail the Public Reference Room at
[email protected].
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VII.
Effective Date
105.
Changes to Order No. 704 adopted in this Order on Rehearing and Clarification
will become effective [insert date 30 days after publication in the Federal Register].
The Commission orders:
The requests for clarification and rehearing are granted in part and denied in part
as discussed in the body of this order.
List of Subjects
18 CFR Part 260
Natural gas, Reporting and recordkeeping requirements.
18 CFR Part 284
Continental shelf; Natural gas; Reporting and recordkeeping requirements.
By the Commission.
(SEAL)
Kimberly D. Bose,
Secretary.
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-64-
In consideration of the foregoing, the Commission amends parts 260 and 284,
Chapter I, Title 18, Code of Federal Regulations to read as follows:
PART 260 - STATEMENTS AND REPORTS (SCHEDULES)
1.
The authority citation for part 260 continues to read as follows:
Authority: 15 U.S.C. 717-717w, 3301-3432; 42 U.S.C. 7101-7352.
2.
Sec. 260.401 is revised as follows:
a.
Paragraph (a) is amended by removing the word “reporting” between the
words “annual” and “report.”
b.
Paragraph (b)(1) is amended by removing the word “wholesale,” between
the words “in” and “physical” and removing the word “As” and inserting the words,
“However, as” at the beginning of the final sentence.
c.
Paragraph (b)(1)(i) is amended by removing the word “and” at the end of
the paragraph.
d.
Paragraph (b)(1)(ii) is amended and paragraph 260.401(b)(1)(iii) is added
to read as follows:
§ 260.401 FERC Form No. 552, Annual Report of Natural Gas Transactions.
*
*
*
*
*
(b)
*
*
*
(1)
*
*
*
(ii)
It engages in reportable physical natural gas sales that amount to less than
2,200,000 MMBtus for the previous calendar year; and
(iii)
It engages in reportable physical natural gas purchases that amount to less
than 2,200,000 MMBtus for the previous calendar year.
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*
*
*
*
-65*
PART 284 - CERTAIN SALES AND TRANSPORTATION OF NATURAL GAS
UNDER THE NATURAL GAS POLICY ACT OF 1978 AND RELATED
AUTHORITIES
3.
The authority citation for Part 284 continues to read as follows:
Authority: 15 U.S.C. 717-717w, 3301-3432; 42 U.S.C. 7101-7352; 43 U.S.C. 1331-1356
4.
Sec. 284.403(a) is amended by removing the word “must” in the final sentence,
and inserting the word “Seller” in its place.
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Note: The following appendix will not be published in the Code of Federal Regulations.
Appendix A to Order No. 704-A:
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Item 1:
THIS FILING IS
An Initial (Original) Submission OR
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Resubmission No. ___
Form No. 552
OMB No. 1902-0242
Expires (mm/dd/yyyy)
FERC TRANSACTION REPORT
FERC FORM No. 552: Annual Report of
Natural Gas Transactions
These reports are mandatory under the Natural Gas Act, Section 23(a)(2), and 18 CFR Parts 260.401. Failure to
report may result in criminal fines, civil penalties, and other sanctions as provided by law. The Federal Energy
Regulatory Commission does not consider these reports to be of a confidential nature.
Exact Legal Name of Respondent (Company)
FERC FORM No. 552 (New)
Year of Report
End of
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INSTRUCTIONS FOR FILING THE FERC FORM NO. 552
GENERAL INFORMATION
I
Purpose
FERC Form No. 552 collects transactional information from natural gas market participants.
The filing of this information is necessary to provide information regarding the use of the natural gas
spot markets and the use of fixed and index price transactions. This form is considered to be a nonconfidential public use form.
II.
Who Must Submit
Physical natural gas buyers and sellers must complete and file the form annually if they make
use of a blanket sales certificate under § 284.402 or § 284.284, or if their reportable physical natural
gas purchases or sales were equal to or greater than 2.2 million (2,200,000) MMBtus (i.e., 2.2 TBtu)
in the reporting year. As explained elsewhere in Form No. 552, not all transactions involving
physical natural gas are reportable. Potential respondents should review the instructions to
determine whether their reportable purchases or their reportable sales meet or exceed this de
minimis threshold. For example, purchases and sales of natural gas made at retail to a natural gas
consumer pursuant to a state commission-approved bundled tariff rate are not reportable.
If a natural gas market participant is required to complete and file Form No. 552 because it
makes use of a blanket sales certificate under § 284.402 or § 284.284, but its natural gas purchases
and sales were each lower than 2.2 TBtus in the reporting year, then it is not required to report the
schedule of Form No. 552 that collects volumetric information.
III.
What and Where to Submit
(a) Submit FERC Form No. 552 electronically through the submission software at
http://www.ferc.gov/docs-filing/eforms.asp#552.
(b) The Corporate Officer Certification must be submitted electronically as part of the FERC
Form No. 552 filing.
(c)
Users may obtain additional blank copies of FERC Form No. 552 for reference free of
charge from: http://www.ferc.gov/docs-filing/eforms.asp#552. Copies may also be obtained
from the Public Reference and Files Maintenance Branch, Federal Energy Regulatory
Commission, 888 First Street, NE, Room 2A, Washington, DC 20426 or by calling (202)
502-8371.
IV. When to Submit:
The FERC Form No. 552 must be filed by May 1st of the year following the reporting year (18
CFR § 260.401).
V.
Where to Send Comments on Public Reporting Burden.
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The public reporting burden for the FERC Form No. 552 collection of information is
estimated to average 4 hours per response, including the time for reviewing instructions,
searching existing data sources, gathering and maintaining the data-needed, and completing
and reviewing the collection of information. This estimate was noted in the Notice of Purposed
Rulemaking and in the Final Rule (RM07-10-000) and addressed by commenters.
Filers may send additional comments regarding these burden estimates or any aspect of
these collections of information, including suggestions for reducing burden, to the Federal
Energy Regulatory Commission, 888 First Street NE, Washington, DC 20426 (Attention:
Information Clearance Officer); and to the Office of Information and Regulatory Affairs, Office of
Management and Budget, Washington, DC 20503 (Attention: Desk Officer for the Federal
Energy Regulatory Commission). No person shall be subject to any penalty if any collection of
information does not display a valid control number (44 U.S.C. § 3512 (a)).
GENERAL INSTRUCTIONS
I. All respondents must identify themselves annually by completing the first part of Form No. 552.
II. Aggregation across affiliates (or members of a public joint action agency) is permitted, though
not required. If a respondent is aggregating volumes across affiliates, the respondent must
complete the “Schedule of Reporting Companies” (page 3) which lists those affiliates and a
separate “Price Index Reporting” schedule for each affiliate.
III. Asset managers may not report aggregated information for their customers in Form No. 552.
Customers of asset managers are individually responsible for determining whether they must
file Form No. 552. An asset manager may itself be required to submit Form No. 552 to the
extent that its activities are not undertaken on behalf of an asset management client.
IV. Report all gas quantities in Trillion British Thermal Unit (TBtu) unless the schedule specifically
requires the reporting in another unit of measurement.
V. For reported volumes, enter numbers to the tenth of a unit only, except where otherwise noted.
VI. Report volumes of physical natural gas as explained in the definitions.
VII. Complete each question fully and accurately, even if it has been answered in a previous
report. Enter the word "None" where it truly and completely states the fact.
VIII. Enter the month, day, and year for all dates. Use customary abbreviations. The "Date of
Report" included in the header of each page is to be completed only for resubmissions
(see IX. below).
IX. For any resubmissions, submit the electronic filing using the form submission only. Please
explain the reason for the resubmission in a footnote to the data field.
X. Footnote and further explain as necessary.
XI. Do not make references to reports of previous periods/years or to other reports in lieu of
required entries, except as specifically authorized.
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XII. Regarding reportable transactions that involve deliveries that occur or may occur over multiple
calendar years, only volumes for delivery that use, contribute to, or may contribute to the
formation of a price index during the subject calendar year should be reported. For a multiyear contract that relies on a price index to establish a price, volumes should be reported in the
year in which the index is referenced.
DEFINITIONS
I.
Affiliate– An affiliate means a person who controls, is controlled by or is under common control with
another person. For purposes of the completion of Form No. 552, a joint public action agency may
submit members’ collective information as if those members were affiliates.
II.
Blanket Certificate – A blanket certificate means either (i) a blanket marketing certificate granted to a
person that is not an interstate pipeline pursuant to 18 CFR § 284.402, or (ii) a blanket certificate for
unbundled sales service granted to an interstate pipeline pursuant to 18 CFR § 284.284.
III.
Date of Report – The date the report is submitted to the Commission.
IV.
Fixed Price – A “Physical Natural Gas Transaction” price determined by agreement between buyer
and seller and not benchmarked to any other source of information. For example, physical basis
transactions that directly refer to futures prices, for the purpose of this form, are not “Fixed Price”
transactions.
V.
Next-Day Delivery – Delivery of a transaction executed prior to NAESB nomination deadline
(11:30am Central Prevailing Time) on one day for uniform physical delivery over the next pipeline
day. Transactions done for Friday are usually for flow on Saturday, Sunday, and Monday inclusive.
Trading patterns may vary in the case of holidays or the end of a month that occurs on a weekend.
VI.
Next-Month Delivery – Delivery of a transaction executed during the last five (5) business days of
one month for uniform physical delivery over the next month.
VII.
Physical Natural Gas Transaction – A natural gas transaction that contains an obligation to deliver
natural gas at a specified location and at a specified time, with the exception of physically-delivered
futures contracts. It is not necessary that natural gas actually be delivered under the transactions,
only that the delivery obligation existed in the agreement when executed. Certain Physical Natural
Gas Transactions may not remain in existence through the time of delivery because they were
traded away or “booked out.” For purposes of this form, these transactions should be included
whether they went to delivery or not. Order No. 704 and 704-A discuss a variety of particular
instances. Physical Natural Gas Transactions are only those transactions for Next-Day Delivery or
Next-Month Delivery that refer, contribute, or could contribute to the formation of a price index
during the calendar year. The following physical natural gas volumes should be included in
volumetric data submitted in Form No. 552 if the relevant transactions refer to or could contribute to
the formation of a price index:
a. cash-out, imbalance makeup and operational volumes reported by pipelines; and
b. volumes attributable to royalty-in-kind transactions, gas provided for processing such as plant
thermal reduction (not including unprocessed gas), and purchases and sales related to the
production and gathering function.
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Notwithstanding the above, the following volumes should, in all cases, be excluded in volumetric
data submitted in Form No. 552:
a. sales to and purchases by retail consumers of natural gas pursuant to a state commissionapproved bundled tariff,
b. sales or purchases of volumes that originate outside of the lower 48 states of the United States
of America and are delivered outside of the lower 48 states,
c. volumes associated with transactions among affiliates,
d. volumes associated with any type of financially-settled transaction,
e. unprocessed gas volumes,
f.
volumes traded in futures contracts, even those that go to physical delivery,
g. volumes of imported LNG traded prior to regasification and exported LNG traded after
liquefaction, and
h. volumes that are not Next-Day Delivery or Next-Month Delivery.
VIII.
Price Index Publisher – Companies that report price indices for U.S. wholesale natural gas markets.
The list of companies can change over time.
IX.
Prices that Refer to (Daily or Monthly) Price Indices – Prices for Physical Natural Gas Transactions
that reference directly a daily or monthly index price published by a “Price Index Publisher” rather
than a “Fixed Price” or a price that refers directly to some other benchmark.
X.
Quantity – Amount of purchases or sales expressed in units of energy “British Thermal Units” (Btu).
One million BTUs (MMBtu) are, by definition, the same as one Dekatherm (Dth). A volume of one
billion cubic feet (Bcf) of natural gas contains approximately one trillion Btus (TBtu or million
MMBtu) of energy depending on the exact energy content of the natural gas. The quantities to be
reported in the ”Purchase and Sales Information” schedule should be measured in tenths of TBtus.
XI.
Reporting Company – The person, corporation, licensee, agency, authority, or other legal entity or
instrumentality on whose behalf the report is being submitted by the “Respondent.”
XII.
Respondent – The person, corporation, licensee, agency, authority, or other legal entity or
instrumentality that is submitting the report either on its own behalf, or on behalf of itself and/or its
affiliates. A Respondent may choose to either report for all its affiliates collectively, or may choose
to have each of its affiliates report separately as their own “Respondent.” If reporting collectively,
the “Respondent” must report for each “Affiliate” in the “Schedule of Reporting Companies” and the
“Price Index Reporting Schedule,” and collectively for all its affiliates in the “Purchase and Sales
Information” schedule.
XIII.
Natural Gas Purchases – The volumetric “Quantity” of “Physical Natural Gas Transactions”
purchased by the “Reporting Company” during the “Year of Report.”
XIV.
Natural Gas Sales – The volumetric “Quantity” of “Physical Natural Gas Transactions” sold by the
“Reporting Company” during the “Year of Report.”
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XV.
Year of Report – The calendar year for which the report is being submitted.
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01 Exact Legal Name of Respondent
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ANNUAL REPORT OF NATURAL GAS TRANSACTIONS
IDENTIFICATION OF RESPONDENT
02 Year of Report
End of
03 Previous Name and Date of Change (If name changed during year)
04 Address of Principal Office at End of Year (Street, City, State, Zip Code)
05 Name of Contact Person
06 Title of Contact Person
07 Address of Contact Person (Street, City, State, Zip Code)
08 Email Address of Contact Person
09 Telephone of Contact Person, Including Area Code
10 This Report is:
(1) An Original
(2) A Resubmission
11 Date of Report
(MM,DD,YYYY)
ANNUAL CORPORATE OFFICER CERTIFICATION
The undersigned officer certifies that:
I have examined this report and to the best of my knowledge, information, and belief all statements of fact contained in this report are
accurate and complete statements of the business affairs of the respondent.
12 Name
13 Title
14 Signature
15 Date Signed
Title 18, U.S.C. 1001, makes it a crime for any person knowingly and willingly to make to any Agency or Department of the United
States any false, fictitious or fraudulent statements as to any matter within its jurisdiction.
FERC FORM NO. 552 (NEW)
Page 1
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Name of Respondent*
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This Report is:
(1)
An Original
(2)
A Resubmission
Date of Report*
(Mo, Da, Yr)
/
/
Year/Period of Report*
End of Year/Qtr
List of Schedules
Enter in column (d) the terms “none,” “not applicable,” or “NA” as appropriate, where no information or amounts have been reported
for certain pages. Omit pages where the responses are “none,” “not applicable,” or “NA.”
* An asterisk means that the previous term is explained in more detail in the definitions.
Line
No.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
Total
Title of Schedule
(a)
Schedule of Reporting Companies
Price Index Reporting
Purchases and Sales Information
FERC FORM NO. 552 (NEW)
Reference
Page No.
Date Revised
(b)
3
4
5
(c)
Page 2
Remarks
(d)
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Name of Respondent*
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This Report is:
(1)
An Original
(2)
A Resubmission
Date of Report*
(Mo, Da, Yr)
/
/
Year/Period of Report*
End of Year/Qtr
Schedule of Reporting Companies
If the Respondent* is reporting collectively for multiple Affiliates*, list the exact legal name of those Affiliates* in this form.
Respondent* should complete the next schedule, Price Index Reporting, for each of these companies separately. Respondent* should
complete the “Purchase and Sales Information” schedule only once for these companies collectively.
* An asterisk means that the previous term is explained in more detail in the definitions.
Line
No.
List the Exact Legal Names of all Affiliates* Reported by Respondent* below
(a)
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
FERC FORM NO. 552 (NEW)
Page 3
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Name of Respondent*
Name of Reporting Company*
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This Report is:
Date of Report*
Year/Period of Report*
(1)
An Original
(Mo, Da, Yr)
End of Year
(2)
A Resubmission
/
/
Reporting Company* is:
(1)
Same as Respondent*
(2)
An Affiliate* of Respondent* (other Affiliates* reported separately)
Price Index Reporting
Even if the Respondent* is reporting collectively for multiple Affiliates*, the Respondent* still must complete this schedule for each of
its Affiliates* separately.
When answering yes/ no questions, to select yes enter 1 in the yes column and 0 in the no column of the appropriate row. To select no
enter 1 in the no column and 0 in the yes column of the appropriate row.
* An asterisk means that the previous term is explained in more detail in the definitions.
Line
No.
1
2
3
4
5
6
7
Question
(a)
At any time during the report year, did the Reporting Company* operate under a Blanket Certificate*?
Did the Reporting Company* report any transaction information to Price Index Publishers* during the
Report Year*?
If no on either of lines 1 or 2, skip the question on line 4 and move to line 5.
Did the Reporting Company’s* reporting comply with the regulations governing reporting to Price Index
Publishers* pursuant to 18 CFR § 284.403?
Were the Reporting Company’s* total Natural Gas Purchases* equal to or greater than 2.2 TBtu for the
Report Year*?
Were the Reporting Company’s* total Natural Gas Sales* equal to or greater than 2.2 TBtu delivered in the
Report Year*?
If no on both lines 5 and 6, Reporting Company* is not required to complete the next schedule (i.e.,
Purchases and Sales Information). If yes on either line 5 or 6, Reporting Company* is required to complete
the next schedule, including volumes related both to Natural Gas Purchases* and Natural Gas Sales.*
FERC FORM NO. 552 (NEW)
Page 4
Yes
No
(b)
(c)
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Name of Respondent*
This Report is:
Date of Report*
Year/Period of Report*
(1)
An Original
(Mo, Da, Yr)
End of Year
(2)
A Resubmission
/
/
Reporting Company* is:
(1)
Same as Respondent*
(2)
An Affiliate* of Respondent* (other Affiliates* reported separately)
Name of Reporting Company*
Purchase and Sales Information
If the Respondent* is reporting collectively for multiple Affiliates,* the Respondent* should complete this schedule for all of its
Affiliate* companies collectively. Volumes should be reported to the nearest tenth of a TBtu.
* An asterisk means that the previous term is explained in more detail in the definitions.
Line
No.
1
2
3
4
5
6
7
8
9
Purchases
(TBtu)
Item
Sales
(TBtu)
(c)
(b)
(a)
What was the total volume of Physical Natural Gas Transactions* (sales and
purchases) engaged in by the Respondent in the prior calendar year?
Of the amounts reported on line 1, what quantities were contracted at Fixed
Prices* for Next-Day Delivery*?
Of the amounts reported on line 1, what quantities were contracted at prices
that refer to published Next-Day Delivery* gas price indices?
Of the amounts reported on line 1, what quantities were contracted at Fixed
Prices for Next-Month Delivery*?
Of the amounts reported on line 1, what quantities were contracted at prices
that refer to* published Next-Month Delivery* gas price indices?
Of the amounts reported on line 1, what quantities were contracted under
trigger agreements, such as NYMEX Plus contracts.
Of the amounts reported on line 1, what quantities were contracted as physical
basis transactions?
If there is a difference between Respondent’s* purchases reported on line 1 and the sum of its purchases on lines 2, 3, 4, 5, 6
and 7, please explain the difference in the space below.
If there is a difference between Respondent’s* sales reported on line 1 and the sum of its sales on lines 2, 3, 4, 5, 6 and 7,
please explain the difference in the space below.
FERC FORM NO. 552 (NEW)
Page 5
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Document Content(s)
19637555.DOC..........................................................1-78
| File Type | application/pdf |
| File Modified | 2012-06-21 |
| File Created | 2008-09-18 |