On February 1, 2013, the Department of Justice (DOJ) filed comments in response to the Federal Energy Regulatory Commission's (FERC) Notice of Inquiry in which FERC is considering amending its regulations to require jurisdictional sellers of natural gas to report on a quarterly basis detailed, transaction-specific information regarding every sale of natural gas that entails physical delivery the next day or the next month. FERC already requires sellers of electricity and transmission service to file such information on a quarterly basis. FERC has taken the position that existing natural gas reporting requirements may not be sufficient to ensure that market prices are transparent such that FERC can detect and prevent market manipulation. FERC also is considering whether and how publicly to disseminate any transactional data that is collected.
In its comments, the DOJ urges FERC to consider the potential anticompetitive effects of transparency. The DOJ argues that while transparent reporting of market information can enhance efficiency and facilitate market monitoring, transparency also can increase the likelihood of an exercise of market power by facilitating coordination among suppliers. The DOJ notes that successful coordination requires that suppliers reach terms of coordination that are profitable and detect and punish deviations from those terms. The DOJ points out that a supplier is in a better position to do so when it has ready access to detailed information about its rival's activities. The DOJ cautions FERC against adopting additional reporting requirements without weighing these costs against any potential benefits. In the event that FERC does require such reports, the DOJ suggests that FERC consider adopting measures to protect against the risk of coordination, such as making reported information confidential except under certain limited circumstances, aggregating reported data or delaying the release of reported information.
The DOJ's comments come at a time when FERC has been increasing its oversight over markets and the day-to-day activities of market participants. For more on these developments, see our October 18, 2012 post on ENERGY LEGAL BLOGTM. The DOJ's comments serve as a reminder to FERC that it fully must consider the costs associated with its decisions and recognize that its efforts to expand its authority may at times come into conflict with other policy goals.