Most pan FERC NOPR, but gas association eyes FERC role.
Citing overlap with the Securities and Exchange Commission (SEC), the power industry has largely panned FERC's proposals to require greater disclosure on financial instruments and derivatives. Also criticized is FERC's move to force marketers to adopt reporting standards similar to the Uniform Systems of Accounts (USOA) used by utilities, as announced in the commission's Notice of Proposed Rulemaking (NOPR) issued Jan. 16. (See FERC Docket No. RM02-3-000)
But one group, the American Public Gas Association (APGA), has offered some tantalizing ideas on how the industry might use derivatives to hedge capacity on gas pipelines and transmission lines. APGA has offered an apparently viable argument on why FERC might well have an interest at stake in financial disclosure of energy risk management. According to APGA, derivatives can play a key role in hedging the locational basis risk between points on gas pipeline and electric transmission networks.
In this way, APGA sees derivatives as valuable for the network as well as the commodity, thus justifying some degree of oversight at the FERC.