No place for government in energy price reporting or clearing, says Ferc head

Pat Wood, chairman of the US Federal Energy Commission (Ferc), has said he does not believe regulatory agencies should be involved in compiling energy price reporting. He also said the government has no place in suggesting that energy merchants should trade contracts through clearing houses.

Speaking after a meeting with US energy executives and the executive director of the Committee of Chief Risk Officers, Michael Smith, at the Global Energy Management Institute in the University of Houston’s Bauer College of Business, Wood reportedly said questions about price indexes and clearing were only part of the larger concern over the energy industry's health.

Following Enron’s demise, many market participants have espoused the virtues of using clearing houses, such as EnergyClear, or the services provided by the IntercontinentalExchange and the New York Mercantile Exchange, to bring confidence back to the energy trading markets, as many trading counterparts have seen their credit ratings deteriorate.

But others have suggested that clearing houses are unnecessary. Most notably, Paul Newman, managing director of Intercapital Commodity Swaps in London, has said much of the counterparty credit protection offered by clearing can be provided at around a tenth of the price through regular bilateral margining.

Questions have also arisen over the reliability of price indexes, often provided by energy news services such as Platts and Argus. Under such services energy traders provide prices for products to news services, although some traders, as well as regulators, have voiced concern that such information can often be misleading.

The Ferc and the Commodity Futures Trading Commission will hold a joint technical conference in Washington DC tomorrow, titled ‘Credit Issues in the Energy Markets: Clearing and Other Solutions’.