News July-September 2004
News Release: August 02, 2004 | View Printable PDF Version |
Docket Number: IN04-2-000 |
Commission Accepts $8.1 Million to Resolve Improper Sharing
of Gas Storage Inventory Information
The Federal Energy Regulatory Commission today approved three settlements
with units of Dominion Resources Inc., Nicor Inc. and NiSource
Inc., in which the companies agreed to pay a total of $8.1 million
in civil penalties and customer refunds to resolve enforcement
matters relating to violations of the Commission’s Standards
of Conduct and providing unauthorized transportation-related information
to customers.
As part of the agreements, the companies admit that
their employees shared with employees of their affiliates and favored
customers commercially sensitive natural
gas storage inventory information. This non-public information had commercial
value because it helped traders anticipate natural gas storage transportation
volumes, which would affect gas prices and operational decisions.
Also today,
the Commission issued a notice of technical conference and request for written
comments regarding reporting of natural gas storage inventory information.
The conference will explore whether the Commission should require increased reporting
of storage inventory information to provide greater transparency and prevent
improper exchanges of storage-related information.
Under the separate settlements
accepted by the Commission, Dominion Transmission Inc., Dominion Resources Inc.
(Dominion Resources) and Dominion Energy Clearinghouse
(Dominion entities) agreed to refund $4.5 million to storage customers and pay
a $500,000 civil penalty. Nicor’s Northern Illinois Gas Co. agreed to pay
a civil penalty of $600,000 and NiSource’s Columbia Gas Transmission Corporation
(Columbia) agreed to pay a civil penalty of $2.5 million. The companies also
agreed to undertake remedial measures intended to prevent any recurrence of such
activity.
The penalties, assessed under the Natural Gas Policy Act, represent
a relatively rare instance in which the Commission may impose civil penalties.
Expanding the
Commission’s civil penalty authority would enhance the agency’s ability
to deter anticompetitive behavior in energy markets.
As explained in the settlements,
the pipeline companies periodically communicated, for extended periods of time,
their non-public daily injection or withdrawal
volumes for previous days to customers or other industry participants. The information
communicated was potentially helpful to understanding and anticipating gas price
movements, NYMEX natural gas futures price movements, and gas price differentials
between production and consumer markets. In addition, the information was potentially
useful to pipeline company customers because it provided clues regarding pipeline
operating dynamics. This behavior violated the Commission’s Standards of
Conduct and rules proscribing undue preference.
The Agreement with the Dominion
entities states that Dominion Transmission Inc. (DTI) communicated its non-public
storage inventory information to a risk group
employee of Dominion Resources, who passed the information to a gas trader in
Dominion Energy Clearinghouse (DEC). This disclosure violated the Commission’s
standards of conduct which prohibits the preferential communication of pipeline
information to a marketing affiliate. The gas trader in DEC communicated the
DTI storage inventory information to other industry participants.
The Agreement
with Nicor states that Nicor communicated its non-public storage inventory information
to one of its customers. The Agreement with Columbia states
that Columbia communicated its non-public storage inventory information to three
of its customers. In addition to agreeing to pay a penalty, Columbia agreed to
record all conversations between its customer service representatives and its
customers for a period of one year.
The disclosures by Nicor and Columbia favored
select customers. None of the companies whose representatives signed Agreements
approved today posted their daily injection
and withdrawal information during the time when the communications regarding
storage inventory information were made.
The natural gas storage technical conference,
scheduled for September 28, 2004, was prompted by the information contained in
the Agreements that suggests that
a web of improper contacts regarding non-public storage inventory information
permeates parts of the natural gas industry.
The Agreements that the Commission
approved today, and the technical conference that it announced, are part of the
Commission’s continuing effort to police
natural gas transportation and sales markets, and to consider potential changes
in rules.
R-04-34
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