Resources Frequently Asked Questions (FAQs)
Form No. 552
Staff has made numerous changes to the FAQ as a result of Order 704-C and added several additional questions under Posting 4. The FAQ in Postings 1, 2, and 3 have been retained, although the answers have been modified.
Go to FAQ Posting 1 dated 2/3/2009
Go to FAQ Posting 2 dated 3/6/2009
Go to FAQ Posting 3 dated 3/27/2009
Go to FAQ Posting 4 dated 6/17/2010
Go to FAQ Posting 5 dated 11/22/2010
1. What is meant by "could contribute to a gas index"?
"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."
2. Must a company holding a blanket certificate under either sections 284.284 or 284.402, but which has made no natural gas purchases or sales for calendar year 2008 or 2009, submit Form No. 552?
3. Is there a way to note on Form No. 552 that data provided are incomplete or missing?
In addition, upon discovering missing data, the Respondent should promptly refile a corrected Form No. 552 by selecting the "Resubmission" feature.
4. Must individual subsidiaries of a Respondent submit information on Form No. 552?
5. Are affiliates allowed to aggregate their reporting information under corporate parent?
6. Are fixed price trades done in 2008 for January 2009 reportable?
7. If an end-user filing Form No. 552 purchases natural gas at retail, must it report the purchase of the natural gas?
8. If a public joint action agency separately purchases and then resells natural gas to its members as separate, independent transactions, are both of those transactions reportable?
9. If a company holds an energy management agreement (EMA) and sells and purchases physical natural gas on behalf of other companies, is it required to file Form No. 552?
10. Can an asset manager file Form No. 552 on behalf of another company?
11. If a parent company chooses to aggregate volumes for reporting on Form No. 552, must it list affiliates that have blanket certificates but have no reportable volumes?
12. Is a fixed price contract (that can not contribute to an index, reference an index, or use an index) but has a GDD knockout provision - that is the contract can be canceled for a period of time based on daily index prices - is this reportable?
13. Are "Exchange for Physical" transactions included in Form No. 552?
14. How are prepays reported in Form No. 552?
15. Does a Local Distribution Company (LDC) that buys natural gas for consumption by its own generation units report those volumes in Form No. 552?
16. What are physical basis transactions?
As an example of a publisher describing physical basis transactions that can contribute to an index see The Platts' Methodology Guidelines (November 2008) which states, "report all physical basis transactions in which the basis value is negotiated on one of the first three days of bidweek and the price is set by the final closing value of the near-month NYMEX futures contract plus or minus the negotiated basis." Therefore, NYMEX last day settlement and a differential (premium or discount) are physical basis transactions and are reportable on page 4, line 7 of Form No. 552.
17. What are NYMEX trigger transactions and are these transactions reportable?
18. What are NYMEX Plus transactions and are these transactions reportable?
19. Would a transaction that is priced at "index + 10 cents" be considered a "physical basis transaction" to be reported on page 4, line 6 of the form?
However, regardless of the fact that such a transaction is not a "physical basis transaction," it is a reportable transaction to the extent it uses an index and should be reported on page 5 in lines 3 or 5.
20. How are transactions that involve differing pricing structures and/or include a blended pricing mechanism reported?
21. Must a Respondent report cash-out transactions if those transactions are not Next-Day Delivery or Next-Month Delivery?
22. Are cash-out transactions priced at pipeline tariff rates reportable?
23. Are daily Fixed Price physical natural gas transactions that are executed after 11:30 AM Central Prevailing Time reportable?
24. What is the meaning of "control" as that word is utilized in the definition of "Affiliate" in Form No. 552?
25. How should joint ventures report their volumes in Form No. 552?
26. What effect does a planned merger have on the reporting requirement?
27. Are transactions involving unprocessed gas reportable in Form No. 552?
Some volumes of natural gas may emerge from the wellhead sufficiently "lean" that it may never need processing to remove natural gas liquids before being consumed. A transaction involving this "lean" natural gas is reportable if it uses an index or it contributes to or may contribute to the formation of a gas index in the reporting year. Please see Order No. 704-C at paragraphs 38 and 39.
"Percentage of proceeds" contracts that involve unprocessed gas continue to be exempt from reporting in Form No. 552.
28. How does a company determine whether or not it is operating under a blanket market certificate?
29. In Order No. 704-A, P 87, it is unclear what is meant by the last line: "....the year in which the index is referenced." Does it mean the year in which the index is published, or the year the index is used?
30. Pre-bid week transactions. Pursuant to Line No. 5 of the "Purchase and Sales Information" portion of Form No. 552 and the definition of "Next-Month Delivery," please confirm that quantities contracted for prior to the last five (5) business days of the month for uniform physical delivery the next month are not to be reported. Since many monthly index deals are prior to the five (5) business day period, this definition will exclude a number of transactions from reporting on Form No. 552.
Therefore, all physical natural gas transactions that use daily or monthly indices to set the price of natural gas must be reported on the Form No. 552, no matter when they were contracted. Order 704-C also clarifies that in those cases where a gas index is a part of a basket of indices that includes non-gas indices, the transactions should be reported in lines 3 or 5 and the non-gas indices identified on page 4 in lines 8 or 9.
31. Take or Release Contracts. Gas is sometimes purchased under long-term contracts that offer an option to take or release up to the contract maximum quantity on a monthly or daily basis. The contract price is mutually agreed upon at the time the monthly or daily option is exercised. Please confirm that only those purchases that are actually exercised during the reporting year are to be included on Form No. 552, and that supplies released back to the supplier are not reportable because the option was not exercised.
32. Is NYMEX considered an "index" publisher for the purposes of Order No. 704?
33. Please explain the fundamental difference between a physical basis transaction and a NYMEX Plus transaction.
34. Are all physical natural gas sales and purchases reportable on the Form No. 552?
35. What transactions are often not reported correctly on the Form No. 552?
- Long dated deals that use a strip of NYMEX Plus or Physical Basis to price natural gas are often misreported in line 6 and 7, respectively. These transactions are not reportable in Form No. 552 at all, because they would not be acceptable to an Index Publisher and would not contribute to monthly gas index formation.
- Transactions that use a weekly index are often not reported. A closer inspection of the methodology used to compute the weekly index usually shows that a "weekly" index is normally formed by averaging multiple daily indices. Therefore, these kinds of transactions should be reported on page 4, line 3 as referencing a daily index.
- Balance of month transactions that use a daily index to set the price of natural gas are reportable on page 4 line 3.
36. Why is the Commission requiring Respondents to report the use of indices instead of just gas indices used to set the price of natural gas?
The Commission is asking Respondents that use a basket of daily or monthly indices that includes gas and other indices to identify the names of the indices used on page 4 in lines 8 or 9 However, transactions that use a "basket of indices" that only contains non-gas price indices are not reportable.
37. When must physical natural gas that requires international transportation be reported on the form?
- Volumes originating outside the lower 48 states and delivered at locations outside the lower 48 states should not be reported.
- Volumes originating from inside the lower 48 states and delivered outside the lower 48 states are reportable; and
- Volumes originating outside the lower 48 states and delivered inside the lower 48 states are reportable.
Thus, any volumes that either originate in or are delivered into the lower 48 states should be reported to the same extent as purely domestic volumes. (See questions 38 and 39 for further guidance)
Staff is providing additional guidance on reporting international natural gas transactions on Form No. 552. Respondents should use the following guidance to report their 2010 calendar year Form No. 552 data. Respondents are not required to revise or correct data for prior reporting periods.
38. What should be considered when reporting sales or purchases of natural gas that are transported between the U.S. and Canada or the U.S. and Mexico?
A U.S. LDC purchases 10 TBtu of natural gas from a supplier in Canada using a monthly index price. Subsequent to the initial purchase from the Canadian supplier, the LDC resells the entire 10 TBtu to a Canadian power generator and none of the gas is delivered/imported into the U.S.
The U.S. LDC would not report the 10 TBtu of gas that was purchased in Canada or the sale to the Canadian power generator, because the natural gas was not delivered/imported into the U.S. The Canadian supplier would not report the sale and the Canadian power generator would not report the purchase for the same reason.
A Canadian marketer purchases 2.5 TBtu of shale gas from a producer in Pennsylvania. The gas does not require processing and the purchase price is based on fixed price next month delivery during bidweek. 1.5 TBtu are exported and delivered to Canada, with the remainder sold by the Canadian marketer to a U.S. wholesale customer using an index.
The Canadian marketer reports all 2.5 TBtu of the purchase, including the 1.5 TBtu delivered/imported into Canada and the 1TBtu sold to a U.S. customer. The shale gas producer would report 2.5 TBtu as a sale, and the U.S. customer would also report the purchase of 1.0 TBtu, following the procedures for domestic purchases and sales.
A U.S. LDC purchases 30 TBtu of natural gas in Canada using a monthly index, stores the gas in Canada, and does not take delivery in the U.S. until the following year.
Natural gas that is purchased and stored in Canada and not delivered into the U.S. until the following year is not reportable as a purchase on Form No. 552 because the volumes did not enter the U.S. in the reporting year. Volumes taken out of storage by the LDC and delivered into the U.S. in the following year are not reportable as a purchase in the following year's Form No. 552 because the purchase did not occur in the reporting year.
Natural gas that is purchased out of storage from a third party and imported into the U.S. is reportable as both a sale by the third party and purchase by the LDC in the reporting year in which the transaction occurred to the extent the transaction otherwise meets the reporting criteria. Sales made by the LDC in the U.S. are reportable to the same extent as volumes that were sourced domestically.
An LDC purchases 12 TBtu of natural gas in Canada using a monthly index in a 6 month period over two calendar years. Deliveries into the U.S. will be made in equal volumes beginning in December of year 1 and end in May of year 2.
The LDC and Seller must report only the volumes that were delivered in year 1, i.e. 2 TBtu that rely on a monthly index. The remaining volume of 10 TBtu that are delivered in year 2 should be reported in year 2.
See reporting over multiple calendar years in XI. of the General Instructions of Form No. 552:
"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 an index during the subject calendar year should be reported. For a multi-year contract that relies on an index to establish a natural gas price, volumes should be reported in the year in which the index is referenced."
39. My company purchased 50 TBtu of natural gas from Canada in a calendar year and all of it was delivered into the U.S. Do I have to examine all of my transactions and allocate the volumes to the various transactions types reportable in the form? Is there another approach I could use to allocate the 50 TBtu to the transaction types on the form?
If the Company delivers only a portion of the natural gas purchased in Canada in a calendar year, the Company may apply the allocation percentages to the volumes delivered into the U.S. during the calendar year to determine the transaction types on the form under which the volumes should be included.