Electric Co-op Today

Federal officials have again delayed regulations to tighten controls over energy futures markets, pushing back the effective date of swap regulations until July 16, 2012.

Russ Wasson

The Commodity Futures Trading Commission’s Dec. 19 action marked an additional delay in the effective date of regulations contained in the Dodd-Frank Wall Street Reform and Consumer Protection Act. The provisions were originally slated to take effect July 16, 2011, and later pushed back to Dec. 31, 2011.

Dodd-Frank, aimed at financial practices that contributed to the economic crisis of 2008, amended the Commodity Exchange Act to establish a comprehensive new regulatory framework.

While the CFTC has not yet defined the term “swap” in the electric area, common types of contracts which might be considered swaps include capacity, reserve sharing, renewable energy certificates and emission attributes.

NRECA has cautioned that electric co-ops, primarily G&Ts, use derivatives not for speculation, but as a means to provide predictability in the price of power, fuel, transmission, financing and other supply resources.

“Rural electric cooperatives use derivatives to keep costs down by reducing the risk associated with those necessary inputs,” NRECA CEO Glenn English underlined in testimony submitted on Capitol Hill last July.

In postponing the regulations’ effectiveness, the CFTC has acknowledged a need for additional clarity prior to implementation. Russ Wasson, NRECA director of tax, finance and accounting policy, has characterized the agency as “overwhelmed” in trying to complete the regulations.

“They’re more complex than the commission thought,” Wasson said.

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Tags: Business & Finance