Electric Co-op Today

NRECA has joined other energy trade associations to urge support for two House bills that would minimize the impact of recently enacted financial reforms on their energy market operations.

Gary Gensler

The eight trade groups, whose members serve virtually all electricity and natural gas customers in the United States, wrote House members on Dec. 7 in support of the bipartisan bills.

In the letter, NRECA and the other associations emphasized their support for the goals of the Dodd-Frank Wall Street Reform and Consumer Protection Act, a response to financial sector abuses that damaged the economy.

But they underscored concerns that rules to implement Dodd-Frank, written  by Chairman Gary Gensler’s Commodity Futures Trading Commission and other financial regulators after the reform measure’s enactment, could deviate significantly from congressional intent.

The challenges stem from the regulations’ treatment of derivatives. Derivatives help electric co-ops and other market participants insulate customers from wholesale commodity price volatility, offering stability and certainty vital for critical capital investments, the groups said.

However, under the new rules, co-ops and other end-users that use swaps for hedging purposes fear they could be miscast as swap dealers—larger traders seeking to profit from speculation on derivatives—and face a range of unnecessary burdens and costs, the letter cautioned.

Accordingly, the signatories urged support for H.R. 3527, a bill introduced by Rep. Randy Hultgren, R-Ill., to clarify the definition of swap dealer under new derivatives regulations to exclude co-ops and other end-users.

The energy associations also urged passage of H.R. 2682, introduced by Rep. Michael Grimm, R-N.Y., which would clarify exemptions from new margin rules for companies that use derivatives to manage risks.

Committee markup of the measures is expected early next year.

“These bipartisan bills … will help to ensure that Dodd-Frank is implemented appropriately, will assure a robust commercial end-user exemption, as intended by Congress, and will not create loopholes in the regulations,” the groups underscored.

In addition to NRECA, signatories included the American Gas Association, American Public Power Association, Edison Electric Institute, Electric Power Supply Association, Independent Petroleum Association of America, Large Public Power Council, and Natural Gas Supply Association.

Tags: Business and Finance, Legislation