Electric Co-op Today

The House Agriculture Committee has advanced several bills that address electric cooperatives’ concerns with federal regulators’ “overreach” in writing financial reform regulations. NRECA characterized the action as “a big victory” for co-ops.

Rep. Frank Lucas

The three bills, among six the committee cleared on Jan. 25, would allow co-ops to continue using financial instruments such as derivatives without being subjected to potentially costly regulations. Derivatives help insulate customers from wholesale commodity price volatility.

The regulations are being written by the Commodity Futures Trading Commission to meet the goals of the Dodd-Frank Wall Street Reform and Consumer Protection Act. While Congress clearly intended to exempt end-users such as electric co-ops from the regulations, NRECA has noted, the CFTC’s proposals have not done so.

Accordingly, NRECA and member co-ops have presented their concerns on Capitol Hill. House Agriculture Committee Chairman Frank Lucas, R-Okla., characterized his panel’s action as “the culmination of the committee’s oversight efforts” on the CFTC’s rulemakings.

The bills of particular interest to electric co-ops included:

• H.R. 2682, introduced by Rep. Michael Grimm, R-N.Y. This measure clarifies that end-users can continue to use derivatives to manage business risk without costly margin requirements.

• H.R. 3527, introduced by Rep. Randy Hultgren, R-Ill. This legislation clarifies the definition of swap dealers—larger traders seeking to profit from derivatives—to ensure that energy and agriculture end-users are not misclassified and subject to costly new regulatory requirements.

• H.R. 3336, introduced by Rep. Vicky Hartzler, R-Mo. This bill ensures that banks and farm credit institutions can continue providing interest rate swaps for loans without being classified as swap dealers. It would exempt the National Rural Utilities Cooperative Finance Corporation (CFC) from costly clearing requirements.

While the next steps for the legislation are uncertain, supporters believe it is quite possible the bills may be considered on the House floor early this year.

NRECA supports lawmakers’ efforts, stating: “We hope that the CFTC will follow congressional intent, but also feel that legislation may be necessary to provide better direction to the commission.”

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Tags: Business and Finance, Legislation