The Electric Power Supply Association (EPSA) has joined other energy trade organizations in urging the Commodity Futures Trading Commission (CFTC) not to ensnare electric and natural gas companies in defining “swap dealers.”
EPSA recently joined comments June 7 with the American Gas Association (AGA), Edison Electric Institute (EEI), Independent Petroleum Association of America (IPAA) and the National Rural Electric Cooperative Association (NRECA).
The CFTC is evidently considering changing rules issued jointly with the Securities and Exchange Commission (SEC) in the spring of 2012. The agencies had set up a de minimis threshold of swap dealing activity in which a swap market participant can engage before the entity is required to register with the CFTC as a swap dealer.
A new category of market participants, swap dealers, was created by the Dodd-Frank Act. These swap dealers must register with the CFTC and are subject to extensive recordkeeping, reporting, business conduct standards, clearing, and in the future regulatory capital and margin requirements.
But market participants below an $8bn minimal standard are not required to register as swap dealers. The energy groups said this $8bn threshold should not be lowered.
“We are concerned that there would be serious and unintended negative consequences for the United States energy commodity swaps markets, and the electric and gas utilities, energy companies and other commercial end-users that rely on such markets to hedge commercial risks of their electric and gas operations and physical assets,” according to the letter.
“The $8 billion de minimis threshold in the current CFTC rule is necessary and appropriate to allow utilities and other market participants to engage in these transactions ancillary to their broader energy commodity businesses, without incurring the higher costs associated with being a swap dealer,” the energy groups assert.
The letter was addressed to CFTC Chairman Gary Gensler. Several members of congress were also copied on the letter.