The US Commodity Futures Trading Commission should publish a list of the types of electricity and natural gas contracts and transactions that will not be classified as swaps under the CFTC's developing over-the-counter derivative regulatory regime, the Federal Energy Regulatory Commission said Friday.
A list of commercial merchandising agreements which would not be defined as swaps, and thus not subject to new Dodd-Frank Wall Street Reform and Consumer Protection rules, "would help provide regulatory certainty in the energy industries," FERC General Counsel Michael Bardee wrote in a letter sent to the CFTC Friday.
A list of all agreements involving all gas and electricity contracts may not be feasible so "it should be made clear that the list is not intended to be exhaustive and comprehensive," Bardee wrote.
Bardee's letter was a response to a swaps definition the CFTC unveiled in May that excludes the majority of cash forward contracts from the definition of swap and, in turn, the over-the-counter derivatives regulatory regime the CFTC is developing under Dodd-Frank.
The proposal, however, does not deal with the contentious issue of whether financial transmission rights in wholesale electricity markets will become swaps and, as a result, subject to CFTC oversight.
Instead, regional transmission organizations and independent system operators will have to prove to the CFTC through a waiver process that it would be in the public interest to have FTRs exempted from the regulations.
In the letter, Bardee repeated past FERC concerns that the definition of swap could include transactions in the wholesale electricity and gas markets, such as FTRs and forward capacity sales, that fall under FERC jurisdiction.
"As we have stated in prior comments, Dodd-Frank terms should be interpreted as not applying to any contract or instrument traded in an RTO/ISO market pursuant to a FERC-accepted or approved rate schedule or tariff," Bardee wrote.
The CFTC and FERC were mandated by Dodd-Frank to have two agreements on information sharing and jurisdiction finalized more than six months ago, but sources in both agencies have argued the agreements have been stalled for months and have become a low priority.
