March 20 The U.S. House Agriculture Committee on
Wednesday approved a bill that would make it easier for
municipal and other government-owned utilities to hedge against
power and fuel price risks with all market participants.
The legislation seeks to end the unintended consequences of
the swap dealer rules adopted by the Commodity Futures Trading
Commission to implement the Dodd-Frank act.
Under current CFTC regulations, non-financial entities like
investor-owned utilities, independent power producers and
natural gas providers that enter into as little as $25 million
in swap transactions with special entities like government-owned
utilities over any 12-month period risk being drawn into the
highly regulated swap dealer regime.
A company may engage in up to $8 billion in swap dealing
activity (phasing down to $3 billion over time) without being
considered a swap dealer by the CFTC. Most of the companies
registered as swap dealers are banks or units of banks, some
with trillions of dollars of derivatives contracts.
To avoid being considered swap dealers, non-financial
entities have stopped entering into such transactions with
government-owned utilities, the American Public Power
Association (APPA), an industry trade group representing
community- and state-owned not-for-profit utilities, said in a
The move has boosted the cost of doing business for
government-owned utilities because there are often only a
limited number of counterparties available for any particular
swap sought, APPA said.
The bill passed by the committee would treat a utility
operations-related swap with a government-owned utility no
differently than a similar swap with any other entity, so these
transactions would not count toward the $25 million threshold.
"This much-needed legislation will allow government-owned
utilities to hedge against power and fuel price risks with all
market participants and not just the biggest banks and swap
dealers," APPA's president and chief executive, Mark Crisson,
said. "This will put our members on a level playing with other
power utilities and will help ensure that they can adequately
plan for the future."