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Consumer groups endorse Public Power Risk Management Act

From the May 21, 2013 issue of Public Power Daily

Originally published May 21, 2013

By Robert Varela
Editorial Director

The Consumer Federation of America has become the second major consumer group to endorse the Public Power Risk Management Act, H.R. 1038, which is strongly supported by APPA. In a May 17 letter to the House and Senate Agriculture Committees, CFA said the legislation would "protect public utility ratepayers from increased costs and rate volatility by ensuring that these utilities have the same ability as other utilities to hedge operational risks." Public Citizen endorsed the legislation, along with 28 other members of the Commodity Markets Oversight Coalition, in a May 1 letter to the same committees.

The narrowly targeted legislation, introduced by Rep. Doug LaMalfa, R-Calif., would address a problem created by Commodity Futures Trading Commission (CFTC) rules requiring entities to register as swap dealers if they engage in more than $25 million in swap dealing activity with a "special entity." The CFTC definition of "special entity" includes government bodies, such as public power utilities. However, under the CFTC’s de minimus rules, entities may engage in up to $8 billion in swap dealing activities with non-government utilities without being required to register as a swap dealer. 

The Public Power Risk Management Act would require the CFTC to treat operations-related swap transactions the same under such de minimus threshold rules, whether the transactions were with a public power utility or any other utility.

CFA wrote that it continues to believe that entities genuinely acting as swap dealers should be required to register as swap dealers, but that it is "inappropriate for non-financial counterparties – such as natural gas producers, independent generators, and other utilities – to be treated as swap dealers in their transactions with public utilities, [which] are essentially functioning as business units, not as governing bodies." These types of transactions have given no cause for concern in the past and public power utilities should be as free as other utilities to engage in these transactions to hedge risks, CFA said.


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Senior Vice President, Publishing 
Jeanne Wickline LaBella

Editorial Director
Robert Varela

Editor, Public Power Daily
Jeannine Anderson

Communications Assistant
Fallon W. Forbush

Manager, Integrated Media 
David L. Blaylock

Integrated Media Editor 
Laura D’Alessandro