Key senators slam CFTC for not cooperating with FERC on market manipulation
Originally published September 10, 2013
Two key senators tore into the Commodity Futures Trading Commission after Federal Energy Regulatory Commission Chairman Jon Wellinghoff said the CFTC has declined to provide FERC "with certain data that we believe is critical to our surveillance program to detect and deter energy market manipulation." Senate Energy and Natural Resources Committee Chairman Ron Wyden, D-Ore., said Wellinghoff "has asked Congress to step in and I will be consulting with our colleagues on Capitol Hill about doing exactly that."
"In the Dodd-Frank Act, Congress directed CFTC and FERC to cooperate in order to protect American consumers from manipulation, so it is unconscionable the CFTC would be unwilling to share this essential information with FERC," said Sen. Dianne Feinstein, D-Calif., chair of the Appropriations Subcommittee on Energy and Water Development.
"While FERC has already taken major enforcement actions against traders and companies that manipulated energy prices, it appears that their federal counterparts at the CFTC have been working to undermine FERC’s efforts," Wyden said.
Their comments were prompted by Wellinghoff’s Aug. 29 response to an April 29 letter from Feinstein, Wyden and Sen. Lisa Murkowski, R-Alaska, who urged the two agencies to work together to provide rigorous oversight of U.S. energy markets. Their April letter called on the CFTC and FERC to execute memoranda of understanding on information-sharing and jurisdiction to ‘ensure complete integration of data and other information used to monitor and investigate natural gas and electricity market trading.’
Wellinghoff said the agencies have not agreed on a memorandum of understanding on information-sharing and "disagree over whether the CFTC should provide FERC with certain data that we believe is critical to our surveillance program to detect and deter energy market manipulation." That data "includes the Large Trader Report, which would allow FERC staff to identify market participants with an incentive in the financial markets to manipulate the physical markets by trading at physical hubs and nodes," he said. "This ability, in tum, would improve the efficiency and precision of FERC staff’s surveillance screens."
Wellinghoff also made a pitch for "a legislative fix to eliminate uncertainty" over whether FERC has authority to protect consumers from price impacts in the physical energy markets resulting from manipulation of the financial markets. In a 2013 decision in Hunter v. FERC, a federal appeals court ruled that the CFTC has exclusive jurisdiction over futures, "depriving FERC of authority to bring an action based on manipulation in the futures market even though the activity affected prices in the physical natural gas and electricity markets," Wellinghoff noted.
While FERC believes the Hunter decision is narrow in scope, "it has been interpreted broadly by some market participants to support arguments that FERC does not have the authority to bring manipulation cases for conduct that is squarely within FERC's jurisdictional markets," Wellinghoff said. He asked Congress to "ensure that FERC has the full authority needed to police manipulation of wholesale physical natural gas and electric markets."
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