APPA Applauds CFTC for Providing No-Action Relief for Public Power Utilities Hedging Commercial Operations Risks
March 21, 2014
Washington, D.C., March 21, 2013 – The American Public Power Association (APPA) applauds the Commodity Futures Trading Commission for issuing today a “no-action letter” that allows public power utilities to hedge commercial operations risks on an even playing field with other energy market participants.
“We are very pleased with the no-action relief provided today,” said APPA President and CEO Mark Crisson. “With this no-action letter and the CFTC’s upcoming roundtable, Acting Chairman Mark Wetjen has shown a much needed, and much appreciated, focus on issues affecting end-users.”
The no-action letter allows public power utilities to hedge commercial operations risks—not with just the biggest banks and swap dealers—but with regional utilities, natural gas distributors, and independent power generators who have served as swap counterparties in the past. The letter puts public power utilities on an even playing field with investor-owned utilities and rural electric cooperatives in seeking counterparties to commercial operations-related swaps.
The relief provided in the no-action letter is similar to that which would be provided under the Public Power Risk Management Act—legislation approved unanimously by the U.S. House of Representatives in June 2012 that is advancing with broad bipartisan support in the U.S. Senate.
This narrowly crafted relief applies only to swaps used to hedge or mitigate commercial operations risks of public power and natural gas utilities. It would do nothing to undermine the current regulatory protections for non-operations-related “financial” swaps entered into by public power and natural gas utilities, state and local governmental entities or other “special entities.”
Stakeholders supporting similar relief either through an amendment to CFTC regulations or an amendment to the Commodities Exchange Act itself include the U.S. Chamber of Commerce, Public Citizen, the Consumer Federation of America, the Edison Electric Institute, and the Commodities Markets Oversight Coalition.
APPA looks forward to working with Acting Chairman Wetjen and the CFTC as it moves to formalize this relief either through the rulemaking process or in response to a pending petition.
“The real winners here are public power customers, who will benefit from the cost savings and rate stability this no-action letter will make possible,” Crisson said.