The American Public Power Association and the National Rural Electric Cooperative Association (NRECA) in recent comments urged the Commodity Futures Trading Commission (CFTC) to modify some of its proposed rules regarding swaps.
The CFTC implemented its swaps regulations in accordance with the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act.
In 2017 the agency launched a review of swap reporting requirements, including Project KISS, which was designed to streamline and eliminate regulations deemed burdensome or overlapping.
While APPA and NRECA say they continue to “strongly support” the CFTC’s efforts to streamline swap reporting rule requirements for non-financial commodity swaps, they requested that the commission provide interim relief and suspend the obligation of non-financial swap counterparties to report certain swaps, particularly energy swaps, in the “granular and burdensome detail currently required.”
APPA and NRECA say its members have a “direct and significant interest” in the swap reporting requirements, especially the granularity of the data the CFTC collects from not-for-profit electric companies and their commercial end-user counterparties “each and every time” a bilateral, uncleared energy swap is entered into and then subsequently over the life cycle of each swap.
The comments go on to say that it is “regrettable that the Commission has continued to require reporting of this data for nearly 7 years, merely” so it can be stored in data repositories, which, the authors of the letter say, one CFTC staffer in 2011 characterized as “an ever-growing pile of unusable information.”
APPA and NRECA also requested that the CFTC should delete from its current proposals the new requirement presumption that non-financial counterparties will correct or complete swap data reported for “dead swaps.”
The “heavy burdens” of understanding and complying with the 2012 swap reporting rules “fall squarely on entities whose primary business is in commercial industry,” the letter argues. The authors explain that “the focus of our not-for-profit electric operations is to provide reliable and affordable electricity to American businesses and consumers, not to transact in the financial markets or comply with financial markets reporting protocols.”
APPA and NRECA recommend that the CFTC could simplify its reporting requirements and thereby “more effectively employ its limited regulatory resources and, at the same time, dramatically reduce the regulatory burden on commercial end-users, by excluding or exempting commercial end-users from reporting obligations” for unregulated swaps “and/or by limiting the number of data elements reported at the time each such swap is executed and extending the timeframe for such swap reporting.”
“Each dollar spent on compliance with financial markets rules and regulations is a dollar less that can be invested in infrastructure and electric operations to ‘keep the lights on’ for Main Street businesses and consumers, and is likely to result in higher and more volatile costs for residential, commercial and industrial electricity customers,” the groups said.
