CFTC Issues Advisory on Energy Transactions (CFTC Letter 14-20)

The CFTC issued an advisory intended to help clarify statements made in a Final Order responding to a petition from independent system operators and regional transmission organizations exempting specified transactions. These exemptions were authorized by a tariff or protocol approved by the Federal Energy Regulatory Commission ("FERC") or the Public Utility Commission of Texas ("PUCT"), from certain provisions of the CEA.

Specifically, market participants requested clarification from CFTC Staff in the Division of Clearing and Risk ("DCR") and the Division of Market Oversight ("DMO") about the CFTC's definition of energy transactions, as described in the following quote from the Final Order: "The Commission notes that financial schedules and internal bilateral transactions are the subject of a separate request for supplemental relief filed by [California Independent Service Operator Corporation] and [ISO New England, Inc.] and, therefore, the Commission is taking no position in this [Order] with respect to those products."The DCR and DMO stated in the advisory that nothing in the statement implies the scope of the Order's Covered Transactions. The DCR and DMO further provided that any transaction may qualify as a Covered Transaction, regardless of its title or status as an item under consideration by the CFTC, so long as it falls within the definitions in the Order of "Financial Transmission Rights," "Energy Transactions," "Forward Capacity Transactions," or "Reserve or Regulation Transactions"; is offered or sold in a market administered by one of the petitioning RTOs or ISOs pursuant to a tariff or protocol that has been approved or permitted by FERC or PUCT to take effect; and complies with all other enumerated terms and conditions in the Order.

See: CFTC Letter 14-20.