CFTC Issues Final Order to Exempt Certain Non-Financial Energy Derivative Transactions between Government and/or Cooperatively Owned Electric Utilities
The CFTC approved by a seriatim vote of 5-0 a Final Order that exempts certain non-financial energy derivative transactions between and among government-owned electric utilities and cooperatively owned electric utilities from most of the requirements of the Commodity Exchange Act (CEA). The entities eligible for the relief are charged with the unique public service mission of providing their customers with reliable, affordable electric energy service. Dodd-Frank directed the CFTC to provide such an exemption for certain transactions between certain electric utilities if it is in the public interest. The CFTC issued a Proposed Order on August 23, 2012, and requested public comments for 30 days. The Final Order makes changes, mostly clarifying and technical, to the Proposed Order based on the comments received.
Specifically, the transactions covered by the Final Order are entered into for the primary purpose of managing supply or price risks arising from current or anticipated public service obligations to physically generate, transmit, and deliver electric energy service to customers. Under the Final Order, the Commission retains its general anti-fraud and anti-manipulation authority, as well as certain scienter-based prohibitions under the CEA, and can continue to inspect the books and records associated with the covered transactions.
Please contact Paul Pantano, Tony Mansfield, Athena Eastwood, Joseph Williams or your regular CWT contact if you have any questions.
View Final Order in full here (Cabinet link).See also: Chairman Gensler's Statement of Support.Related News: "CFTC Issues Final Order to Exempt Certain Specified Transactions of Regional Transmission Organizations and Independent System Operators" (March 28, 2013).For a compilation of recent news items on the subject of jurisdiction over particular products and transactions, see "Current Topics - Product Characterization."