Tamara Hinton, 202.225.0184
WASHINGTON – Rep. Frank Lucas, Chairman of the House Agriculture Committee, and Rep. Doug LaMalfa today issued a statement in response to the Commodity Futures Trading Commission's (CFTC) No-Action Letter to exempt producers, utility companies, and other non-financial entities from being required to register as a swap dealer when they enter into energy contracts with government-owned utilities.
"I am pleased the CFTC has reconsidered its regulatory treatment of public utilities under the Dodd-Frank Act. However, a No-Action Letter is not the rule of law. This approach means CFTC reserves the right to change its mind and regulate these entities as swap dealers in the future. A legislative response is required. The House has acted with one, undivided voice on this issue. It’s time for Majority Leader Reid to pass the House bill or its Senate companion so that millions of Americans have certainty that the Dodd-Frank Act will not increase their electric bills,” said Chairman Frank Lucas.
The CFTC's regulations under the Dodd-Frank Act had strained the ability of public utility companies to use commodity swaps to manage risk in their operations. Non-financial entities can engage in up to $3 billion (subject to an initial three year phase-in level of $8 billion) in most swap activities, including with a private utility, before being regulated as a swap dealer. But with a public utility, they can only engage in $25 million in swap activities.
The restrictive regulations served as a deterrent for many to do business with public utilities, which limited the ability of public utilities to protect themselves and their customers from increased costs and market volatility. Ultimately, this unequal and illogical treatment of public utilities would cause Americans’ electric and natural gas rates to increase.
Recognizing this problem, Rep. LaMalfa introduced H.R. 1038, the Public Power Risk Management Act, to remedy this issue. The House Agriculture Committee advanced the bill and the U.S. House of Representatives unanimously passed it with a vote of 423-0. The CFTC essentially uses the language of H.R. 1038 in its No-Action Letter, but this is not permanent. The U.S. Senate has failed to consider H.R. 1038 or its Senate companion legislation, S. 1802.
“While the CFTC’s recognition of the disproportionate impact these regulations place on public power is encouraging, this reform needs to be codified to ensure stability for ratepayers and providers. This is not a controversial issue. In fact, the House, a significant portion of the Senate and now the CFTC are all in agreement that reform is needed. It’s time for the Senate to act to ensure that the 47 million Americans who rely upon public power will not face rate increases as a result of the Dodd-Frank Act,” said Rep. Doug LaMalfa.
On March 11, 2013, Rep. Doug LaMalfa introduced H.R. 1038, the Public Power Risk Management Act, which protects Americans from electricity and natural gas rate increases caused by regulatory overreach. The bill would allow producers, utility companies, and other non-financial entities to continue entering into energy swaps with government-owned utilities without danger of being required to register with the CFTC as a swap dealer.
On March 20, 2013, the House Agriculture Committee advanced H.R. 1038.
On June 12, 2013, the U.S. House of Representatives unanimously passed H.R. 1038 with a 423-0 vote. The U.S. Senate has failed to consider the bill.
On December 11, 2013, Sen. Joe Donnelly introduced S. 1802, the Public Power Risk Management Act. It has bipartisan support with 13 original cosponsors. The U.S. Senate has failed to consider it.