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Rep. Frank Lucas, Chairman of the House Agriculture Committee, and Rep. Doug LaMalfa today issued statements after the Commodity Futures Trading Commission (CFTC) voted, 4-0, to exempt producers, utility companies, and other non-financial entities from being required to register as swap dealers when they enter into energy contracts with government-owned utilities. 

The rule largely reflects the intent of H.R. 1038, the Public Power Risk Management Act, which was sponsored by Rep. Doug LaMalfa. The House Agriculture Committee advanced this bipartisan bill that ultimately won unanimous support on the House floor last year. Further, it was included within H.R. 4413, the Customer Protection and End-User Relief Act, that passed in the House this summer.

"I am pleased this is the agenda and outcome of the first open meeting under Chairman Massad's leadership. It is encouraging to see common sense has prevailed on a regulatory issue that is critical to the livelihoods of so many. The House acted with one, united voice and I applaud the CFTC for following suit thereby protecting Americans from electricity and natural gas rate increases,"strongsaid Chairman Frank Lucas.

"I am pleased the CFTC finalized a rule consistent with the intent of my bill, H.R. 1038, the Public Power Risk Management Act which was also included in, H.R. 4413, the Customer Protection and End-User Relief Act. Not only will the CFTC’s decision to implement this rule help to ensure continued growth in our agriculture sector, but most importantly, it will protect public power utilities’ access to risk management practices, and in turn, protect American ratepayers from escalating energy prices due to misguided regulations,"strongsaid Rep. Doug LaMalfa.

Background:

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 have caused Americans’ electric and natural gas rates to increase.

On March 11, 2013, Rep. Doug LaMalfa introduced H.R. 1038, the Public Power Risk Management Act. 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 by voice vote.

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. 

On March 26, 2014, the CFTC issued a No-Action Letter that reconsidered the treatment of public utilities under the Dodd-Frank Act. Chairman Lucas and Rep. LaMalfa emphasized the fact that a No-Action Letter is not the rule of law.

On June 24, 2014, the U.S. House of Representatives passed H.R. 4413, the Customer Protection and End-User Relief Act, by a vote of 265-144. The bill included H.R. 1038.

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