State utility regulators back federal energy speculation measures

State utility regulators expressed their support for federal legislation to reduce energy market speculation on Feb. 18 during their organization's 2009 winter meeting.

State utility regulators expressed their support for federal legislation to reduce energy market speculation on Feb. 18 during their organization's 2009 winter meeting.

Members of the National Association of Regulatory Utility Commissioners adopted a resolution which also supports the US Commodity Futures Trading Commission's efforts to close the so-called Enron loophole, which exempts electronically traded energy commodities from regulatory oversight.

The provision in the 2000 Commodity Futures Modernization Act severely limits both the Federal Energy Regulatory Commission and CFTC's ability to identify and prevent excessive natural gas market speculation, NARUC said.

It also backed new federal legislation to address the flow of investment capital into financial markets in ways which produce commodity price movements that harm consumers, businesses and financial markets.

"NARUC supports proposals such as increasing margin requirements for futures contracts on speculators who do not intend to take delivery on essential commodities such as natural gas, and requiring over-the-counter natural gas derivative contracts to be cleared by exchanges as simple steps to combat excessive speculation," the resolution continued.

Any federal legislation and regulation address futures markets should fully accommodate legitimate hedging activities by gas and electric utilities as a strategy to manage the risk of price volatility and mitigate the impacts of such volatility on consumers, it added.

NARUC supports FERC and CFTC actions to increase gas supplies and availability, and vigorous enforcement action against fraud, manipulation and abusive practices which could help reduce gas prices, the resolution concluded.

Contact Nick Snow at nicks@pennwell.com

More in Economics & Markets