Meeting Date:
Monday, February 7, 2011
CFTC Staff:
Tom Leahy
Jeff Steiner
Jason Shafer
George Pullen
Arkadiusz Nowak
Laurie Gussow
Organization(s):
Edison Electric Institute (“EEI”)
Dominion Resources Services, Inc. (“Dominion”)
Exelon Corporation (“Exelon”)
Bracewell & Giuliani (“Bracewell”)
NextEra Energy (“NextEra”)
Dayton Power & Light (“DPL”)
Consolidated Edision
American Electric Power (“AEP”)
Constellation Energy
External Attendees:
Aaron Trent (EEI)
Lopa Parkikh (EEI)
Jason Bishop (Dominion)
David Holden (Dominion)
Noel Trask (Exelon)
Dave Perlman (Bracewell representing Exelon)
Nicole Daggs (NextEra)
Matt Fuller (NextEra)
Eric Driscoll (DPL)
Steve Henry (DPL)
Jay Jadwin (AEP)
Joanne Goza (AEP)
Scott Butler (Consolidated Edison)
Carl Coscia (Constellation Energy)
Additional Information:
On February 7, 2010 the Commission staff met with EEI to discuss the real-time reporting proposed rule. EEI’s general concerns related to anonymity and liquidity issues, specifically the value disclosing information relating to end-user to end-user power swaps compared to the harm that disclosing such information would have to end-users and to the customer. EEI further suggested that the rule, as proposed, sacrifices price discovery in order to increase transparency.
EEI suggested that disclosing end-user to end-user swap transaction data does not serve a price discovery function and would not be valuable to market participants. EEI views bilateral end-user to end-user transactions as customized activities, the disclosure of which may create harm since (1) the market will know where the end-user is going to hedge and (2) the trades are not currently included within the definition of block trade or large notional swap. The markets are illiquid and if these trades are reported, then the markets will know the identities of the parties that entered into the swap, and liquidity in that market could dissipate. End-users may be forced to warehouse all of their risk with one counterparty. EEI says that there are people in the markets that will wait for this information and play the market on them.
Another issue that EEI raised is that a generalized description of the swap to protect the identities of the counterparties would likely be insufficient to provide price discovery to the market. The power industry currently relies on provider of last resort auctions, and therefore the reported swap transaction data would have to be so general as to have no meaning.
By requiring disclosure of swap transaction and pricing information for certain end-user swaps, costs could be substantially increased to the end-user and accordingly passed on to the customer. EEI suggested that if there is a need or a value to the information to the market, ICE currently would put the information out there for people to see. EEI stated that hedging strategies are well documented and known by the industry through quarterly and yearly fillings with the SEC. The companies do this to provide transparency to shareholders. Anything that would reveal more than is already publicized is going to have the effect of changing the way that they can hedge and the prices at which they can put on those hedges.
EEI stated that there are certain items that may have to be cleared but would be sufficiently illiquid to still reveal to the public who the counterparties are that entered into the swap. EEI also suggested that the definition of “block trade” should be modified to account for some of these concerns.
