Meeting Date:
Wednesday, January 19, 2011
CFTC Staff:
Dan Berkovitz
Julian Hammar
Lee Ann Duffy
Mark Fajfar
Jeff Burns
Susan Nathan
David Taylor
Irina Leonova
Tom Leahy
Jeff Steiner
Peter Sanchez
Organization(s):
National Rural Electric Cooperative Association
American Public Power Association
American Public Gas Association
Large Public Power Council
ACES Power Marketing
Schiff Hardin LLP
Wilmer Cutler Pickering Hale and Dorr LLP
External Attendees:
Russell Wasson (National Rural Electric Cooperative Association)
Julie Barkemeyer (National Rural Electric Cooperative Association)
Susan Kelly (American Public Power Association)
David Schryver (American Public Gas Association)
Noreen Carter-Roche (Large Public Power Council)
Jeffrey Walker (ACES Power Marketing)
Patricia Dondanville (Schiff Hardin LLP)
Paul M. Architzel (Wilmer Cutler Pickering Hale and Dorr LLP)
Josh Kans (SEC)
Peter Curley (SEC)
Additional Information:
NFPEEU, as a whole, stressed that they are not financial entities, engage in no speculation and perform a public service.
NFPEEU believes its members are in a special situation because they are all non-profit entities and any increased costs they bear must be passed directly to ratepayers (i.e.., they do not have shareholders to absorb losses). Also, in terms of their use of swaps, they are required to enter into a variety of different types of customized swaps to reduce the risks of energy commodity price fluctuations because they are mandated to provide continuous electric service to their customers and must deal with a variety of variable conditions, such as changing weather patterns and different sized customer bases. The swaps they use are mostly energy commodity swaps.
NFPEEU commented on several rulemakings.
Definition of Swap Dealer: NFPEEU took exception to the statement in the rule proposal that swap dealers are active in most swap markets (75 Fed Reg 80174, 80177, footnote 18). They believe that their members enter into electricity swaps among themselves without the presence of a swap dealer or other form of central hub. NFPEEU believes that this swap market lacks larger entities serving as a resource to accommodate demand for swaps or to facilitate other parties’ interest in swaps. Instead, the participants in this market reach an equilibrium among themselves without calling upon an external “supply” of swaps. NFPEEU explained that the electricity market is not like some other commodity markets where large sources of supply filter the flow of the commodity down to smaller and smaller businesses. Instead, the generation, transmission and use of electricity is widely dispersed and geographically specific. For these reasons, a swap relating to electricity will only have value to the specific parties who have need for electricity at a particular place and time. (That is, the electricity market is not like the market for natural gas, for example, where it would be possible for a user to store natural gas for later use or to ship it to another location if necessary.)
