NGI The Weekly Gas Market Report / NGI All News Access

Senators Feinstein, Cantwell Target Energy Market Manipulation with New Bill

March 7, 2005
/ Print
| Share More
/ Text Size+

In light of the continuing flow of information regarding alleged past energy market manipulation by Enron and other companies, U.S. Sens. Dianne Feinstein (D-CA), Maria Cantwell (D-WA), Ron Wyden (D-OR), and Tom Harkin (D-IA) have introduced legislation that would increase penalties for natural gas and power market manipulation, improve price transparency and give regulators new tools to oversee energy markets.

"A mountain of evidence has accumulated definitively showing that energy companies deliberately manipulated the market," said Feinstein in a statement. "It's been more than four years since the beginning of the energy crisis in the West, and yet Congress has done virtually nothing to protect American consumers. It's time to provide the necessary regulatory oversight and ensure that there is not a repeat of the energy crisis that had such a devastating impact on California and the West."

The legislation, called the "Energy Markets Improvement Act of 2005," would increase penalties for violations of the Federal Power Act and Natural Gas Act to a maximum of $1 million from the current $5,000. It also would increase the maximum sentence for violations of the Federal Power Act from two to five years in prison and would extend penalty authority to other provisions of the Federal Power Act.

It also would direct the Federal Energy Regulatory Commission (FERC) to establish "an electronic system to provide information about the price and availability of wholesale electricity to buyers and sellers and the public." The bill would prohibit round trip electricity trades, prohibit other forms of manipulation in electricity markets and give FERC discretionary authority to revoke market-based rates for violations.

The senators also said the legislation would give the Commodity Futures Trading Commission (CFTC) new powers to gather market data about over-the-counter transactions. For over-the-counter trades in energy derivatives that perform a "significant price discovery function," and for all energy trades on electronic exchanges, the bill would require large traders (defined using current law as "eligible commercial entities" and "eligible contract participants") to keep records and report large trades to the CFTC.

The data reporting would be restricted to information that has a "significant price discovery function." It would require CFTC to seek only information necessary to detect and prevent price manipulation in the futures and over-the-counter markets for energy, to keep proprietary trade and business data confidential except when used for law enforcement purposes, and to not require the real-time publication of proprietary data.

"It has become clear that we cannot depend on any ethical conduct from traders in the energy market," Feinstein said. "The federal government, therefore, needs to step in and give FERC increased authority to punish bad behavior and prevent future abuses."

Despite the apparent impact the legislation would have, the senators said that it would have no effect on the "regulation of futures markets, financial derivatives, metals...swaps or electronic trading of non-energy commodities."

©Copyright 2005 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.

ISSN © 2577-9877 | ISSN © 1532-1266
Comments powered by Disqus