The Minnesota Municipal Utilities Association (MMUA), which represents more than 150 municipal gas and electric utilities in the state, joined a push by the American Public Gas Association (APGA) on Thursday to support strengthening the gas market transparency language in the Commodity Futures Trading Commission (CFTC) reauthorization legislation.
The MMUA's decision to join the APGA follows an announcement of support in January by the Iowa Association of Municipal Utilities and more than 30 Iowa public gas systems (see Daily GPI, Jan. 25). The APGA has been publicly pushing for stronger oversight of gas markets in recent months following the collapse of Amaranth Advisers LLC last September (see Daily GPI, Oct. 3, 2006), including support of the bipartisan Senate bill, the Oil and Gas Traders Oversight Act, introduced last month (see Daily GPI, Feb. 14).
In a joint letter of support to Minnesota Rep. Collin Peterson, who chairs the House Committee of Agriculture, MMUA Executive Director Jack Kegel and APGA CEO Bert Kalish said, "Public gas systems nationwide, and the consumers served by them, have an increasing lack of confidence in the natural gas marketplace. The collapse of Amaranth Advisors LLC and the impact it had upon prices has further increased our concerns. Many natural gas distributors locked in prices prior to and during the period Amaranth collapse that in hindsight were distorted due to Amaranth's accumulation of an extraordinarily large position.
"The lack of transparency in the OTC market for natural gas and the extreme price swings surrounding the fallout of Amaranth, have, in their wake, left bona fide hedgers reluctant to participate in the markets for fear of locking in prices that may be artificial."
Kegel and Kalish said "confidence in the fairness of the natural gas market can be restored only if the CFTC has better tools to detect and deter potential manipulative activity in the OTC markets in natural gas. The primary tool used by the CFTC to detect and deter possible manipulative activity in the regulated futures market is its large trader reporting system. We believe that a similar large trader reporting system with respect to positions held in OTC natural gas contracts is necessary to restore confidence in the fairness of the market price of natural gas."
Only by requiring traders to report "very large positions in OTC contracts in natural gas as a matter of course will the CFTC be able routinely, and prospectively, to assemble a complete picture of the overall size and potential impact of a trader's position," Kegel and Kalish said. "Without having this additional authority, the CFTC can only continue to be reactive to such events in the future, discovering the full extent of a trader's position only after consumers have already suffered injury from such market abuses."
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