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Dodd-Frank Reform a Mixed Bag, Industry Exec Says

The Dodd-Frank Wall Street Reform and Consumer Protection Act got some things right, and the industry has largely adapted to the new provisions, but there are still some parts of the new law that could use some tweaking, according to Matthew Picardi, vice president for regulatory affairs at Shell Energy North America.

Speaking at the LDC Gas Forum Northeast in Boston on Monday, Picardi told the audience that Dodd-Frank has in some ways met the promise of providing more transparency in natural gas markets and in protecting customers.

"A lot of that has happened and there has certainly been some good things," Picardi said. "It's had an impact on the markets certainly from an operational perspective. The cost of doing business [has increased] for a lot of firms, [as has] the complexity of doing business, especially around options and financial instruments. I'm impressed with the flexibility of the people in the industry and the ability to adapt to new rules and to find a way to continue to do business and manage the supply side of their business."

Heralded as landmark legislation when it was signed into law by president Obama in July 2010, the new rules were seen as the groundwork for the biggest overhaul of the financial regulatory system since the 1930s (see Daily GPIJuly 22, 2010).

"I hope to see, going forward, some very basic things that would affect the industry, change," Picardi said. "For example, the discussion of the use of natural gas to hedge electricity. The idea of Dodd-Frank was to reduce risk and take systemic risk out of the financial system. Certainly in large ways it does it, [like] when you transact with these new entity swap dealers. There are statutory protections built in. But in some ways, when you see some odd things like [not allowing natural gas to hedge electricity], it may add risk. I hope as we go forward we can straighten some of these big things out and the industry [can] continue to adapt as it has."

Late last month several energy industry trade associations, including the American Petroleum Institute and the American Gas Association, joined other entities to urge the Commodity Futures Trading Commission (CFTC) to amend swaps rules enacted by Dodd-Frank, arguing that the rules in their current form posed a significant financial burden to the industry (see Daily GPIMay 28).

Also late last month, the CFTC took action on three issues including the current definition of a swap dealer that then-Chairman Mark Wetjen said will have a lasting impact on energy-end users that may have fallen victim to "negative, unintended consequences" of Dodd-Frank (see Daily GPIMay 27). In making the new proposals, Wetjen asserted that the agency is listening to the industry.

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