Three commodity futures exchanges are expected to launch six newelectricity futures and options contracts this year based ondelivery east of the Mississippi and it looks like two Nymexcontracts could be the first to market. The Commodity FuturesTrading Commission yesterday approved the Nymex contracts, whichare based on delivery through the Cinergy transmission system (inOhio) and through the Entergy transmission system (in Louisiana). Athird Nymex electricity contract, based on delivery through thePennsylvania-New Jersey-Maryland Interconnection transmissionsystem, was not submitted to the CFTC because of recent changes inPJM policies. The PJM contract is expected to be submitted at alater date when the most active trading locations in the PJM poolare identified.

Nymex President R. Patrick Thompson said the exchange plans tolaunch the Cinergy and Entergy electricity contracts this summer.All three eastern contracts were designed to complement Nymex’s twowestern electricity futures and options contracts, which have grownto an average volume of 2,500 contracts a day. But they also maycompete with the contracts of two other exchanges, resulting in areduction of liquidity on some or all of them, according to someobservers.

The Chicago Board of Trade is gearing up to file with the CFTCfor approval of two contracts based on delivery to CommonwealthEdison and the Tennessee Valley Authority, and hopes to launch thecontracts this summer as well. And the Minneapolis Grain Exchangeis awaiting CFTC approval of its futures and options contracts,which will be based on delivery at the TC Gen point on the NorthernStates Power system.

CPM Energy President Scott Spiewak said only two of the proposedcontracts are likely to compete – the PJM and Cinergy contracts -and they are under the same roof at Nymex. The TVA, Entergy, ComEdand Northern States Power contracts are more likely to servespecific markets with little overlap. Spiewak believes the launchof so many contracts could trigger rapid deregulation. “Its ascreaming billboard to local jurisdictions to open up theirmarkets. [The contracts] will provide evidence that if you allowcustomers to buy power on the open market they could do a hell of alot better than buying from regulated utilities.”

Specifications for the approved Nymex contracts include thefollowing: the delivery rate is 2 MW/hour through every hour of thedelivery period; the contract unit is 736 MWh of firm power; thedelivery period is 16 on-peak hours (7 a.m. through 11 p.m.prevailing time each business day of the delivery month); tradingon the delivery month will cease on the fourth business day priorto the first day of the delivery month; prices will be quoted indollars and cents per MWh with a minimum price fluctuation of$0.01/MWh and a maximum price fluctuation of $3/MWh above or belowthe previous day’s settlement price. Nymex already has started aseries of training sessions on its new contracts. The next trainingsession will take place on May 5 in New Orleans prior to start ofGasMart/Power ’98, NGI’s national trade fair for natural gas andelectricity.

©Copyright 1998 Intelligence Press Inc. All rights reserved. Thepreceding news report may not be republished or redistributed, inwhole or in part, in any form, without prior written consent ofIntelligence Press,Inc.