Senate Energy and Natural Resources Chairman Pete Domenici (R-NM) is proposing to put solutions “to the looming crisis in natural gas supply and demand” on the front burner of the new Congress, calling for legislative proposals to be filed with the committee by Jan. 7. The senator’s announcement followed on a number of complaints recently over the rising price and volatility of natural gas.
Domenici last Monday issued a broad call for legislative proposals that offer long-term solutions. The proposals will be reviewed by committee staff and a half-day meeting has tentatively been scheduled for Jan. 19 to hear about those that appear most promising.
The supply problem is evidenced by rising natural gas prices, which “have driven up the cost of an array of goods and services and placed a financial hardship on consumers whose homes are heated and cooled by natural gas,” the chairman said.
The call for new legislation followed on complaints from industrial consumers and municipal distributors last week when it was revealed that a storage report, that had driven the price of December gas on the futures market up by more than a dollar, had been erroneous (see NGI, Dec. 6).
The complaints also sparked a reaction from the other side of the Congress, as Ranking Minority Member Rep. John Dingell (D-MI) asked FERC, the CFTC and Nymex for investigations of trading by hedge funds. Dingell said he was following up on a claim by Stephen Etsler of Stand Energy, Cincinnati, OH, that speculative trading by hedge funds was distorting the market.
A letter with Stand’s accusations that hedge funds are “destabilizing the market” was sent to every member of Congress. The same hedge fund traders who do not understand market dynamics “overreacted” to the EIA storage withdrawal report on Nov. 24, driving up the December price, Stand said. Judith Phillips, president and CEO of Stand Energy, said that because of the last-minute run-up in the December futures contract, their end use customers, including medium-sized industrials, and commercials, hospitals and schools, were having to pay about $1.20 more in December. The company indexes many of its contracts to the Nymex expiration.
“We are buying product for our customers based on the run-up. It’s physical volumes, not paper volumes. They’re taking delivery on that at a price $1.20 higher than they would have been a couple hours before,” Phillips said. Industrial companies already are having trouble controlling energy costs and competing with Chinese imports. “We all know how everything’s going to China. If we keep on doing these crazy things in the industry, we’re going to cause more businesses to go to China.”
Stand cited a report by Peter Fusaro of Global Change Associates as saying that more than 200 hedge funds are operating in the energy markets (see NGI, Dec. 6).
Dingell’s letter to Chairman Patrick Wood of the Federal Energy Regulatory Commission, Acting Chairman Sharon Brown-Hruska of the Commodity Futures Trading Commission and Chairman Mitchell Steinhause of the New York Mercantile Exchange asked for a review and response by Jan. 3, 2005. The responses should include an evaluation of “the adequacy of your regulatory tools and a discussion of any actions you deem appropriate to take. Are there any oversight or legislative issues that should be examined by this committee?”
Dingell also sent a copy of the letter to the Securities and Exchange Commission “in case their enhanced oversight of hedge funds has uncovered any information that might be relevant to this inquiry.”
The Senate committee contact is Counsel Lisa Epifani at email@example.com.
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