As the House of Representatives moved toward floor debate starting Thursday with a possible vote within a few days on financial reform measures, all the major natural gas and electric power organizations joined in a letter to House members urging that the end-user exemption from mandatory clearing or exchange trading of derivatives or swaps be preserved.

The group called on congressmen to oppose any amendments to the Wall Street Reform and Consumer Protection Act of 2009 (H.R. 4173) that would undermine the draft bill exemption, which would apply to end-users or commercial traders going into the derivatives or swaps market to hedge their own activities in the physical gas market (see Daily GPI, Nov. 11). The letter also called for support of certain amendments that would strengthen the exemption for “legitimate end-user hedging by excluding end-users from the definitions of ‘swap dealer’ and ‘major swap participant.'”

The letter was issued Wednesday afternoon just before the House Rules Committee began extended deliberations on which of the more than 200 amendments proposed to the broad-based banking and financial reform legislation would be allowed to be offered on the floor. It also called on congressmen to support an amendment exempting ‘book out’ transactions (transactions that may not be physically settled) from mandatory clearing requirements, and oppose another amendment that would permit the Commodity Futures Trading Commission (CFTC) and/or the Securities and Exchange Commission (SEC) from imposing margining requirements on legitimate hedging transactions by requiring mandatory clearing.

The group made clear they did not represent any banking or financial institutions, saying, “Our interests are focused on commercial risk management practices and well-functioning markets.” Signing the letter were the American Gas Association, American Public Gas Association, American Public Power Association, American Wind Energy Association, America’s Natural Gas Alliance, Edison Electric Institute, Electric Power Supply Association, Independent Petroleum Association of America, Natural Gas Supply Association and the National Rural Electric Cooperative Association.

“There is no suggestion that energy/electricity OTC [over the counter] transactions were implicated in the financial crisis or pose future systemic risks,” the letter stated. “Our members do not pose systemic risk to the broader economy. In fact, the entire commodity market is less than 1% of the global OTC derivatives market, and the energy commodity portion is yet a fraction of that 1%.”

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