Key House energy lawmakers expressed support for the Federal Energy Regulatory Commission (FERC) and the Commodity Futures Trading Commission (CFTC) working together to combat manipulation in energy markets, saying that their jurisdictional authorities were complementary.

“Efforts by FERC to protect the wholesale energy markets from manipulation are not inconsistent with the CFTC’s exclusive day-to-day regulation of futures exchanges, futures contract terms, trading rules, and the like. We do not view these regulatory jurisdictions as conflicting or duplicative but rather as complementary,” said Rep. John D. Dingell (D-MI), chairman of the House Energy and Commerce Committee, and Rep. Joe Barton (R-TX), the ranking member of the panel, in a recent letter to FERC Chairman Joseph Kelliher and CFTC Chairman Walter Lukken.

Citing the broad new oversight power and civil penalty authority given to FERC in the Energy Policy Act of 2005 (EPAct), the House lawmakers said they expected FERC to “engage in active oversight and to make appropriate and vigorous use of these new authorities in order to provide for the integrity of those markets, fair competition and the protection of consumers.”

EPAct required the CFTC and FERC to develop a memorandum of understanding to encourage the sharing of information between the two agencies. “It was clear then, and remains clear now, that energy markets, and manipulation schemes seeking to exploit them, straddle the discrete regulatory jurisdictions of your two agencies. In recognition of this deep interconnectedness, it did not make sense to use to retain the previous administrative burdens for sharing information,” Dingell and Barton said.

“Our clear intent [in EPAct] was for your two agencies to work together, share information, conduct joint investigations and find and prosecute market manipulation wherever it might take place,” they noted.

FERC has come under attack for its enforcement action in July against fallen hedge fund Amaranth Advisors LLC, with some lawmakers and critics claiming that the agency has stepped on the CFTC’s jurisdiction in the natural gas futures market. Amaranth in particular has argued that FERC’s jurisdiction does not extend to the gas futures market, where the hedge fund’s manipulation is alleged to have occurred.

What specifically concerns the industry and many lawmakers is a possible jurisdictional dispute between FERC and the CFTC. FERC monitors the physical gas market, while the CFTC monitors the futures market. In July, the two federal agencies separately instigated investigations against Amaranth Advisors for allegedly manipulating gas prices (see Daily GPI, Sept. 12; July 27). Amaranth this week is expected to ask the U.S. District Court for the Southern District of New York to throw out the FERC case and rule that the CFTC has sole authority to regulate the gas futures market.

At a House subcommittee hearing Wednesday, concerns that FERC has overstepped its oversight authority were aired (see Daily GPI, Sept. 27). “There is a growing fear that recent FERC actions may be encroaching upon the CFTC’s exclusive jurisdiction over the futures markets,” said Rep. Bob Etheridge (D-NC), chair of the House Subcommittee on General Farm Commodities and Risk Management. “I do not know why the FERC chose to take an enforcement action, which has called its own authority into question.”

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