IntercontinentalExchange (ICE), a leading electronic energy trading platform, Friday assailed congressional Democrats’ “hastily submitted” legislative proposals that it says place “arbitrary controls” on regulated energy futures markets.

“The various trading proposals by Senate Democrats would result in adverse consequences for consumers, market prices and on the competitiveness of the U.S. [energy] markets,” Atlanta-based ICE said.

The target of ICE’s attack is the Consumer-First Energy Act of 2008, proposed by Senate Majority Leader Henry Reid (D-NV) and other Democrats, that would revoke $17 million in tax breaks for energy companies, impose a windfall profits tax on energy companies that don’t invest in renewable energy sources and impose federal penalties for energy price gouging (see Daily GPI, May 8).

Besides taxing energy companies, the bill would revive a plan passed earlier by both the Senate and House of Representatives to allow the federal government to sue OPEC — the source of one-third of global oil supply — for price manipulation. In addition, the legislation would seek to prevent oil market speculation and would prevent companies that trade U.S. oil futures from routing transactions through offshore markets to evade position limits. It also seeks to require the Commodity Futures Trading Commission (CFTC) to boost margin requirements for all oil futures transactions.

“Proposals designed to place restrictions on qualified participants would inevitably impact liquidity, leading to the degradation of price discovery, and importantly, increasing the potential for even greater price volatility,” ICE said. “The presence of hedgers, and those that are willing to take on the risk that hedgers wish to lay off, are vital to properly functioning markets.”

In 2006 the CFTC held hearings on the issue of foreign boards of trade and subsequently affirmed its view that mutual recognition was essential for energy markets. This “resulting mutual recognition system is now a cornerstone of CFTC policy. Since 1982 the CFTC has actively [worked] with regulatory agencies around the world to ensure fair and open access to global markets. Hastily enacted legislation that seeks to alter well-established regulatory policy could greatly impair the functioning of commodity markets to the detriment of American consumers,” the electronic exchange said.

ICE called on Congress to focus its efforts on developing long-term and permanent solutions to reduce U.S. dependence on foreign energy by promoting energy efficiency, introducing new energy sources and technologies and allowing environmentally responsible drilling in North America.

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