Legislative language that would have given the Commodity Futures Trading Commission (CFTC) greater oversight of wholesale natural gas prices was removed from a broad legislative amendment on electricity that was released late Wednesday by the Senate Energy and Natural Resources Committee.

In the amendment, Committee Chairman Pete Domenici (R-NM) proposed that the Federal Energy Regulatory Commission take steps to set up an electronic information system to provide access to wholesale electricity prices and data on transmission capacity availability. The requirement for strict CFTC oversight of natural gas prices that had been mentioned in earlier drafts of the amendment was removed (see Daily GPI, July 22).

The amendment, which seeks to shore up regulation of power markets, is expected to be offered as a substitute to the existing electricity title in the Senate omnibus energy bill (S. 14), on which lawmakers are to resume debate possibly this week. A number of other amendments are expected to come up next week, but the electricity proposal could be the most contentious.

The electronic information system, which would be established within six months of an energy bill being enacted into law, would make price and market information available to federal and state regulators, buyers and sellers of wholesale electricity, users of transmission services and the public, according to the amendment.

It would give FERC the authority to exclude the disclosure of any information that could be “detrimental to the operation of an effective market or jeopardize system security,” which appears to be an exemption from the Freedom of Information Act. In deciding which information should be posted, the Commission should try to “ensure that consumers and competitive markets are protected from the adverse effects of potential collusion or other anticompetitive behaviors that can be facilitated by untimely disclosure of transaction-specific information,” the amendment said.

It further would make it illegal for parties to “knowingly and willfully” report false information on the price of electricity sold at wholesale and on the availability of transmission capacity. It specifically prohibits parties from “knowingly and willfully” participating in round-trip trading of electricity, a practice that a number of energy traders engaged in to boost their trading volumes.

The amendment also specifies that parties would be in violation of the Commodity Exchange Act if they “knowingly and willfully” reported or manipulated information on the “price, quantity, sale or purchase, and counterparty of any agreement, contract or transaction related to natural gas or electricity in interstate commerce, which the person or entity knew to be false at the time of reporting to any governmental entity or any person or entity engaged in the business of collecting and disseminating information.” Violators would be subject to potential “administrative or civil action” by the CFTC.

This “strengthens the [CFTC’s] authority to investigate and punish fraud and manipulation in the reporting of electric and natural gas prices. The CFTC’s anti-fraud authority is also clarified to apply to all principal-to-principal transactions, thereby closing the so-called Enron loophole,” Domenici said.

The measure would amend the Federal Power Act to boost FERC criminal penalties against violators to $1 million, and potential prison terms to five years. FERC’s civil penalty authority would increase to $1 million as well. The proposal would amend the Natural Gas Act to make violators subject to fines of up to $1 million and five years in prison.

It also would move up the date for electricity refunds to take effect. Currently the earliest date for refunds to take effect is 60 days after a complaint has been filed at FERC. The amendment seeks to eliminate the 60-day waiting period, thus making the earliest effective date for refunds on “the date of the filing of such complaint.”

Capitol Hill observers said the FERC report and the CFTC endorsement of that report, which found no market manipulation involved in the February natural gas price spikes, plus the joint agency issuance of a safe harbor provision and encouragement to the industry (see Daily GPI, July 24 & July 24), helped to head off onerous requirements for natural gas price reporting. They also cited almost around-the-clock lobbying, aimed at preserving a functioning gas market and keeping FERC in the picture, by a number of those involved over the past few days. A significant feature is that the Domenici amendment, as currently written, has FERC issuing rules to set up the electronic system for power price reporting, not the CFTC.

There still may be a battle on the Senate floor over price transparency, and there is a provision authorizing FERC to set up a gas price reporting system in the House version of the energy bill (see Daily GPI, April 7). The House provision, however, was not part of the original legislation crafted by the committee leaders, and they would not be expected to push the point in a conference committee.

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