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Senate Amendment Would Preserve FERC’s Market Authority
As broad financial reform legislation neared completion in the Senate, a bipartisan group of senators slipped in an amendment cutting off a move by the Commodity Futures Trading Commission (CFTC) to claim sole jurisdiction over natural gas and power transactions. The amendment passed by voice vote on the Senate floor Tuesday night, preserving the existing authority of individual states and FERC in the oversight of the natural gas and power markets.
A broad alliance of co-sponsors, including Energy Committee chairman Sen. Jeff Bingaman, (D-NM), ranking member Sen. Lisa Murkowski (R-AK) and Senate majority leader Sen. Harry Reid (D-NV) signed on to the amendment to preserve the Federal Energy Regulatory Commission’s (FERC) Federal Power Act and Natural Gas Act authority to ensure just and reasonable (J&R) rates to natural gas and electric power utility customers.
“The Senate tonight took a strong, principled stand in support of consumer protection,” Bingaman said. “Let’s hope this safeguard doesn’t get tampered with in conference.”
The Senate Democratic leadership has been planning to have a vote on the financial reform bill by the end of this week. However, a cloture vote Wednesday afternoon to limit debate and amendments and schedule a vote on the measure itself was 57-42, short of the necessary two/thirds majority.
The amendment specifies that the jurisdiction of the CFTC over futures or derivative contracts shall not be construed to supersede or limit FERC’s authority or that of a state regulatory agency over rates and charges for natural gas and electricity. Currently the CFTC mainly has had jurisdiction over the paper market while FERC has minded the physical market for natural gas, including pipelines, and the electric power transmission system. The state regulatory agencies regulate electric utility rates to consumers.
The split jurisdiction has led to some clashes in the past, notably over the prosecution of the failed hedge fund Amaranth Advisors LLC, which involved large natural gas futures market trades (CFTC jurisdiction) that were said to impact the physical market (FERC jurisdiction). In the end both agencies carried out legal action against the company and its principal. Some onlookers have advised that Congress should designate “primary regulators” for specific types of transactions, while others have suggested the two agencies be required to concoct a memorandum of understanding (MOU) as to their primary jurisdictions (see Daily GPI, Sept. 8, 2009).
The CFTC has lobbied to extend its jurisdiction, particularly over the regional transmission organizations in the power market (see Daily GPI, March 10). The agency has argued of the danger potential regulatory loopholes that would allow cases of market manipulation to slip through the cracks.
FERC Chairman Jon Wellinghoff and his immediate predecessor, Joseph Kelliher recently told a congressional committee that requiring the two agencies to agree on an MOU would not end the dispute. “I think Congress decides jurisdiction, not agencies, and that FERC and CFTC have an honest disagreement on interpreting the law…at this point, only courts or Congress can resolve the dispute between the agencies,” Kelliher said.
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