In light of recent attempts by the Administration and Congress to reform over-the-counter (OTC) energy derivatives markets, AGA has penned a letter with the Edison Electric Institute (EEI) and the Electric Power Supply Association (EPSA) expressing concern with some of the proposals in question. The letter was signed by 70 member companies belonging to the three organizations and was sent to members of the Senate Committee on Banking, Housing, and Urban Affairs and the Senate Committee on Agriculture, Nutrition and Forestry on Friday.
Specifically, the group is asking that any OTC derivatives legislation provide a clear exemption for end-users of OTC derivatives products, such as electric and gas utilities that use OTC derivatives markets to hedge against commodity price risk for natural gas and wholesale electric power. The hedging transactions of end-users do not contribute to systemic risk, and should be exempted from the definitions of swap dealer and major swap participant.
Further concerns are expressed in the letter, which can be found here.
Electricity and gas utilities engage in risk management transactions in the OTC derivatives markets to help ensure stable and affordable rates for their customers. The organizations stand ready to work with lawmakers to enhance transparency and improve overall market functions of transactions without creating unintended consequences.