House Agriculture Committee reports Public Power Risk Management Act
Originally published March 21, 2013
The House Agriculture Committee approved yesterday by voice vote the Public Power Risk Management Act of 2013, H.R. 1038, which would allow non-financial counterparties to enter into utility-related swaps with public power and gas utilities without being automatically deemed to be a swap dealer and therefore subject to burdensome requirements under the Dodd-Frank Act. "We greatly appreciate the Committee's action today," said APPA President and CEO President Mark Crisson.
"This much-needed legislation will allow government-owned utilities to appropriately hedge against power and fuel price risks with all market participants and not just the biggest banks and swap dealers," Crisson said. "This will put our members on a level playing with other power utilities and will help ensure that they can adequately plan for the future and continue to provide reliable service and affordable rates to our customers."
The bipartisan bill was introduced by House Agriculture Committee member Doug LaMalfa, R-Calif., and was co-sponsored by fellow House Agriculture Committee members Jim Costa, D-Calif., Jeff Denham, R-Calif., John Garamendi, D-Calif., and Financial Services Committee member Blaine Luetkemeyer, R-Mo.
APPA applauded Agriculture Committee Chairman Frank Lucas, R-Okla., for bringing the issue of public power's ability to manage risk in the wake of the Dodd-Frank Act before the committee in both July 2011 and June 2012. "Without Chairman Lucas having taken an active interest in how the Dodd-Frank Act is affecting public power utilities—and so public power customers—the legislation would not have advanced today," Crisson said.
Under the Commodity Futures Trading Commission’s swap dealer regulations, most entities with swap dealing activity in excess of $3 billion ($8 billion during a phase-in period) must register and thus be regulated as swap dealers. However, a sub-threshold for "special entities"—a category that includes public power and public gas utilities—is only $25 million. "As a result, non-financial entities (such as natural gas producers, independent generators, and investor-owned utility companies) that do not want to be swap dealers will severely limit their swap-dealing activities with government-owned utilities to avoid exceeding the $25 million threshold," Owensboro, Ky., Municipal Utilities General Manager and CEO Terrance Naulty told the House Agriculture Committee at a March 14 hearing.
"While the CFTC has not completed its implementation of the Dodd-Frank Act, these regulations are affecting APPA members now," Crisson said. APPA understands the desire of Rep. Collin Peterson, D-Minn., the Agriculture Committee's ranking minority member, to withhold amending the Dodd-Frank Act until the CFTC has finalized all the regulations implementing it, Crisson said. "As a result, we are doubly appreciative of his work to improve the legislation prior to its introduction."
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