In July 2010, President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”), which, among other things, granted to the Commodity Futures Trading Commission (“CFTC”) comprehensive authority to regulate financial transactions involving commodities, including exchanged-traded futures and over-the-counter derivatives involving natural gas. The Act also gave the CFTC broad anti-market manipulation and anti-fraud authority over commodity option transactions in interstate commerce. The CFTC has issued rules implementing the provisions of the Dodd-Frank Act related to regulation of swaps. Key rulemakings have defined what transactions and market entities are subject to the greatest regulatory scrutiny – swap dealers, major swap participants, derivatives clearing organizations, futures commission merchants, swap execution facilities, and swap data repositories – and set out the reporting and recording keeping requirements for market participants.
AGA member companies provide natural gas service to retail customers under rates, terms and conditions that are regulated at the local level by a state commission or other regulatory authority with jurisdiction. They use financial tools to hedge the commercial risks associated with providing natural gas service to customers, such as commodity cost volatility. These tools include futures contracts traded on CFTC-regulated exchanges and over-the-counter energy derivatives. Under CFTC rules, AGA member companies are classified as non-financial entities, or “end-users” of futures and swaps.
AGA believes that the CFTC’s rulemakings to implement the Dodd-Frank Act should ensure that the financial markets related to energy commodities function efficiently and protect the ability of commercial hedgers to engage in risk management activities at reasonable cost for the benefit of American energy consumers.
AGA members also participate in the physical natural gas market and contract for pipeline transportation, storage and asset management services in order to procure and deliver affordable, reliable natural gas to their customers. AGA has actively called for reasonable regulatory outcomes that do not treat member companies’ non-financial natural gas contracting practices as financial “swap” activity. As the CFTC moves to implement its final rules and policies, AGA continues to monitor where AGA member companies face ongoing compliance challenges and develop advocacy programs to address these issues.
AGA Contact: Arushi Sharma, AGA Counsel, Regulatory Affairs | 202.824.7120 | firstname.lastname@example.org