Warning of higher electricity prices

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(Wash.D.C.) – A group of energy companies has requested that federal regulators delay putting in place new rules written under the 2010 financial reform act, warning that they could cause higher and more volatile electricity prices.

In a letter dated Monday to the Commodity Futures Trading Commission, which has spent the past year finalizing reform rules, the energy group urged the regulators to extend by at least a year the deadline by which energy companies need to comply with the new rules.

“Careful and deliberate implementation” is necessary to maintain the liquidity of markets and the delivery of electric commodities, the group wrote. Lack of either “could result in higher prices for consumers and commodity market participants” or cause “severe and substantial disruptions” in energy markets, it warned.

The rules referred to by the energy group would establish reporting requirements on swaps, a type of transaction based on future prices. Transactions used by utilities, small energy companies and others to hedge against risks like volatile prices are exempt from the new regulations.

Earlier this year, the CFTC finalized what were seen as two pivotal rules defining the financial transactions and participants falling under the new regulations, but the agency has yet to finalize several other proposed rules under the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act.

Energy market participants, the group said in its letter, need more time to prepare for the record-keeping requirements and determine which of their transactions are included in the new regulations that have been finalized. They also need to know which of their transactions will fall under exemptions, they said.

“Despite their diligent and ongoing preparation efforts,” the group said, “members need additional time to ensure that their compliance procedures and practices and any process or transaction changes are designed and implemented thoughtfully, efficiently, and with the least possible disruption to their individual businesses and broader markets.”

The Edison Electric Institute, American Gas Association and Electric Power Supply Association, which all signed the letter, proposed a schedule that has the CFTC providing a six-month “transition period” after all Dodd-Frank regulations are completed.

Companies dealing in transactions that are deemed to fall outside the regulations for swap dealers would be given an extra six months beyond that to put in place new reporting requirements. (Greenwire, 9-26-2012)