[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[S. 1951 Introduced in Senate (IS)]







107th CONGRESS
  2d Session
                                S. 1951

 To provide regulatory oversight over energy trading markets, and for 
                            other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                           February 14, 2002

 Mrs. Feinstein (for herself, Ms. Cantwell, Mr. Wyden, and Mrs. Boxer) 
introduced the following bill; which was read twice and referred to the 
           Committee on Agriculture, Nutrition, and Forestry

_______________________________________________________________________

                                 A BILL


 
 To provide regulatory oversight over energy trading markets, and for 
                            other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. JURISDICTION OF THE COMMODITY FUTURES TRADING COMMISSION 
              OVER ENERGY TRADING MARKETS.

    (a) Repeal of Definition of Exempt Commodity.--Section 1a of the 
Commodity Exchange Act (7 U.S.C. 1a) is amended by striking paragraph 
(14) and inserting the following:
            ``(14) [Repealed.]''.
    (b) FERC Liaison.--Section 2(a)(8) of the Commodity Exchange Act (7 
U.S.C. 2(a)(8)) is amended by adding at the end the following:
                    ``(C) FERC liaison.--The Commission shall, in 
                cooperation with the Federal Energy Regulatory 
                Commission, maintain a liaison between the Commission 
                and the Federal Energy Regulatory Commission.''.
    (c) Exempt Transactions.--Section 2 of the Commodity Exchange Act 
(7 U.S.C. 2) is amended by striking subsection (g) and inserting the 
following:
    ``(g) Exempt Transactions.--
            ``(1) Applicability.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), this Act shall not apply to any 
                agreement, contract, or transaction in a commodity 
                other than an agricultural commodity if the agreement, 
                contract, or transaction--
                            ``(i) is between persons that are eligible 
                        contract participants at the time at which the 
                        agreement, contract, or transaction is entered 
                        into;
                            ``(ii) is subject to individual negotiation 
                        by the parties to the agreement, contract, or 
                        transaction; and
                            ``(iii) is not executed or traded on a 
                        trading facility.
                    ``(B) Exceptions.--An agreement, contract, or 
                transaction described in subparagraph (A) shall be 
                subject to--
                            ``(i) sections 4b, 4c(b), 4o, and 5b;
                            ``(ii) subsections (c) and (d) of section 
                        6, 6c, 6d, and 8a, to the extent that those 
                        provisions--
                                    ``(I) provide for the enforcement 
                                of the requirements specified in this 
                                paragraph and paragraphs (2), (3), and 
                                (4); and
                                    ``(II) prohibit the manipulation of 
                                the market price of any commodity in 
                                interstate commerce or for future 
                                delivery on or subject to the rules of 
                                any contract market;
                            ``(iii) sections 6c, 6d, 8a, and 9(a)(2), 
                        to the extent that those provisions prohibit 
                        the manipulation of the market price of any 
                        commodity in interstate commerce or for future 
                        delivery on or subject to the rules of any 
                        contract market;
                            ``(iv) section 12(e)(2); and
                            ``(v) section 22(a)(4).
            ``(2) Eligible trading facilities and systems.--
                    ``(A) In general.--A person or group of persons 
                that constitutes, maintains, administers, or provides a 
                physical or electronic facility or system in which a 
                person has the ability to offer, execute, trade, or 
                confirm the execution of an agreement, contract, or 
                transaction by making or accepting the bids and offers 
                of all other participants on the facility or system 
                (including facilities or systems described in clauses 
                (i) and (iii) of section 1a(33)(B)), may offer to enter 
                into, enter into, or confirm the execution of any 
                agreement, contract, or transaction under paragraph (1) 
                if the person or group of persons meets the requirement 
                of subparagraph (B).
                    ``(B) Requirement.--The requirement of this 
                subparagraph is that a person or group of persons 
                described in subparagraph (A) shall--
                            ``(i) register with the Commission in any 
                        capacity that the Commission requires by rule, 
                        regulation, or order;
                            ``(ii) file with the Commission any reports 
                        (including large trader position reports) that 
                        the Commission requires by rule, regulation, or 
                        order;
                            ``(iii) maintain sufficient net capital, as 
                        determined by the Commission; and
                            ``(iv)(I) maintain books and records 
                        consistent with section 4i; and
                            ``(II) make those books and records 
                        available to representatives of the Commission 
                        and the Department of Justice for inspection at 
                        all times.
            ``(3) Reporting requirements.--An eligible contract 
        participant that enters into an agreement, contract, or 
        transaction exempt under paragraph (1) shall--
                    ``(A) file with the Commission any reports that the 
                Commission may require by rule, regulation, or order; 
                and
                    ``(B)(i) maintain books and records consistent with 
                section 4i; and
                    ``(ii) make those books and records available to 
                representatives of the Commission and the Department of 
                Justice for inspection at all times.
            ``(4) Transactions exempted by commission action.--Any 
        agreement, contract, or transaction under paragraph (1) that 
        would otherwise be exempted by the Commission under section 
        4(c) shall be subject to--
                    ``(A) sections 4b, 4c(b), and 4o; and
                    ``(B) subsections (c) and (d) of section 6, 6c, 6d, 
                8a, and 9(a)(2), to the extent that those provisions 
                prohibit the manipulation of the market price of any 
                commodity in interstate commerce or for future delivery 
                on or subject to the rules of any contract market.
            ``(5) Effect.--This subsection does not affect the power of 
        the Federal Energy Regulatory Commission to regulate 
        transactions described in paragraph (1) under the Federal Power 
        Act (16 U.S.C. 791a et seq.).''.
    (d) Repeal of Guidelines for Transactions in Exempt Commodities.--
Section 2 of the Commodity Exchange Act (7 U.S.C. 2) is amended--
            (1) by striking subsection (h); and
            (2) by redesignating subsection (i) as subsection (i).
    (e) Contracts Designed to Defraud or Mislead.--Section 4b of the 
Commodity Exchange Act (7 U.S.C. 6b) is amended by striking subsection 
(a) and inserting the following:
    ``(a) Prohibition.--It shall be unlawful--
            ``(1) for any member of a contract market, or for any 
        correspondent, agent, or employee of any member, in or in 
        connection with any order to make, or the making of, any 
        contract of sale commodity in interstate commerce, made, or to 
        be made on or subject to the rules of any contract market; or
            ``(2) for any person, in or in connection with any order to 
        make, or the making of, any agreement, transaction, or contract 
        in a commodity subject to the provisions of this Act--
                    ``(A) to cheat or defraud or attempt to cheat or 
                defraud the other person;
                    ``(B) willfully to make or cause to be made to the 
                other person any false report or statement, or 
                willfully to enter or cause to be entered for the other 
                person any false record;
                    ``(C) willfully to deceive or attempt to deceive 
                the other person by any means in regard to any order or 
                contract or the disposition or execution of the order 
                or contract, or in regard to any act of agency 
                performed with respect to the order or contract for the 
                other person; or
                    ``(D) to bucket the order, or to fill the order by 
                offset against the order of any other person, or 
                willfully, knowingly, and without the prior consent of 
                the other person to become the buyer in respect to any 
                selling order of the other person, or to become the 
                seller in respect to any buying order of the other 
                person.''.
    (f) Conforming Amendments.--The Commodity Exchange Act is amended--
            (1) in section 2(e) (7 U.S.C. 2(e))--
                    (A) in paragraph (1), by striking ``, 2(g), or 
                2(h)(3)'';
                    (B) in paragraph (2), by striking ``, or operating 
                as an exempt board of trade'';
                    (C) by striking paragraph (3); and
                    (D) by redesignating paragraph (4) as paragraph 
                (3);
            (2) in section 2(h) (7 U.S.C. 2(h)) (as redesignated by 
        subsection (d)), by striking ``2(h) or'';
            (3) in section 4i (7 U.S.C. 6i)--
                    (A) by striking ``any contract market or'' and 
                inserting ``any contract market,''; and
                    (B) by inserting ``, or pursuant to an exemption 
                under section 4(c)'' after ``transaction execution 
                facility'';
            (4) in section 5a(g)(1) (7 U.S.C. 7a(g)(1)), by striking 
        ``, or exempt under section 2(h) of this Act'';
            (5) in section 5b (7 U.S.C. 7a-1)--
                    (A) in subsection (a)(1), by striking ``2(h) or''; 
                and
                    (B) in subsection (b), by striking ``2(h) or''; and
            (6) in section 12(e)(2)(B) (7 U.S.C. 16(e)(2)(B)), by 
        striking ``2(h) or''.

SEC. 2. RECRUITMENT AND RETENTION OF QUALIFIED PERSONNEL AT THE FEDERAL 
              ENERGY REGULATORY COMMISSION.

    Section 401(c) of the Department of Energy Organization Act (42 
U.S.C. 7171(c)) is amended--
            (1) by striking paragraph (2);
            (2) by redesignating paragraphs (1), (3), (4), and (5) as 
        subparagraphs (A), (B), (C), and (D), respectively;
            (3) by striking ``(c) The Chairman'' and inserting the 
        following:
    ``(c) Administration.--
            ``(1) In general.--The Chairman''; and
            (4) by adding at the end the following:
            ``(2) Personnel matters.--
                    ``(A) In general.--The Chairman may--
                            ``(i) appoint, prescribe the duties, and 
                        fix the salaries of an executive director, a 
                        secretary, a chief engineer, a general counsel, 
                        a solicitor, and a chief accountant; and
                            ``(ii) subject to the civil service laws--
                                    ``(I) appoint any other officers 
                                and employees that are necessary in the 
                                execution of the duties of the 
                                Commission; and
                                    ``(II) fix the salaries of any 
                                officer or employee appointed under 
                                subclause (I).
                    ``(B) Compensation.--
                            ``(i) In general.--Rates of basic pay for 
                        all employees of the Commission may be set and 
                        adjusted by the Chairman without regard to the 
                        provisions of chapter 51 or subchapter III of 
chapter 53 of title 5, United States Code.
                            ``(ii) Additional compensation.--The 
                        Chairman may provide additional compensation 
                        and benefits to employees of the Commission if 
                        the same type and amounts of compensation or 
                        benefits are or are authorized to be provided 
                        by any other Federal agency under applicable 
                        provisions of law (including regulations).
                            ``(iii) Comparability.--In setting and 
                        adjusting the total amount of compensation and 
                        benefits for employees under this paragraph, 
                        the Chairman shall consult with, and seek to 
                        maintain comparability with, other Federal 
                        agencies.
                    ``(C) Early retirement.--The Chairman may offer 
                early out retirement and voluntary separation incentive 
                payments, as appropriate.
                    ``(D) Recruitment.--The Chairman may use modified 
                hiring delegation authorities to recruit for positions 
                at all grade levels that are difficult to fill, 
                including economists, engineers, accountants, auditors, 
                and energy, market, and financial analysts.
                    ``(E) Merit system principles.--This paragraph 
                shall be administered consistent with merit system 
                principles.
                    ``(F) Consultation with OPM.--In carrying out this 
                paragraph, the Chairman shall consult with the Director 
                of the Office of Personnel Management.''.

SEC. 3. JURISDICTION OF THE FEDERAL ENERGY REGULATORY COMMISSION OVER 
              ENERGY TRADING MARKETS.

    Section 402 of the Department of Energy Organization Act (42 U.S.C. 
7172) is amended by adding at the end the following:
    ``(i) Jurisdiction Over Derivatives Transactions.--
            ``(1) Definitions.--In this subsection:
                    ``(A) Derivatives transaction.--
                            ``(i) In general.--The term `derivatives 
                        transaction' means a transaction based on, or 
                        reflecting prices of or for, electric energy or 
                        natural gas.
                            ``(ii) Inclusions.--The term `derivatives 
                        transaction' includes--
                                    ``(I) futures;
                                    ``(II) options;
                                    ``(III) forwards; and
                                    ``(IV) swaps.
                            ``(iii) Exclusions.--The term `derivatives 
                        transaction' does not include a derivatives 
                        transaction that is--
                                    ``(I) under the exclusive 
                                jurisdiction of the Commodity Futures 
                                Trading Commission; or
                                    ``(II) concerns a retail sale of 
                                electric energy or natural gas and is 
                                under the exclusive jurisdiction of a 
                                State.
                    ``(B) Person.--The term `person' has the meaning 
                given the term in section 1a of the Commodity Exchange 
                Act (7 U.S.C. 1a).
            ``(2) Jurisdiction.--The Commission shall have jurisdiction 
        over--
                    ``(A) derivatives transactions;
                    ``(B) any person that makes a derivatives 
                transaction; and
                    ``(C) any entity that operates an electronic forum 
                in which persons make derivatives transactions.
            ``(3) Authorities and duties.--
                    ``(A) In general.--The authorities and duties of 
                the Commission under this subsection with respect to 
                derivatives transactions shall be the same as the 
                authorities and duties of the Commission under--
                            ``(i) sections 205 and 206 and part III of 
                        the Federal Power Act (16 U.S.C. 824d, 824e, 
                        825 et seq.); and
                            ``(ii) sections 4 and 5 of the Natural Gas 
                        Act (15 U.S.C. 717c, 717d).
                    ``(B) Meetings.--The Commission shall meet 
                quarterly with the Commodity Futures Trading 
                Commission, the Securities Exchange Commission, the 
                Federal Trade Commission, and the Federal Reserve Board 
                to discuss--
                            ``(i) conditions and events in energy 
                        trading markets; and
                            ``(ii) any changes in Federal law 
                        (including regulations) that may be appropriate 
                        to regulate energy trading markets.
                    ``(C) Report.--Not later than the date that is 1 
                year after the date of enactment of this subsection and 
                annually thereafter, the Commission shall submit to 
                Congress a report that describes the activities of the 
                Commission relating to the regulation of derivatives 
                under this subsection during the preceding year.
            ``(4) Rights and obligations.--Persons and entities 
        regulated under this subsection shall have the same rights and 
        obligations as persons regulated by the Commission under 
        sections 205 and 206 and part III of the Federal Power Act (16 
        U.S.C. 824d, 824e, 825 et seq.).
            ``(5) Liaison.--The Commission shall, in cooperation with 
        the Commodity Futures Trading Commission, maintain a liaison 
        between the Commission and the Commodity Futures Trading 
        Commission.
            ``(6) Rates.--It shall be unlawful to make, demand, or 
        receive rates and charges for or in connection with derivatives 
        transactions that are unjust, unreasonable, discriminatory, or 
        preferential.''.
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