[Congressional Record Volume 159, Number 83 (Wednesday, June 12, 2013)]
[House]
[Pages H3307-H3309]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
PUBLIC POWER RISK MANAGEMENT ACT OF 2013
Mr. LaMALFA Madam Speaker, I move to suspend the rules and pass the
bill (H.R. 1038) to provide equal treatment for utility special
entities using utility operations-related swaps, and for other
purposes.
The Clerk read the title of the bill.
The text of the bill is as follows:
H.R. 1038
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Public Power Risk Management
Act of 2013''.
SEC. 2. TRANSACTIONS WITH UTILITY SPECIAL ENTITIES.
Section 1a(49) of the Commodity Exchange Act (7 U.S.C.
1a(49)) is amended by adding at the end the following:
``(E) Certain transactions with a utility special entity.--
``(i) Transactions in utility operations-related swaps
shall be reported pursuant to section 4r.
``(ii) In making a determination to exempt pursuant to
subparagraph (D), the Commission shall treat a utility
operations-related swap entered into with a utility special
entity, as defined in section 4s(h)(2)(D), as if it were
entered into with an entity that is not a special entity, as
defined in section 4s(h)(2)(C).''.
SEC. 3. UTILITY SPECIAL ENTITY DEFINED.
Section 4s(h)(2) of the Commodity Exchange Act (7 U.S.C.
6s(h)(2)) is amended by adding at the end the following:
``(D) Utility special entity.--For purposes of this Act,
the term `utility special entity' means a special entity, or
any instrumentality, department, or corporation of or
established by a State or political subdivision of a State,
that--
``(i) owns or operates an electric or natural gas facility
or an electric or natural gas operation;
``(ii) supplies natural gas and or electric energy to
another utility special entity;
``(iii) has public service obligations under Federal,
State, or local law or regulation to deliver electric energy
or natural gas service to customers; or
``(iv) is a Federal power marketing agency, as defined in
section 3 of the Federal Power Act.''.
SEC. 4. UTILITY OPERATIONS-RELATED SWAP.
(a) Swap Further Defined.--Section 1a(47)(A)(iii) of the
Commodity Exchange Act (7 U.S.C. 1a(47)(A)(iii)) is amended--
(1) by striking ``and'' at the end of subclause (XXI);
(2) by adding ``and'' at the end of subclause (XXII); and
(3) by adding at the end the following:
``(XXIII) a utility operations-related swap;''.
(b) Utility Operations-Related Swap Defined.--Section 1a of
such Act (7 U.S.C. 1a) is amended by adding at the end the
following:
``(52) Utility operations-related swap.--The term `utility
operations-related swap' means a swap that--
``(A) is entered into to hedge or mitigate a commercial
risk;
``(B) is not a contract, agreement, or transaction based
on, derived on, or referencing--
``(i) an interest rate, credit, equity, or currency asset
class; or
``(ii) a metal, agricultural commodity, or crude oil or
gasoline commodity of any grade, except as used as fuel for
electric energy generation; and
``(C) is associated with--
``(i) the generation, production, purchase, or sale of
natural gas or electric energy, the supply of natural gas or
electric energy to a utility, or the delivery of natural gas
or electric energy service to utility customers;
``(ii) all fuel supply for the facilities or operations of
a utility;
``(iii) compliance with an electric system reliability
obligation;
``(iv) compliance with an energy, energy efficiency,
conservation, or renewable energy or environmental statute,
regulation, or government order applicable to a utility; or
``(v) any other electric energy or natural gas swap to
which a utility is a party.''.
SEC. 5. EFFECTIVE DATE.
The amendments made by this Act take effect as if enacted
on July 21, 2010.
The SPEAKER pro tempore. Pursuant to the rule, the gentleman from
California (Mr. LaMalfa) and the gentleman from Georgia (Mr. David
Scott) each will control 20 minutes.
The Chair recognizes the gentleman from California.
General Leave
Mr. LaMALFA Madam Speaker, I ask unanimous consent that all Members
may have 5 legislative days in which to revise and extend their remarks
on the bill, H.R. 1038.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from California?
There was no objection.
Mr. LaMALFA Madam Speaker, I yield myself as much time as I may
consume.
Madam Speaker, the premise of the heavily bipartisan Public Power
Risk Management Act is simple and is one that all Members of the House
should support. It seeks to keep electricity and natural gas rates from
increasing for over 47 million Americans. Those 47 million Americans
are customers of over 2,000 publicly owned utilities who have used
swaps to manage their risk for years.
Unfortunately, the Dodd-Frank Act, though well-intentioned and
enacted to make reforms to our Nation's financial industry, has been
used to limit who can do business with a publicly owned utility.
For example, in my district specifically, the city of Redding,
California, the Redding Electric Utility has been concerned that
potential limitations to hedging options in the future could increase
the costs to their customers, as well as Grays Harbor Public Utility
District, a community-owned nonprofit utility that serves 45,000
customers in Washington State, which previously had 20 counterparties
whom they could use to help manage their risk, says Doug Streeter, its
chief financial officer. Now, instead of 20, it is down to just two
counterparties due to overly restrictive rules born out of, I think, an
unintentional consequence of the Dodd-Frank Act.
``What we're hearing from the counterparties is it's abundantly clear
that they're worth more to us than we are to them,'' Mr. Streeter says.
``It wasn't a big book of business for them, and it's just not worth it
for them to be designated as a swap dealer. They're not willing to take
that on, so they've left the market,'' continued Mr. Streeter.
Of course, this unintended consequence is affecting utilities in
congressional districts all across the
[[Page H3308]]
United States. The results of this limitation are fewer options for
publicly owned utilities to manage their risks, which will translate
into higher costs for millions of American ratepayers.
I was not yet a Member of this body when Dodd-Frank was debated, but
I think it's safe to say that at no point during the debate was it
contemplated that Dodd-Frank could lead to higher energy rates for
millions of Americans, which is an unacceptable result during a period
of tremendous economic uncertainty. This potential outcome can be
prevented by sending H.R. 1038 to the Senate today with a strong
bipartisan vote.
I should note that while my bill seeks to preserve a publicly owned
utility's access to cost-effective and customized nonfinancial
commodity swaps used to generate electricity or produce natural gas, it
still requires financial swaps to be governed by the new CFTC rules
issued under the Dodd-Frank Act and requires reporting of all
transactions to the CFTC to ensure market integrity.
I should also note that my bill has broad bipartisan support from
many Members all over the country from both sides of the aisle, for
which we're very thankful, as well as broad support by key
stakeholders, including the Consumer Federation of America and the
United States Chamber of Commerce, of which I will include their
letters in the Record.
Let's stick up for these utilities and their customers. They're
simply trying to manage their risk so that they can keep rates low for
millions of Americans.
With that, I reserve the balance of my time.
Consumer Federation of America,
May 17, 2013.
Hon. Frank D. Lucas,
Chairman, Committee on Agriculture,
Rayburn House Office Building, Washington, DC.
Hon. Collin C. Peterson,
Ranking Member, Committee on Agriculture,
Rayburn House Office Building, Washington, DC.
Dear Chairman Lucas and Ranking Member Peterson: The
Consumer Federation of America encourages the House
Agriculture Committee to approve H.R. 1038, the Public Power
Risk Management Act. This narrowly crafted legislation would
protect public utility ratepayers from increased costs and
rate volatility by ensuring that these utilities have the
same ability as other utilities to hedge operational risks.
CFA has long-recognized the central importance of a strong
swap dealer definition to the effective oversight of the
derivatives markets and, by extension, to the stability of
the financial system. We believe it is essential that those
entities that are genuinely acting as swap dealers remain
subject to appropriate regulatory requirements and oversight.
However, we also believe it is inappropriate for non-
financial counterparties--such as natural gas producers,
independent generators, and other utilities--to be treated as
swap dealers in their transactions with public utilities, who
are essentially functioning as business units, not as
governing bodies. In the past, these transactions have given
no cause for concern. Public utilities should be as free as
other utilities to engage in these transactions to hedge
risks.
The Commodity Futures Trading Commission has recognized
this unique problem and has taken steps to try to mitigate
it. But as yet, these measures have not been sufficient to
persuade nonfinancial counterparties to resume normal
dealings with public utilities. We believe that H.R. 1038
would provide the clarity that allows such a presumption.
Sincerely,
Stephen Brobeck,
Executive Director.
____
Chamber of Commerce of the
United States of America,
Washington, DC, June 11, 2013.
R. Bruce Josten,
Executive Vice President, Government Affairs.
To the Members of the U.S. House of Representatives. The
U.S. Chamber of Commerce, the world's largest business
federation representing the interests of more than three
million businesses and organizations of all sizes, sectors,
and regions, as well as state and local chambers and industry
associations, and dedicated to promoting, protecting, and
defending America's free enterprise system, strongly supports
H.R. 634, H.R. 742, H.R. 1038, and H.R. 1256, bills that
would provide critical relief for Main Street companies that
rely on derivatives to manage their business risk, and ensure
regulation reflects the global nature of the derivatives
market.
H.R. 634, the ``Business Risk Mitigation and Price
Stabilization Act of 2013,'' would create an exemption for
corporate ``end users'' that manage their business risk with
derivatives. Despite the clear intent of Congress to shield
end users from unnecessary cash collateral requirements, the
Prudential Banking Regulators believe they do not have the
flexibility under the Dodd-Frank Wall Street Reform and
Consumer Protection Act (Dodd-Frank) to provide a regulatory
exemption. Federal Reserve Chairman Ben Bernanke has noted
this problem on a number of occasions and has supported a
legislative fix, and an identical bill passed the House in
2012 by an overwhelming bipartisan margin--370-24. Main
Street companies urgently need legislative relief from cash
draining government-imposed margin requirements, so they are
not forced to choose between hedging risk and growing their
businesses.
H.R. 742, the ``Swap Data Repository and Clearinghouse
Indemnification Correction Act of 2013,'' would eliminate an
unworkable indemnification requirement in Dodd-Frank that
would lead to a balkanized system for storing and accessing
swaps data. Some foreign jurisdictions have laws or
regulations that make indemnification impossible, and
therefore prevent foreign regulators from accessing swaps
information from U.S.-registered swap data repositories. This
bill would repeal the indemnification requirement, but make
clear that regulators have an obligation to maintain the
confidentiality of the information.
H.R. 1038, the ``Public Power Risk Management Act of
2013,'' would help ensure that public utilities' ability to
hedge their risk and minimize customer costs would not be
hindered by Commodity Futures Trading Commission (CFTC)
regulation. CFTC's ``swap dealer'' definition punishes
counterparties who transact with ``special entities'' like
public utilities by increasing their compliance burden,
making it more difficult and more expensive for these special
entities to find willing partners in the market.
H.R. 1256, the ``Swap Jurisdiction Certainty Act,'' would
require CFTC and the Securities and Exchange Commission (SEC)
to conduct a joint rulemaking to define the territorial reach
of U.S. derivatives regulation, while carefully considering
the costs and benefits of regulating transactions between
non-U.S. counterparties. CFTC has proposed guidance, rather
than a notice and comment period for proposed rulemaking,
while SEC has more faithfully followed the regulatory
process. The lack of interagency coordination on even this
basic procedural point is problematic, but more concerning is
CFTC's substantive approach which could increase end user
costs by imposing new burdens on their dealer counterparties
that operate globally.
These bills would provide clarity and certainty for
companies that use derivatives to hedge their business risk
efficiently, allowing them to focus on growing their business
and creating jobs.
Sincerely,
R. Bruce Josten.
Mr. DAVID SCOTT of Georgia. Madam Speaker, I yield myself such time
as I may consume.
I rise today to offer my full support for H.R. 1038, the Public Power
Risk Management Act, which is sponsored by my colleague from California
(Mr. LaMalfa). And I'd like to commend Mr. LaMalfa for his outstanding
leadership because, as he pointed out, this is another one of those
unintended consequences that we're here to fix.
H.R. 1038 is a noncontroversial bill. It passed the House Committee
on Agriculture by a voice vote. And H.R. 1038 seeks to correct an
oversight in Dodd-Frank that has hindered the ability of publicly owned
utilities to offset their risk in the traditional fashion. Put simply,
H.R. 1038 would simply allow producers, utility companies, and other
nonfinancial entities to continue entering into energy swaps with
government-owned utilities without danger of being required to register
with the CFTC as a swap dealer.
What this will do is it will allow these publicly owned utilities to
continue using their traditional swap counterparties to help manage
their risk related to the generation of electricity and the production
of natural gas. This is very important, Madam Speaker, because, if the
law remains as it is without this bill, the ability of utilities to
manage risk would be hindered by increased costs and could lead to
higher energy rates for millions of Americans. We certainly do not want
this to happen.
{time} 1340
This is something we want to avoid, especially during our still
fragile economic recovery. So, Madam Speaker, I support this technical
correction to Dodd-Frank, and I urge my colleagues to support it as
well.
I reserve the balance of my time.
Mr. LaMALFA Madam Speaker, I yield 1 minute to the gentleman from
Arkansas (Mr. Crawford).
Mr. CRAWFORD. I thank the gentleman from California for his
leadership on this issue and for the opportunity to allow me to speak
in support of H.R. 1038, the Public Power Risk Management Act of 2013.
[[Page H3309]]
This is a good, bipartisan piece of legislation that would simply
allow producers, utility companies, and other nonfinancial entities to
continue entering into energy swaps with government-owned utilities,
also known as utility special entities, without requiring them to
register with the CFTC as a swap dealer solely because of their
dealings with government-owned utilities.
As a group, public power utilities deliver electricity to one in
seven of every electric customers in the United States, over 47 million
people--certainly some in major metropolitan areas such as Los Angeles,
San Antonio, Seattle, and Orlando--but the vast majority of public
power companies serve communities with populations of 10,000 people or
less.
H.R. 1038 will place utility special entities on a level-playing
field with everyone else in the marketplace, allowing many of them to
keep the same swap counterparties they have used to manage risk for
years. Utility special entities should be allowed to keep using swaps
to help manage their risk related to the generation of electricity or
production of natural gas. To hinder these utilities' ability to manage
risk would only increase their costs and possibly lead to higher energy
rates for millions of Americans, an unacceptable result during a period
of tremendous economic uncertainty.
Madam Speaker, I urge passage of H.R. 1038 and urge a ``yes'' vote.
Mr. DAVID SCOTT of Georgia. I have no other speakers, Madam Speaker,
so I would like to close by saying that Mr. Costa, our distinguished
Congressman from California, expresses his deep concern and support for
this legislation, and I certainly wanted to register that on his
behalf.
And certainly to Mr. LaMalfa and to Mr. Crawford, I again commend you
for your outstanding work on this. Wherever we can cut costs and save
money for the American people, we need to do it and do it quickly.
Therefore, I urge very quick passage of this very important and timely
piece of legislation.
I yield back the balance of my time.
Mr. LaMALFA Madam Speaker, I appreciate again how we have been able
to come together in such a good bipartisan fashion. I greatly
appreciate my colleague from Georgia's kind and helpful words in moving
this legislation today on the floor.
In closing, again, H.R. 1038 seeks to keep electricity and natural
gas bills affordable for over 47 million Americans. Our publicly owned
utilities should have access to the risk management tools that they
need to keep costs down, a goal we all share, and which prevents
utility rates from rising. I ask my colleagues to support this
commonsense legislation.
I yield back the balance of my time.
Mr. COSTA. Madam Speaker, I rise in support of the bi-partisan, H.R.
1038, the Public Power Risk Management Act of 2013.
This bill allows producers, utility companies, and other non-
financial entities (swap counterparties) to continue entering into
energy swaps with government-owned utilities (aka: utility special
entities) without requiring them to register with the CFTC as a ``swap
dealer'' solely because of their dealings with government-owned
utilities.
There are over 2,000 municipal, state and locally-owned, not-for-
profit electric utilities throughout the United States, which deliver
electricity to one in every seven electricity customers in the United
States, over 47 million people. Further, the vast majority of public
power companies serve communities with populations of 10,000 people or
less.
Utility special entities should be allowed to keep using traditional
swap counterparties, such as natural gas producers, independent
generators, and investor-owned utility companies to help manage their
operational risk related to the generation of electricity or production
of natural gas.
I urge my colleagues to support this commonsense, bipartisan
legislation.
The SPEAKER pro tempore. The question is on the motion offered by the
gentleman from California (Mr. LaMalfa) that the House suspend the
rules and pass the bill, H.R. 1038.
The question was taken.
The SPEAKER pro tempore. In the opinion of the Chair, two-thirds
being in the affirmative, the ayes have it.
Mr. DAVID SCOTT of Georgia. Madam Speaker, on that I demand the yeas
and nays.
The yeas and nays were ordered.
The SPEAKER pro tempore. Pursuant to clause 8 of rule XX, further
proceedings on this motion will be postponed.
____________________