[Congressional Record (Bound Edition), Volume 159 (2013), Part 6]
[House]
[Pages 8743-8746]
[From the U.S. 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:

[[Page 8744]]

       ``(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 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

[[Page 8745]]

     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.
  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.

[[Page 8746]]


  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.

                          ____________________