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o c_AF PA Acco,,, sn„ „ts Advocacy at the Commodity Futures Trading Commission-
<br /> ' . a e c The 2010 Dodd-Frank Wall Street Reform and Consumer
<br /> J. s. + Protection Act gave the Commodity Futures Trading
<br /> ` :r ��,,u`'t' Commission(CFTC)oversight of the"swap"market.APPA has
<br /> worked to ensure that the CFTC's implementation of this new
<br /> :::'' t�O
<br /> '-.Li regulatory regime for"swaps"enables public power utilities to
<br /> hedge their commercial risks without unnecessary regulatory
<br /> ;,- 113�V<15 disruptions or costs.This endeavor will continue in 2013,
<br /> 4; ' as the CFTC has repeatedly missed deadlines established in the Dodd-Frank t $ s ': own rules,and failed postponed
<br /> to issue final rules in several important
<br /> �� proceedings or respond to industry petitions.
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<br /> 4 "- � „. " ' a '�t . 4 APPAs advocacy efforts,however,continued to pay off in
<br /> 2012.APPA argued—in its comments and in meetings with
<br /> Protecting Public Power's Image-In 2012,APPA and some CFTC staff and commissioners—for rules and interpretations
<br /> of its members were contacted by a number of retail electric that exclude forward commercial contracts(including power
<br /> consumers who had confused APPA or one of its members supply contracts) from the CFTC's oversight of swaps.A
<br />' with a company named"Public Power, LLC." Public Power primary concern was that nonfinancial commodity contracts
<br /> LLC and its subsidiaries are retail electric power suppliers that contain option features would be considered swaps.The
<br /> in a number of states(including New Jersey,Maryland and CFTC's final rule defining"swap"includes interpretations
<br /> Illinois) that have implemented retail access. Unfortunately, that will exclude from CFTC oversight many types of
<br /> consumers unhappy with Public Power LLC's high pressure commercial contracts with"embedded options,"including
<br /> marketing tactics and poor customer service were Googling all-requirements contracts and netting agreements,and
<br /> the term"public power,"and then calling APPA to complain. contracts covering intangible commodities(such as emissions
<br /> APPA contacted its trademark counsel, but was informed that allowances and other environmental commodities).The
<br /> it would likely be difficult and expensive to challenge Public CFTC's final rule on commodity options also provides that
<br /> Power LLC's use of these words. "trade options," (commodity options used by commercial
<br /> entities to deliver or receive physical commodities in
<br /> Public Power LLC, however,subsequently filed an application connection with their businesses)are eligible for an
<br /> with the Federal Energy Regulatory Commission(FERC) exemption from most rules applicable to swaps. For example,
<br /> seeking authorization to engage in a business transaction. in many cases, the reporting requirement for trade options
<br /> APPA and the Public Power Association of New Jersey will be on a simple,annual form.
<br /> (PPANJ)used the opportunity that this application created to Finally,in 2012, the CFTC issued a proposed exemption
<br /> reach a settlement with Public Power, LLC intended to reduce order in response to a petition that APPA and other not-
<br /> the customer confusion created by the company's name.The for-profit electric utility groups filed, seeking to exempt
<br /> August 9, 2012,settlement agreement requires Public Power, from CFTC oversight transactions among public power
<br /> LLC and its subsidiaries to use the following disclaimer in utilities,cooperative utilities and federal power marketing
<br /> its marketing materials and on its social media sites: "Public administrations. Taken together, these rules,interpretations,
<br /> Power, LLC and its subsidiaries are not endorsed by or and exemptions significantly narrow the scope of the CFTC's
<br /> affiliated with the American Public Power Association (APPA) jurisdiction over public power utilities' transactions.
<br /> or its members, the Public Power Association of New Jersey,
<br /> or any government-owned, not-for-profit utility."Telephone APPA also worked with some in Congress to exert pressure
<br /> and in-person marketing and sales personnel must recite this on the CFTC to rethink one issue,in particular,related to the
<br /> disclaimer in sales pitches and marketing call scripts. Finally, threshold monetary level of transactions in the derivatives
<br /> the agreement also bars any new subsidiaries or affiliates of markets whereby public power's counter parties must register
<br /> the marketer from using"Public Power" in their name.APPA as"swap dealers."The CFTC has established a ludicrously
<br /> and PPANJ in cum agreed only to refrain from intervening in low threshold for banks and other counter parties to register
<br /> the FERC proceeding, thus allowing it to move forward on an as swap dealers when transacting with"governmental bodies,"
<br /> uncontested basis. such as public power utilities.Therefore, to avoid having
<br /> to register as swap dealers,many of our counter parties are
<br /> APPA continues to monitor Public Power LLC's compliance refusing to engage in hedging transactions with us.This is an
<br /> with the settlement agreement and assess whether these untenable situation,and has garnered the attention of House
<br /> measures are sufficient to distinguish APPA and its members Agriculture Committee Chairman Lucas(R-010,among others,
<br />• from Public Power, LLC and its affiliates in the minds of retail who had APPA testify before his committee on this subject in
<br /> customers. APPA may take further action in 2013 if these 2012. It is clear that we will have to continue to exert pressure
<br /> issues persist. on the CFTC to reverse its decision on this issue in 2013.
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