CFTC Proposes Guidance Clarifying that Certain Electric Capacity and Natural Gas Peaking Contracts are not “Swaps”
by Nate Endrud | April 5, 2016
The CFTC has proposed guidance that certain capacity contracts in electric power markets and certain natural gas peaking supply contracts should not be considered “swaps” under the Commodity Exchange Act. The guidance does not provide a precise definition of the excluded contracts but identifies their common characteristics as follows:
“[T]he natural gas and electric power contracts discussed above are all entered into by commercial market participants, who contemplate physical settlement of the transactions, in response to regulatory requirements, the need to maintain reliable supplies, and practical considerations of storage or transport. In each case, the particular commodities covered by the contract are needed by at least one of the parties for the normal operation of its business, and the specific identity of the counterparty is an important consideration because of, for example, concerns about reliability or the practicability of supply.”
In addition, the Commission identified that the contracts are “not traded on an organized market or over-the-counter, and do not have severable payment obligations,” and are entered into “by commercial or non-profit entities to assure availability of a commodity, not to hedge against risks arising from a future change in price for the commodity or to serve a speculative or investment purpose.”
The CFTC requested comments on the guidance within 30 days after its publication in the Federal Register.
ABOUT STINSON LEONARD STREET
Stinson Leonard Street LLP provides sophisticated transactional and litigation legal services to clients ranging from individuals and privately held enterprises to national and international public companies. As one of the 100 largest firms in the U.S., Stinson Leonard Street has offices in 14 cities, including Minneapolis, Mankato and St. Cloud, Minn.; Kansas City, St. Louis and Jefferson City, Mo.; Phoenix, Ariz.; Denver, Colo.; Washington, D.C.; Decatur, Ill.; Wichita and Overland Park, Kan.; Omaha, Neb.; and Bismarck, N.D.
The views expressed herein are the views of the blogger and not those of Stinson Leonard Street or any client.
- New Tax Act Disclosures, Explanations and Examples
- Initial Tax Disclosures Regarding 162(m) in Proxy Statements
- Pay Ratio Disclosure Checklist
- Drafting 10-K Disclosures for the Tax Cuts and Jobs Act
- Director Discretionary Compensation Awards Tested by Entire Fairness Standard According to Delaware Supreme Court
- ISS Updates FAQs for 2018 Proxy Season