“Last Congress, an issue arose over the overlap in jurisdiction between the Commodity Futures Trading Commission over futures instruments, and the new authority that we had given the Federal Energy regulatory Commission over market manipulation in regulated electricity markets.  We thought we had resolved this matter with a colloquy on the floor and report language clarifying that there was no intent for the CFTC to take over regulation of matters that had been jurisdictional at FERC under the Federal Power Act or the Natural Gas Act. 

 

“We come to this point with new legislation that has passed the House and may be considered soon in the Senate, legislation that many tell us would make the problems that FERC has in controlling the markets under its purview even more difficult.

 

“For several years now many in the Congress have been criticizing our regulatory agencies like the CFTC for not regulating derivatives closely enough, allowing harmful speculation in oil and gas markets.  Also, many have laid some of the blame for the collapse of our financial markets on lax regulation allowing dangerous dependence on derivatives.  Now the CFTC comes with a more aggressive approach to financial instruments and many of us reply that this new aggressiveness in regulation should not be applied to things in electricity markets that look a lot like derivatives to CFTC.

 

“I think that there is a clear difference.  The FERC regulates electricity markets and the instruments that are used in those markets under the Federal Power Act.  The Federal Power Act is concerned about rates.  Rates and contracts must be just and reasonable and not unduly discriminatory or preferential.  The standard under which CFTC regulates derivatives and futures contracts has only to do with orderly markets that are not manipulated.  It does not regulate rates.

 

“We seem to be presented with two choices: create a bright line between the jurisdictions of the two agencies, or allow the CFTC to decide what falls under its scope exclusively, thus becoming the arbiter of FERC jurisdiction under its organic statutes.  I am not sure that those are the only two alternatives before us. 

 

“It is with these questions in mind that we come here today to hear from the agencies and affected industries.  This is a difficult matter and the Congress needs to understand it before we legislate.”

 

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