81 FR 20583 - Certain Natural Gas and Electric Power Contracts
COMMODITY FUTURES TRADING COMMISSION
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 81, Issue 68 (April 8, 2016)
SECURITIES AND EXCHANGE COMMISSION
Federal Register Volume 81, Issue 68 (April 8, 2016)
| Page Range | 20583-20587 | |
| FR Document | 2016-08076 |
[Federal Register Volume 81, Number 68 (Friday, April 8, 2016)] [Proposed Rules] [Pages 20583-20587] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-08076] ======================================================================= ----------------------------------------------------------------------- COMMODITY FUTURES TRADING COMMISSION 17 CFR Part 1 SECURITIES AND EXCHANGE COMMISSION 17 CFR Part 241 [Release No. 33-10062; 34-77506; File No. S7-05-16] RIN 3235-AL93 Certain Natural Gas and Electric Power Contracts AGENCY: Commodity Futures Trading Commission; Securities and Exchange Commission. ACTION: Proposed guidance. ----------------------------------------------------------------------- SUMMARY: In accordance with section 712(d)(4) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the ``Dodd-Frank Act''), the Commodity Futures Trading Commission (the ``CFTC'') and the Securities and Exchange Commission (``SEC''), after consultation with the Board of Governors of the Federal Reserve System (``Board of Governors''), are jointly issuing the CFTC's proposed guidance on certain contracts that provide for rights and obligations with respect to electric power and natural gas. The CFTC invites public comment on all aspects of its proposed guidance. DATES: Comments must be received on or before May 9, 2016. ADDRESSES: You may submit comments by any of the following methods:CFTC Web site: http://comments.cftc.gov. Follow the instructions for submitting comments through the Comments Online process on the Web site. Mail: Send to Christopher Kirkpatrick, Secretary of the Commission, Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st Street NW., Washington, DC 20581. Hand Delivery/Courier: Same as Mail, above. Federal eRulemaking Portal: http://www.regulations.gov. Follow the instructions for submitting comments. Please submit your comments using only one of these methods. All comments must be submitted in English, or if not, accompanied by an English translation. Comments will be posted as received to www.cftc.gov. You should submit only information that you wish to make available publicly. If you wish the CFTC to consider information that you believe is exempt from disclosure under the Freedom of Information Act, a petition for confidential treatment of the exempt information may be submitted according to the procedures established in Sec. 145.9 of the CFTC's regulations, 17 CFR 145.9. The CFTC reserves the right, but shall have no obligation, to review, pre-screen, filter, redact, refuse or remove any or all of a submission from www.cftc.gov that it may deem to be inappropriate for publication, such as obscene language. All submissions that have been redacted or removed that contain comments on the merits of the notice will be retained in the public comment file and will be considered as required under all applicable laws, and may be accessible under the Freedom of Information Act. FOR FURTHER INFORMATION CONTACT: CFTC: David N. Pepper, Special Counsel, Division of Market Oversight, at (202) 418-5565 or [email protected]; or Mark Fajfar, Assistant General Counsel, Office of the General Counsel, at (202) 418-6636 or [email protected], Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st Street NW., Washington, DC 20581. SEC: Carol McGee, Assistant Director, Office of Derivatives Policy, Division of Trading and Markets, at (202) 551- 5870, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549. SUPPLEMENTARY INFORMATION: I. Introduction In the final rule further defining the term ``swap,'' the CFTC and the SEC adopted an interpretation regarding the facts and circumstances in which certain agreements, contracts, or transactions entered into by commercial and non-profit entities should be considered not to be swaps because they are customary commercial arrangements.\1\ Following adoption of this interpretation, the CFTC received public comments describing certain types of contracts that are closely tied to regulatory obligations in the markets for electric power and natural gas.\2\ --------------------------------------------------------------------------- \1\ See Further Definition of ``Swap,'' Security-Based Swap,'' and ``Security-Based Swap Agreement''; Mixed Swaps; Security-Based Swap Agreement Recordkeeping, 77 FR 48207, 48246 (Aug. 13, 2012) (the ``Products Release''). \2\ The comments were received in response to the CFTC's proposed interpretation on Forward Contracts With Embedded Volumetric Optionality, 79 FR 69073 (Nov. 20, 2014) (comments available at http://comments.cftc.gov/PublicComments/CommentList.aspx?id=1541), and the CFTC's notice of proposed rulemaking on Trade Options, 80 FR 26200 (May 7, 2015) (comments available at http://comments.cftc.gov/PublicComments/CommentList.aspx?id=1580). In addition, the CFTC's Energy and Environmental Markets Advisory Committee discussed related issues at its meeting on July 29, 2015 (transcript available at http://www.cftc.gov/PressRoom/Events/opaevent_eemac072915). --------------------------------------------------------------------------- [[Page 20584]] Having reviewed these comments, the CFTC proposes to issue guidance regarding particular facts and specific circumstances in which these contracts should be considered not to be ``swaps'' for purposes of the Commodity Exchange Act (``CEA'').\3\ This proposed guidance applies the interpretation in the Products Release to the contracts described in Part II.A. of this document and the CFTC preliminarily concludes that such contracts should be considered not to be swaps because they are customary commercial arrangements. --------------------------------------------------------------------------- \3\ See 7 U.S.C. 1a(47). This proposed guidance is being issued jointly with the SEC pursuant to section 712(d)(4) of the Dodd-Frank Act but, given the specific types of contracts at issue, pertains only to the CFTC and swaps. Because the proposed guidance is limited to the particular facts and circumstances of the contracts at issue, the proposed guidance, if adopted, would not pertain to the SEC or security-based swaps. --------------------------------------------------------------------------- II. Proposed Guidance A. Commenters' Description of Certain Contracts Commenters described two types of contracts that are similar in some respects, but are used in different situations to provide for rights and obligations that are suitable to the parties' particular needs in those situations, and which are closely tied to compliance with certain regulatory requirements and frameworks. Each is described briefly below. 1. Certain Capacity Contracts--Electric Power The CFTC understands that certain types of capacity contracts in electric power markets are used in situations where regulatory requirements from a state public utility commission (``PUC'') obligate load serving entities (``LSEs'') and load serving electric utilities in that state to purchase ``capacity'' (sometimes referred to as ``resource adequacy'') \4\ from suppliers to secure grid management and on-demand deliverability of power to consumers. A commenter explained that the LSE or load serving electric utility will be recognized by the PUC and the Federal Energy Regulatory Commission (``FERC'') as having purchased capacity and, therefore, having satisfied that portion of its obligation to purchase the ability to supply the electricity when and as needed.\5\ In each of these instances, a commenter asserted, the purchaser, as required by law, will be considered to have purchased the supplier's capacity to generate, produce and deliver electric power, regardless of whether the electricity underlying the capacity contract is called upon and delivered.\6\ --------------------------------------------------------------------------- \4\ The resource adequacy framework adopted by the California Public Utilities Commission (``CPUC'') is an illustrative example. The CPUC adopted a resource adequacy policy framework in 2004 in order to ensure the reliability of electric service in California. The CPUC established resource adequacy obligations applicable to all LSEs within the CPUC's jurisdiction. The CPUC's resource adequacy policy framework--implemented as the Resource Adequacy program-- guides resource procurement and promotes infrastructure investment by requiring that LSEs procure capacity so that capacity is available to the California Independent System Operator (``ISO'') when and where needed. See generally the discussion of resource adequacy available at http://www.cpuc.ca.gov/ra/. \5\ See letter from International Energy Credit Association (``IECA'') (June 22, 2015) at 9. The CFTC understands that this type of contract enables a Regional Transmission Organization (``RTO'') or ISO to call on resource adequacy capacity to ensure the reliability of electric service to end users or consumers. The LSE or load serving electric utility, which is required to purchase capacity contracts, cannot itself call on the supplier to deliver electricity--only the RTO or ISO can. \6\ See id. --------------------------------------------------------------------------- A commenter said the purchaser does not treat this type of capacity contract as a ``hedge'' in the same sense as it would otherwise use a commodity option as a financial hedge.\7\ In this type of capacity contract, the commenter contended, the purchaser is not procuring the right to profit from a change in the value of the underlying commodity, which the purchaser will then financially settle in order to offset the price volatility risk of some underlying physical transaction in the cash market.\8\ Rather, the purchaser is purchasing a supplier's capacity to produce, generate, and deliver the underlying electricity, thereby ensuring its ability to supply electricity in compliance with a regulatory requirement.\9\ Certain commenters explained that they do not view these contracts as financial instruments, but rather as commercial agreements that enable the purchaser of capacity to ensure that the underlying electricity is delivered when needed by the purchaser to meet state- and/or federally-required reliability objectives.\10\ One commenter stated that state PUCs and the FERC generally do not treat a purchase of capacity in this context as a purchase of a financial instrument or an option, but rather as a purchase of the ability to ensure delivery of the underlying physical commodity.\11\ --------------------------------------------------------------------------- \7\ See id. \8\ See id. \9\ One commenter contended that although this type of capacity contract may not impose a binding obligation on the parties to make and take delivery of a specific quantity of electricity, it does impose a binding obligation on the parties to make and take delivery of the capacity. See id. at 10. \10\ See letter from IECA (June 22, 2015) at 10, and letter from Coalition for Derivatives End-Users (``CDEU'') (Dec. 22, 2014) at 7- 8. \11\ See letter from IECA (June 22, 2015) at 10. --------------------------------------------------------------------------- A commenter explained how the payment structure under a capacity contract for resource adequacy is different from the payment structure under a financially-settled commodity option. According to this commenter, capacity contracts do not involve payment of a nominal option premium, followed by payment of the full market price of the electric power if and when the ``option'' is exercised.\12\ Instead, the initial payment under the capacity contract frequently recovers for the seller the entire fixed cost of producing, generating, supplying or transmitting the electric power.\13\ --------------------------------------------------------------------------- \12\ See id. at 11. \13\ See id. Resource adequacy capacity is not tied to a specific power price and the purchaser of capacity does not have access to the energy tied to the capacity requirement. The capacity purchased is essentially conferred or assigned to the RTO or ISO, and these entities can call the capacity. --------------------------------------------------------------------------- 2. Certain Peaking Supply Contracts--Natural Gas Commenters requested further guidance on whether certain natural gas contracts, which commenters labeled as ``peaking supply contracts,'' and which are entered into by electric utilities (with or without a minimum gas delivery requirement) should be regulated as swaps.\14\ The CFTC understands a peaking supply contract in this context to be a contract that enables an electric utility to purchase natural gas from another natural gas provider on those days when its local natural gas distribution companies (``LDCs'') curtail its natural gas transportation service. For example, one commenter, Linden, explained that it procures sufficient natural gas and gas transportation services to operate its cogeneration facility in the ordinary course through natural gas service agreements with its LDCs.\15\ Linden [[Page 20585]] explained that its natural gas service agreements require Linden to take natural gas from the LDCs if they supply it. However, to ensure that the LDCs are able to meet their regulatory commitments to prioritize and serve residential demand for natural gas, the local board of public utilities (``BPU'') requires that the service agreements permit the LDCs to interrupt natural gas transportation service to Linden during certain specified conditions.\16\ Due to the LDCs' tariff-based commitments to serve residential natural gas demand, the BPU will not allow the LDCs to provide a ``firmer'' category of natural gas service to Linden.\17\ Because of the possibility of these interruptions of transportation service, Linden uses peaking supply contracts to ensure it has sufficient natural gas to operate its cogeneration facility during the interruptions.\18\ --------------------------------------------------------------------------- \14\ See letter from American Gas Association (``AGA'') (Dec. 22, 2014) at 9-11, letter from AGA (June 22, 2015) at 2-5; and letter from Cogen Technologies Linden Venture, L.P. (``Linden'') (June 22, 2015) at 2-3. For purposes of this proposed guidance, the term electric utility means ``all enterprises engaged in the production and/or distribution of electricity for use by the public, including investor-owned electric utility companies; cooperatively- owned electric utilities; government-owned electric utilities (municipal systems, federal agencies, state projects, and public power districts).'' See Federal Energy Regulatory Commission (FERC) Glossary, available at http://ferc.gov/resources/glossary.asp. \15\ Linden is an exempt wholesale generator selling electric power at market-based rates under the jurisdiction of the FERC, and owns and operates a combined cycle natural gas-fired cogeneration facility located in Linden, New Jersey. The electricity produced from Linden's generator is sold, under a long-term power purchase agreement, to Consolidated Edison Company, which then uses the power to serve the electricity needs of consumers in New York City. Steam from Linden's operation is sold, also under a long-term contract, to the co-located Bayway Refinery, the largest refinery on the East Coast, for its industrial processes. See letter from Linden (June 22, 2015) at 1-3. \16\ See id. \17\ See id. \18\ See id. --------------------------------------------------------------------------- Linden represented that, under its natural gas service agreements, the LDCs determine when the conditions for interrupting Linden's service are present, and Linden therefore has no control over such conditions. Thus, Linden does not have discretion as to whether and when an interruption of service as described above will occur.\19\ --------------------------------------------------------------------------- \19\ See id. at 3. --------------------------------------------------------------------------- Linden explained that, under the terms of its natural gas service agreements, Linden is required to take natural gas from the LDCs if they supply it. There is no ability for financial settlement under Linden's peaking supply contracts, and natural gas supplied under those peaking supply contracts cannot be re-sold by Linden.\20\ Linden represented that the price for natural gas in its peaking supply contracts is based on the market cost of fuel at specified delivery points, plus a specified adjustment depending on delivery point.\21\ Thus, since Linden could not use that natural gas for any purpose other than to fuel its facility when an interruption of service occurs, Linden represented that it is practically limited to exercising its right to take delivery under its peaking supply contracts only in the event of an interruption of service, and that it has no discretion as to whether and when it will exercise the right to take delivery under its natural gas peaking supply contracts.\22\ --------------------------------------------------------------------------- \20\ See letter from Linden (Dec. 22, 2014) at 6. \21\ See letter from Linden (June 22, 2015) at 4, n. 12. \22\ See id. at 3-4. --------------------------------------------------------------------------- 3. Common Characteristics Described by Commenters As they have been described by commenters, the 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.\23\ 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.\24\ --------------------------------------------------------------------------- \23\ See letter from CDEU (Dec. 22, 2014) at 7, letter from EDF Trading North America, LLC (Dec. 22, 2014) at 13. \24\ See letter from AGA (Dec. 22, 2014) at 9. --------------------------------------------------------------------------- B. Products Release Discussion of Commercial Contracts In the Products Release, the CFTC and the SEC (the ``Commissions'') adopted an interpretation to assist commercial and non-profit entities in understanding whether certain agreements, contracts, or transactions that they enter into would or would not be regulated as swaps.\25\ To that end, the Products Release listed several specific types of commercial agreements, contracts, and transactions that involve customary business arrangements (whether or not involving a for-profit entity) that will not be considered swaps, including: Employment contracts; sales, servicing, or distribution arrangements; certain fixed or variable interest rate commercial loans or mortgages; and certain agreements, contracts, or transactions related to business combination transactions, real property, intellectual property, and warehouse lending arrangements.\26\ The Commissions stated their intent that this interpretation should ``allow commercial and non-profit entities to continue to operate their businesses and operations without significant disruption and provide that the swap . . . definition [is] not read to include commercial and non-profit operations that historically have not been considered to involve swaps.'' \27\ --------------------------------------------------------------------------- \25\ See Products Release, 77 FR at 48246. \26\ See id., 77 FR at 48247. \27\ See id. --------------------------------------------------------------------------- The Commissions also explained that the list provided in the Products Release was not intended to be exhaustive and that there may be other, similar types of agreements, contracts, and transactions that also should not be considered to be swaps.\28\ The Commissions said that in determining whether similar types of agreements, contracts, and transactions entered into by commercial entities should not be considered swaps, they intend to consider the characteristics and factors that are common to the commercial transactions listed in the Products Release, which are: --------------------------------------------------------------------------- \28\ See id. --------------------------------------------------------------------------- They do not contain payment obligations, whether or not contingent, that are severable from the agreement, contract, or transaction; They are not traded on an organized market or over-the- counter; and . . . In the case of commercial arrangements, they are entered into: --By commercial or non-profit entities as principals (or by their agents) to serve an independent commercial, business, or non-profit purpose, and --Other than for speculative, hedging, or investment purposes.\29\ --------------------------------------------------------------------------- \29\ See id. --------------------------------------------------------------------------- The Commissions concluded that in determining whether an agreement, contract, or transaction not enumerated in the Products Release is a swap, the agreement, contract, or transaction will be evaluated based on its particular facts and circumstances,\30\ and the representative characteristics and factors set out in the Products Release ``are not intended to be a bright-line test for determining whether a particular . . . commercial arrangement is a swap.'' \31\ --------------------------------------------------------------------------- \30\ See id., 77 FR at 48248. \31\ See id., 77 FR at 48250. --------------------------------------------------------------------------- In the Products Release, the CFTC also addressed certain capacity contracts and peaking supply contracts in the context of the CFTC's interpretation of when an agreement, contract, or transaction with embedded volumetric optionality would be considered a forward contract.\32\ The CFTC stated that depending on the relevant facts and circumstances, capacity contracts and peaking supply contracts may qualify as forward contracts with embedded volumetric optionality if they met the elements of the CFTC's interpretation of that provision.\33\ This remains the case; the CFTC does not intend that the proposed [[Page 20586]] guidance herein would affect the interpretation of when an agreement, contract, or transaction with embedded volumetric optionality would be considered a forward contract.\34\ --------------------------------------------------------------------------- \32\ See id., 77 FR at 48238. \33\ See id., 77 FR at 48240. \34\ The CFTC has clarified this interpretation. See Forward Contracts With Embedded Volumetric Optionality, 80 FR 28239 (May 18, 2015). In this clarification, the CFTC addressed certain retail electric market demand-response programs, under which electric utilities have the right to interrupt or curtail service to a customer to support system reliability. See id., 80 FR at 28242, citing letter from the National Rural Electric Cooperative Association, the American Public Power Association, the Large Public Power Association, and the Transmission Access Policy Study Group (Oct. 12, 2012) at 9. The CFTC clarified that since a key function of an electricity system operator is to ensure grid reliability, demand response agreements, even if not specifically mandated by a system operator, may be properly characterized as the product of regulatory requirements within the meaning of the seventh element of the CFTC's interpretation regarding forward contracts with embedded volumetric optionality. For the avoidance of doubt, the CFTC reiterates that the proposed guidance herein would not affect this interpretation. Also, the CFTC's interpretations regarding full requirements and output contracts, as provided in the Products Release, would be unaffected by the proposed guidance herein. See Products Release, 77 FR at 48239-40. Furthermore, the CFTC does not intend that the proposed guidance would supersede or modify a document issued by the CFTC's Office of General Counsel--``Response to Frequently Asked Questions Regarding Certain Physical Commercial Agreements for the Supply and Consumption of Energy,'' available at http://www.cftc.gov/idc/groups/public/@newsroom/documents/file/leaselike_faq.pdf--which continues to be the position of the CFTC's Office of General Counsel on the issues discussed in that document. --------------------------------------------------------------------------- C. Proposed Guidance on Whether Certain Contracts Should Be Considered To Be Swaps In response to the comments, described above, which were provided by market participants regarding certain capacity contracts for electric power and certain peaking supply contracts for natural gas, the CFTC has considered the specific facts and circumstances of these contracts in light of the interpretation in the Products Release of when a contract would be considered not to be a swap because it is a customary commercial arrangement. The CFTC understands, based on the commenters' descriptions, that the contracts described in Part II.A. above are not traded on an organized market or over-the-counter, and do not have severable payment obligations. Thus, the CFTC preliminarily believes that the contracts described in Part II.A. are consistent with the first two elements of the interpretation in the Products Release.\35\ --------------------------------------------------------------------------- \35\ See Products Release, 77 FR at 48247 (the contracts ``do not contain payment obligations, whether or not contingent, that are severable from the agreement, contract, or transaction; [and] . . . are not traded on an organized market or over-the-counter''). --------------------------------------------------------------------------- The CFTC has also considered the contracts described in Part II.A. in light of the statement in the Products Release that, in order not to be considered swaps, the contracts should be entered into ``[b]y commercial or non-profit entities as principals (or by their agents) to serve an independent commercial, business, or non-profit purpose, and [o]ther than for speculative, hedging, or investment purposes.'' \36\ In view of all the facts and circumstances of the contracts described in Part II.A., the CFTC preliminarily believes that such contracts would satisfy this element of the Products Release, and therefore should be considered not to be swaps under the interpretation set forth in the Products Release because they are customary commercial arrangements of the type described in the Products Release. --------------------------------------------------------------------------- \36\ See id. --------------------------------------------------------------------------- The CFTC notes that commenters have represented that the contracts described in Part II.A. are entered into in response to regulatory requirements, the need to maintain reliable supplies, and practical considerations of storage or transport which arise in the course of the normal operation of at least one party's business. In this respect, the CFTC preliminarily believes that the contracts described in Part II.A. are similar to certain contracts--namely, sales, servicing and distribution arrangements, and contracts for the purchase of equipment or inventory--listed in the Products Release as commercial contracts that will not be considered swaps.\37\ Also, in the Products Release the Commissions addressed commenters' assertion that all commercial merchandising transactions hedge an enterprise's commercial risks by stating that a commercial arrangement undertaken for hedging purposes may or may not be a swap depending on the particular facts and circumstances of the arrangement.\38\ --------------------------------------------------------------------------- \37\ See id. \38\ See id., 77 FR at 48249. --------------------------------------------------------------------------- The CFTC observes that when an entity enters into a purchase contract, it is assured of a supply of the equipment or inventory it will need in the future. Similarly, a service contract assures the availability of a needed service in the future. The contracts described in Part II.A. are similar to the purchase and service contracts enumerated in the Products Release because they appear to satisfy the elements of commercial contracts, transactions or arrangements that are not considered swaps, including that they 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. As stated in the Products Release, whether a particular commercial arrangement is a swap depends on the particular facts and circumstances of the arrangement.\39\ This proposed guidance would not apply to any agreement, contract or transaction other than those described in Part II.A., and would not preclude the CFTC from issuing further guidance considering other commodity contracts under the interpretation in the Products Release. --------------------------------------------------------------------------- \39\ See id., 77 FR at 48248. --------------------------------------------------------------------------- III. Request for Comment The CFTC believes that it would benefit from public comment about its proposed guidance, and therefore requests public comment on all aspects of its proposed guidance set forth above, and on the following questions: 1. Are there natural gas and electric power contracts that would not qualify as trade options within the scope of CFTC regulation 32.3 but which would be covered by the proposed guidance? If so, should the proposed guidance be limited so that it encompasses only contracts that do qualify as trade options? Why or why not? 2. Does the proposed guidance provide sufficient clarity on whether the specific types of natural gas and electric power contracts in question should or should not be considered to be swaps? If not, how should the guidance be revised to provide more clarity? 3. Are there other facts and circumstances that the CFTC should consider in determining whether the contracts described in Part II.A. are swaps? If so, what are these factors and how should they be considered? 4. Are there contracts (other than those described in Part II.A.) that are entered into by participants in the electric power and natural gas markets and necessitated by, or closely tied to, compliance with regulatory obligations or frameworks that are similar to those described in Part II.A.? 5. Are there other types of commodity contracts, outside of the electric power and natural gas markets, which are necessitated by, or closely tied to, compliance with regulatory obligations or frameworks that should be considered under the interpretation in the Products Release? If so, please describe these contracts and the regulatory obligations and frameworks to which they are closely tied. 6. Are there public interest considerations regarding the natural gas [[Page 20587]] and electric power contracts in question that should be reflected in the proposed guidance? If so, why and how? 7. Does the proposed guidance provide sufficient clarity that it does not supersede or modify the CFTC OGC FAQ referenced in footnote 34? Is there any potential overlap between the proposed guidance and the CFTC OGC FAQ that should be further clarified? If so, what elements of the proposed guidance should be clarified to indicate that the proposed guidance does not supersede or modify the CFTC OGC FAQ? 8. With respect to natural gas peaking contracts, are there natural gas providers other than LDCs, such as Intrastate and Interstate Natural Gas Pipelines (as those terms are defined by the Energy Information Administration),\40\ which are subject to regulatory obligations to prioritize and serve residential demand for natural gas, such that the providers are obligated to curtail service to electric utilities under certain circumstances? If so, please explain. --------------------------------------------------------------------------- \40\ See Distribution of Natural Gas: The Final Step in the Transmission Process, Energy Information Administration, Office of Oil and Gas, June 2008, available at https://www.eia.gov/pub/oil_gas/natural_gas/feature_articles/2008/ldc2008/ldc2008.pdf. --------------------------------------------------------------------------- By the Securities and Exchange Commission. Dated: April 4, 2016. Brent J. Fields, Secretary. Issued in Washington, DC, on April 4, 2016, by the Commodity Futures Trading Commission. Christopher J. Kirkpatrick, Secretary of the Commission. Commodity Futures Trading Commission (CFTC) Appendices to Certain Natural Gas and Electric Power Contracts--Commission Voting Summary and Chairman's Statement Appendix 1--Commodity Futures Trading Commission Voting Summary On this matter, Chairman Massad and Commissioners Bowen and Giancarlo voted in the affirmative. No Commissioner voted in the negative. Appendix 2--Statement of CFTC Chairman Timothy G. Massad Today, the CFTC and the Securities and Exchange Commission (SEC), have jointly proposed guidance relating to the appropriate treatment of certain peaking supply and capacity contracts. We are issuing this guidance after considering the useful input we have received from market participants expressing concern about this issue. I support this proposal, as it will properly clarify the treatment of contracts used by many businesses with respect to the supply and delivery of electric power and natural gas. We have proposed that certain electric power and natural gas contracts should not be considered ``swaps'' under the Commodity Exchange Act. We have done so because we believe they are examples of customary commercial arrangements as described in the final rule defining the term ``swap.'' For example, these contracts are entered into to assure availability of a commodity, not to hedge against risks arising from a future change in price of that commodity or for speculative, or investment purposes. They are typically entered into in response to regulatory requirements, the need to maintain reliable energy supplies, and practical considerations of storage or transport. All of these factors are consistent with what has been set forth in previous commission guidance. Today's proposed guidance is an important complement to our final rule regarding Trade Options, which will reduce burdens on end-users and allow them to better address commercial risk. I thank my fellow Commissioners Bowen and Giancarlo for joining me in unanimously approving this proposal as well as that final rule. [FR Doc. 2016-08076 Filed 4-7-16; 8:45 am] BILLING CODE 6351-01-P;8011-01-P
![Federal Register / Vol. 81, No. 68 / Friday, April 8, 2016 / Proposed Rules 20583
Kearny Villa Rd, San Diego, CA 92126, COMMODITY FUTURES TRADING Information Act, a petition for
(858) 537–5830. COMMISSION confidential treatment of the exempt
SUPPLEMENTARY INFORMATION: information may be submitted according
17 CFR Part 1 to the procedures established in § 145.9
Meeting Procedures of the CFTC’s regulations, 17 CFR 145.9.
(a) The meetings will be informal in SECURITIES AND EXCHANGE The CFTC reserves the right, but shall
nature and will be conducted by one or COMMISSION have no obligation, to review, pre-
more representatives of the FAA screen, filter, redact, refuse or remove
Western Service Center and Southern 17 CFR Part 241 any or all of a submission from
California TRACON. A representative www.cftc.gov that it may deem to be
[Release No. 33–10062; 34–77506; File No.
from the FAA will present a briefing on S7–05–16]
inappropriate for publication, such as
the planned modification to the Class B obscene language. All submissions that
airspace at San Diego, CA. Each RIN 3235–AL93 have been redacted or removed that
participant will be given an opportunity contain comments on the merits of the
Certain Natural Gas and Electric Power notice will be retained in the public
to deliver comments or make a
Contracts comment file and will be considered as
presentation, although a time limit may
be imposed. Only comments concerning AGENCY: Commodity Futures Trading required under all applicable laws, and
the plan to modify the San Diego Class Commission; Securities and Exchange may be accessible under the Freedom of
B airspace will be accepted. Commission. Information Act.
(b) The meetings will be open to all ACTION: Proposed guidance. FOR FURTHER INFORMATION CONTACT:
persons on a space-available basis. CFTC: David N. Pepper, Special
There will be no admission fee to attend SUMMARY: In accordance with section Counsel, Division of Market Oversight,
and participate. Parking will be 712(d)(4) of the Dodd-Frank Wall Street at (202) 418–5565 or dpepper@cftc.gov;
validated. Attendees needing parking Reform and Consumer Protection Act or Mark Fajfar, Assistant General
validation should bring their parking (the ‘‘Dodd-Frank Act’’), the Commodity Counsel, Office of the General Counsel,
stub to the meeting. Futures Trading Commission (the at (202) 418–6636 or mfajfar@cftc.gov,
(c) Any person wishing to make a ‘‘CFTC’’) and the Securities and Commodity Futures Trading
presentation to the FAA panel will be Exchange Commission (‘‘SEC’’), after Commission, Three Lafayette Centre,
asked to sign in and estimate the consultation with the Board of 1155 21st Street NW., Washington, DC
amount of time needed for such Governors of the Federal Reserve 20581. SEC: Carol McGee, Assistant
presentation. This will permit the panel System (‘‘Board of Governors’’), are Director, Office of Derivatives Policy,
to allocate an appropriate amount of jointly issuing the CFTC’s proposed Division of Trading and Markets, at
time for each presenter. These meetings guidance on certain contracts that (202) 551–5870, Securities and
will not be adjourned until everyone on provide for rights and obligations with Exchange Commission, 100 F Street NE.,
the list has had an opportunity to respect to electric power and natural Washington, DC 20549.
address the panel. gas. The CFTC invites public comment SUPPLEMENTARY INFORMATION:
(d) Position papers or other handout on all aspects of its proposed guidance. I. Introduction
material relating to the substance of DATES: Comments must be received on
these meetings will be accepted. In the final rule further defining the
or before May 9, 2016.
Participants wishing to submit handout term ‘‘swap,’’ the CFTC and the SEC
ADDRESSES: You may submit comments adopted an interpretation regarding the
material should present an original and by any of the following methods:
two copies (three copies total) to the facts and circumstances in which
• CFTC Web site: http:// certain agreements, contracts, or
presiding officer. There should be comments.cftc.gov. Follow the
additional copies of each handout transactions entered into by commercial
instructions for submitting comments and non-profit entities should be
available for other attendees. through the Comments Online process
(e) These meetings will not be considered not to be swaps because they
on the Web site. are customary commercial
formally recorded. However, a summary • Mail: Send to Christopher
of comments made at the meeting will arrangements.1 Following adoption of
Kirkpatrick, Secretary of the this interpretation, the CFTC received
be filed in the docket. Commission, Commodity Futures public comments describing certain
Agenda for the Meetings Trading Commission, Three Lafayette types of contracts that are closely tied to
—Sign-in Centre, 1155 21st Street NW., regulatory obligations in the markets for
—Presentation of Meeting Procedures Washington, DC 20581. electric power and natural gas.2
—Informal Presentation of the Planned • Hand Delivery/Courier: Same as
Class B Airspace Area Modifications Mail, above. 1 See Further Definition of ‘‘Swap,’’ Security-
—Solicitation of Public Comments • Federal eRulemaking Portal: http:// Based Swap,’’ and ‘‘Security-Based Swap
—Stations of Interest on Class B www.regulations.gov. Follow the Agreement’’; Mixed Swaps; Security-Based Swap
instructions for submitting comments. Agreement Recordkeeping, 77 FR 48207, 48246
airspace area modification (Aug. 13, 2012) (the ‘‘Products Release’’).
—Drop box for written comments Please submit your comments using 2 The comments were received in response to the
only one of these methods.
asabaliauskas on DSK3SPTVN1PROD with PROPOSALS
CFTC’s proposed interpretation on Forward
Authority: 49 U.S.C. 106(f), 106(g); 40103, All comments must be submitted in Contracts With Embedded Volumetric Optionality,
40113, 40120; E.O.10854, 24 FR 9565, 3 CFR, 79 FR 69073 (Nov. 20, 2014) (comments available
1959–1963 Comp., p. 389.
English, or if not, accompanied by an
at http://comments.cftc.gov/PublicComments/
English translation. Comments will be CommentList.aspx?id=1541), and the CFTC’s notice
Issued in Washington, DC, on April 4, posted as received to www.cftc.gov. You of proposed rulemaking on Trade Options, 80 FR
2016. should submit only information that 26200 (May 7, 2015) (comments available at
Gemechu Gelgelu, you wish to make available publicly. If http://comments.cftc.gov/PublicComments/
Acting Manager, Airspace Policy Group. CommentList.aspx?id=1580). In addition, the
you wish the CFTC to consider CFTC’s Energy and Environmental Markets
[FR Doc. 2016–08124 Filed 4–7–16; 8:45 am] information that you believe is exempt Advisory Committee discussed related issues at its
BILLING CODE 4910–13–P from disclosure under the Freedom of Continued
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![Federal Register / Vol. 81, No. 68 / Friday, April 8, 2016 / Proposed Rules 20585
explained that its natural gas service contracts only in the event of an that historically have not been
agreements require Linden to take interruption of service, and that it has considered to involve swaps.’’ 27
natural gas from the LDCs if they supply no discretion as to whether and when it The Commissions also explained that
it. However, to ensure that the LDCs are will exercise the right to take delivery the list provided in the Products Release
able to meet their regulatory under its natural gas peaking supply was not intended to be exhaustive and
commitments to prioritize and serve contracts.22 that there may be other, similar types of
residential demand for natural gas, the agreements, contracts, and transactions
3. Common Characteristics Described by
local board of public utilities (‘‘BPU’’) that also should not be considered to be
Commenters
requires that the service agreements swaps.28 The Commissions said that in
permit the LDCs to interrupt natural gas As they have been described by determining whether similar types of
transportation service to Linden during commenters, the natural gas and electric agreements, contracts, and transactions
certain specified conditions.16 Due to power contracts discussed above are all entered into by commercial entities
the LDCs’ tariff-based commitments to entered into by commercial market should not be considered swaps, they
serve residential natural gas demand, participants, who contemplate physical intend to consider the characteristics
the BPU will not allow the LDCs to settlement of the transactions, in and factors that are common to the
provide a ‘‘firmer’’ category of natural response to regulatory requirements, the commercial transactions listed in the
gas service to Linden.17 Because of the need to maintain reliable supplies, and Products Release, which are:
possibility of these interruptions of practical considerations of storage or • They do not contain payment
transportation service, Linden uses transport.23 In each case, the particular obligations, whether or not contingent,
peaking supply contracts to ensure it commodities covered by the contract are that are severable from the agreement,
has sufficient natural gas to operate its needed by at least one of the parties for contract, or transaction;
cogeneration facility during the the normal operation of its business, • They are not traded on an organized
interruptions.18 and the specific identity of the market or over-the-counter; and . . .
Linden represented that, under its counterparty is an important • In the case of commercial
natural gas service agreements, the LDCs consideration because of, for example, arrangements, they are entered into:
determine when the conditions for concerns about reliability or the —By commercial or non-profit
interrupting Linden’s service are practicability of supply.24 entities as principals (or by their agents)
present, and Linden therefore has no to serve an independent commercial,
B. Products Release Discussion of business, or non-profit purpose, and
control over such conditions. Thus,
Commercial Contracts —Other than for speculative, hedging,
Linden does not have discretion as to
whether and when an interruption of In the Products Release, the CFTC and or investment purposes.29
service as described above will occur.19 the SEC (the ‘‘Commissions’’) adopted The Commissions concluded that in
Linden explained that, under the an interpretation to assist commercial determining whether an agreement,
terms of its natural gas service and non-profit entities in understanding contract, or transaction not enumerated
agreements, Linden is required to take whether certain agreements, contracts, in the Products Release is a swap, the
natural gas from the LDCs if they supply or transactions that they enter into agreement, contract, or transaction will
it. There is no ability for financial would or would not be regulated as be evaluated based on its particular facts
settlement under Linden’s peaking swaps.25 To that end, the Products and circumstances,30 and the
supply contracts, and natural gas Release listed several specific types of representative characteristics and
supplied under those peaking supply commercial agreements, contracts, and factors set out in the Products Release
contracts cannot be re-sold by Linden.20 transactions that involve customary ‘‘are not intended to be a bright-line test
Linden represented that the price for business arrangements (whether or not for determining whether a particular
natural gas in its peaking supply involving a for-profit entity) that will . . . commercial arrangement is a
contracts is based on the market cost of not be considered swaps, including: swap.’’ 31
fuel at specified delivery points, plus a Employment contracts; sales, servicing, In the Products Release, the CFTC
specified adjustment depending on or distribution arrangements; certain also addressed certain capacity
delivery point.21 Thus, since Linden fixed or variable interest rate contracts and peaking supply contracts
could not use that natural gas for any commercial loans or mortgages; and in the context of the CFTC’s
purpose other than to fuel its facility certain agreements, contracts, or interpretation of when an agreement,
when an interruption of service occurs, transactions related to business contract, or transaction with embedded
Linden represented that it is practically combination transactions, real property, volumetric optionality would be
limited to exercising its right to take intellectual property, and warehouse considered a forward contract.32 The
delivery under its peaking supply lending arrangements.26 The CFTC stated that depending on the
Commissions stated their intent that this relevant facts and circumstances,
electricity produced from Linden’s generator is interpretation should ‘‘allow capacity contracts and peaking supply
sold, under a long-term power purchase agreement, commercial and non-profit entities to contracts may qualify as forward
to Consolidated Edison Company, which then uses
the power to serve the electricity needs of continue to operate their businesses and contracts with embedded volumetric
consumers in New York City. Steam from Linden’s operations without significant optionality if they met the elements of
operation is sold, also under a long-term contract, disruption and provide that the swap the CFTC’s interpretation of that
asabaliauskas on DSK3SPTVN1PROD with PROPOSALS
to the co-located Bayway Refinery, the largest . . . definition [is] not read to include provision.33 This remains the case; the
refinery on the East Coast, for its industrial
processes. See letter from Linden (June 22, 2015) at commercial and non-profit operations CFTC does not intend that the proposed
1–3.
16 See id. 22 See 27 See id.
id. at 3–4.
17 See id. 23 See 28 See id.
letter from CDEU (Dec. 22, 2014) at 7, letter
18 See id. 29 See id.
from EDF Trading North America, LLC (Dec. 22,
19 See id. at 3. 2014) at 13. 30 See id., 77 FR at 48248.
20 See letter from Linden (Dec. 22, 2014) at 6. 24 See letter from AGA (Dec. 22, 2014) at 9. 31 See id., 77 FR at 48250.
21 See letter from Linden (June 22, 2015) at 4, n. 25 See Products Release, 77 FR at 48246. 32 See id., 77 FR at 48238.
12. 26 See id., 77 FR at 48247. 33 See id., 77 FR at 48240.
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![20586 Federal Register / Vol. 81, No. 68 / Friday, April 8, 2016 / Proposed Rules
guidance herein would affect the The CFTC has also considered the hedge against risks arising from a future
interpretation of when an agreement, contracts described in Part II.A. in light change in price for the commodity or to
contract, or transaction with embedded of the statement in the Products Release serve a speculative or investment
volumetric optionality would be that, in order not to be considered purpose.
considered a forward contract.34 swaps, the contracts should be entered As stated in the Products Release,
into ‘‘[b]y commercial or non-profit whether a particular commercial
C. Proposed Guidance on Whether
entities as principals (or by their agents) arrangement is a swap depends on the
Certain Contracts Should Be Considered
to serve an independent commercial, particular facts and circumstances of the
To Be Swaps
business, or non-profit purpose, and arrangement.39 This proposed guidance
In response to the comments, [o]ther than for speculative, hedging, or would not apply to any agreement,
described above, which were provided investment purposes.’’ 36 In view of all contract or transaction other than those
by market participants regarding certain the facts and circumstances of the described in Part II.A., and would not
capacity contracts for electric power and contracts described in Part II.A., the preclude the CFTC from issuing further
certain peaking supply contracts for CFTC preliminarily believes that such guidance considering other commodity
natural gas, the CFTC has considered contracts would satisfy this element of contracts under the interpretation in the
the specific facts and circumstances of the Products Release, and therefore Products Release.
these contracts in light of the should be considered not to be swaps
interpretation in the Products Release of under the interpretation set forth in the III. Request for Comment
when a contract would be considered Products Release because they are The CFTC believes that it would
not to be a swap because it is a customary commercial arrangements of benefit from public comment about its
customary commercial arrangement. the type described in the Products proposed guidance, and therefore
The CFTC understands, based on the Release. requests public comment on all aspects
commenters’ descriptions, that the The CFTC notes that commenters of its proposed guidance set forth above,
contracts described in Part II.A. above have represented that the contracts and on the following questions:
are not traded on an organized market described in Part II.A. are entered into 1. Are there natural gas and electric
or over-the-counter, and do not have in response to regulatory requirements, power contracts that would not qualify
severable payment obligations. Thus, the need to maintain reliable supplies, as trade options within the scope of
the CFTC preliminarily believes that the and practical considerations of storage CFTC regulation 32.3 but which would
contracts described in Part II.A. are or transport which arise in the course of be covered by the proposed guidance? If
consistent with the first two elements of the normal operation of at least one so, should the proposed guidance be
the interpretation in the Products party’s business. In this respect, the limited so that it encompasses only
Release.35 CFTC preliminarily believes that the contracts that do qualify as trade
contracts described in Part II.A. are options? Why or why not?
34 The CFTC has clarified this interpretation. See
similar to certain contracts—namely, 2. Does the proposed guidance
Forward Contracts With Embedded Volumetric
Optionality, 80 FR 28239 (May 18, 2015). In this
sales, servicing and distribution provide sufficient clarity on whether the
clarification, the CFTC addressed certain retail arrangements, and contracts for the specific types of natural gas and electric
electric market demand-response programs, under purchase of equipment or inventory— power contracts in question should or
which electric utilities have the right to interrupt listed in the Products Release as should not be considered to be swaps?
or curtail service to a customer to support system
reliability. See id., 80 FR at 28242, citing letter from commercial contracts that will not be If not, how should the guidance be
the National Rural Electric Cooperative Association, considered swaps.37 Also, in the revised to provide more clarity?
the American Public Power Association, the Large Products Release the Commissions 3. Are there other facts and
Public Power Association, and the Transmission addressed commenters’ assertion that all circumstances that the CFTC should
Access Policy Study Group (Oct. 12, 2012) at 9.
The CFTC clarified that since a key function of commercial merchandising transactions consider in determining whether the
an electricity system operator is to ensure grid hedge an enterprise’s commercial risks contracts described in Part II.A. are
reliability, demand response agreements, even if not by stating that a commercial swaps? If so, what are these factors and
specifically mandated by a system operator, may be arrangement undertaken for hedging how should they be considered?
properly characterized as the product of regulatory
requirements within the meaning of the seventh purposes may or may not be a swap 4. Are there contracts (other than
element of the CFTC’s interpretation regarding depending on the particular facts and those described in Part II.A.) that are
forward contracts with embedded volumetric circumstances of the arrangement.38 entered into by participants in the
optionality. For the avoidance of doubt, the CFTC electric power and natural gas markets
reiterates that the proposed guidance herein would
The CFTC observes that when an
not affect this interpretation. entity enters into a purchase contract, it and necessitated by, or closely tied to,
Also, the CFTC’s interpretations regarding full is assured of a supply of the equipment compliance with regulatory obligations
requirements and output contracts, as provided in or inventory it will need in the future. or frameworks that are similar to those
the Products Release, would be unaffected by the described in Part II.A.?
proposed guidance herein. See Products Release, 77
Similarly, a service contract assures the
FR at 48239–40. availability of a needed service in the 5. Are there other types of commodity
Furthermore, the CFTC does not intend that the future. The contracts described in Part contracts, outside of the electric power
proposed guidance would supersede or modify a II.A. are similar to the purchase and and natural gas markets, which are
document issued by the CFTC’s Office of General necessitated by, or closely tied to,
Counsel—‘‘Response to Frequently Asked
service contracts enumerated in the
Questions Regarding Certain Physical Commercial Products Release because they appear to compliance with regulatory obligations
or frameworks that should be
asabaliauskas on DSK3SPTVN1PROD with PROPOSALS
Agreements for the Supply and Consumption of satisfy the elements of commercial
Energy,’’ available at http://www.cftc.gov/idc/ contracts, transactions or arrangements considered under the interpretation in
groups/public/@newsroom/documents/file/ the Products Release? If so, please
leaselike_faq.pdf—which continues to be the that are not considered swaps, including
position of the CFTC’s Office of General Counsel on that they are entered into by commercial describe these contracts and the
the issues discussed in that document. or non-profit entities to assure regulatory obligations and frameworks
35 See Products Release, 77 FR at 48247 (the
availability of a commodity, not to to which they are closely tied.
contracts ‘‘do not contain payment obligations, 6. Are there public interest
whether or not contingent, that are severable from
the agreement, contract, or transaction; [and] . . .
36 See id. considerations regarding the natural gas
37 See id.
are not traded on an organized market or over-the-
counter’’). 38 See id., 77 FR at 48249. 39 See id., 77 FR at 48248.
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![Federal Register / Vol. 81, No. 68 / Friday, April 8, 2016 / Proposed Rules 20587
and electric power contracts in question We have proposed that certain electric DATES: As of April 8, 2016, portions of
that should be reflected in the proposed power and natural gas contracts should not proposed rules (REG–147636–08 and
guidance? If so, why and how? be considered ‘‘swaps’’ under the Commodity REG–121534–12) published in the
7. Does the proposed guidance Exchange Act. We have done so because we Federal Register on February 11, 2009
provide sufficient clarity that it does not believe they are examples of customary
commercial arrangements as described in the
(74 FR 6840) and January 17, 2014 (79
supersede or modify the CFTC OGC final rule defining the term ‘‘swap.’’ FR 3145) are withdrawn.
FAQ referenced in footnote 34? Is there For example, these contracts are entered FOR FURTHER INFORMATION CONTACT:
any potential overlap between the into to assure availability of a commodity, Shane M. McCarrick or David A. Levine,
proposed guidance and the CFTC OGC not to hedge against risks arising from a (202) 317–6937.
FAQ that should be further clarified? If future change in price of that commodity or
SUPPLEMENTARY INFORMATION:
so, what elements of the proposed for speculative, or investment purposes. They
guidance should be clarified to indicate are typically entered into in response to Background
that the proposed guidance does not regulatory requirements, the need to
maintain reliable energy supplies, and On February 11, 2009, the Department
supersede or modify the CFTC OGC of Treasury (Treasury Department) and
FAQ? practical considerations of storage or
transport. All of these factors are consistent the IRS published in the Federal
8. With respect to natural gas peaking
with what has been set forth in previous Register proposed regulations (REG–
contracts, are there natural gas providers commission guidance. 147636–08, 74 FR 6840), including
other than LDCs, such as Intrastate and Today’s proposed guidance is an important § 1.367(b)–4(e), (f), and (g), which
Interstate Natural Gas Pipelines (as complement to our final rule regarding Trade provide guidance on the application of
those terms are defined by the Energy Options, which will reduce burdens on end-
Information Administration),40 which section 367(b) to transactions described
users and allow them to better address
are subject to regulatory obligations to commercial risk. I thank my fellow in section 304(a)(1). The regulations
prioritize and serve residential demand Commissioners Bowen and Giancarlo for were proposed by cross-reference to
for natural gas, such that the providers joining me in unanimously approving this temporary regulations in § 1.367(b)–4T
are obligated to curtail service to electric proposal as well as that final rule. in the same issue of the Federal Register
utilities under certain circumstances? If [FR Doc. 2016–08076 Filed 4–7–16; 8:45 am] (T.D. 9444, 74 FR 6824). This document
so, please explain. BILLING CODE 6351–01–P;8011–01–P withdraws these proposed regulations
because the rules in the proposed
By the Securities and Exchange regulations do not reflect current law.
Commission.
DEPARTMENT OF THE TREASURY See Notice 2012–15, 2012–9 I.R.B. 424
Dated: April 4, 2016. (revising the approach under the
Brent J. Fields, Internal Revenue Service proposed regulations regarding the
Secretary. interaction of sections 367 and 304 and
Issued in Washington, DC, on April 4, 26 CFR Part 1 providing that section 367(a) and (b)
2016, by the Commodity Futures Trading apply fully to certain transctions
Commission. [REG–135734–14]
described in section 304(a)(1)). In the
Christopher J. Kirkpatrick, RIN 1545–BL00; RIN 1545–BN30 Rules and Regulations section of this
Secretary of the Commission. issue of the Federal Register, the
Partial Withdrawal of Proposed Treasury Department and the IRS are
Commodity Futures Trading Application of Section 367 to a Section
Commission (CFTC) Appendices to issuing additional temporary regulations
351 Exchange Resulting From a in § 1.367(b)–4T(e), (f), and (g), as well
Certain Natural Gas and Electric Power Transaction Described in Section
Contracts—Commission Voting as (h), that, in the case of certain
304(a)(1); Partial Withdrawal of exchanges, generally require an
Summary and Chairman’s Statement Proposed Guidance for Determining inclusion of amounts in income as a
Appendix 1—Commodity Futures Stock Ownership deemed dividend or recognition of
Trading Commission Voting Summary realized gain that is not otherwise
AGENCY: Internal Revenue Service (IRS),
On this matter, Chairman Massad and Treasury. recognized, or both. Accordingly, the
Commissioners Bowen and Giancarlo voted Treasury Department and the IRS are
ACTION: Partial withdrawal of notice of
in the affirmative. No Commissioner voted in issuing a notice of proposed rulemaking
the negative. proposed rulemaking.
in the Proposed Rules section of this
Appendix 2—Statement of CFTC SUMMARY: This document withdraws issue of the Federal Register that
Chairman Timothy G. Massad portions of a notice of proposed proposes new rules in § 1.367(b)–4T by
rulemaking published in the Federal cross-reference to the temporary
Today, the CFTC and the Securities and
Exchange Commission (SEC), have jointly Register on February 11, 2009. The regulations.
proposed guidance relating to the appropriate withdrawn portions relate to the On January 17, 2014, the Treasury
treatment of certain peaking supply and application of section 367(b) to Department and the IRS published in
capacity contracts. We are issuing this transactions described in section the Federal Register proposed
guidance after considering the useful input 304(a)(1). This document also regulations (REG–121534–12, 79 FR
we have received from market participants withdraws portions of a notice of 3145), including in § 1.7874–4, that
expressing concern about this issue. I support proposed rulemaking published in the provide that certain stock of a foreign
asabaliauskas on DSK3SPTVN1PROD with PROPOSALS
this proposal, as it will properly clarify the
treatment of contracts used by many
Federal Register on January 17, 2014. corporation is disregarded in calculating
businesses with respect to the supply and The withdrawn portions relate to the ownership of the foreign corporation for
delivery of electric power and natural gas. identification of certain stock of a purposes of determining whether it is a
foreign corporation that is disregarded surrogate foreign corporation for
40 See Distribution of Natural Gas: The Final Step in calculating ownership of the foreign purposes of section 7874. The
in the Transmission Process, Energy Information corporation for purposes of determining regulations were proposed by cross-
Administration, Office of Oil and Gas, June 2008, whether it is a surrogate foreign reference to temporary regulations in
available at https://www.eia.gov/pub/oil_gas/
natural_gas/feature_articles/2008/ldc2008/ corporation for purposes of section § 1.7874–4T in the same issue of the
ldc2008.pdf. 7874. Federal Register (T.D. 9654, 79 FR
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Document Created: 2018-02-07 13:50:24
Document Modified: 2018-02-07 13:50:24
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Proposed Rules | |
| Action | Proposed guidance. | |
| Dates | Comments must be received on or before May 9, 2016. | |
| Contact | CFTC: David N. Pepper, Special Counsel, Division of Market Oversight, at (202) 418-5565 or [email protected]; or Mark Fajfar, Assistant General Counsel, Office of the General Counsel, at (202) 418-6636 or [email protected], Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st Street NW., Washington, DC 20581. SEC: Carol McGee, Assistant Director, Office of Derivatives Policy, Division of Trading and Markets, at (202) 551- 5870, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549. | |
| FR Citation | 81 FR 20583 | |
| RIN Number | 3235-AL93 | |
| CFR Citation | 17
CFR
1 17 CFR 241 |
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