Fresh calls for OTC energy market regulation

A broad-based coalition of natural gas producers, service companies, consumer groups and utilities is set to call on the US Congress and federal regulatory agencies to regulate the over-the-counter (OTC) energy derivatives market.

The Coalition for Energy Market Integrity and Transparency is supported by the American Public Power Association, Texas-based oil and gas exploration firm Apache and Democratic senator Dianne Feinstein, among others. The coalition said it is “armed with new evidence of apparent market manipulation” relating to last year’s Californian energy crisis, and that it will present its findings and recommendations at a press briefing to be held in Washington DC tomorrow morning.

The coalition represents a fresh regulatory threat to the OTC energy derivatives market. Earlier this month the US Senate blocked a measure to re-regulate the trading of OTC energy derivatives. Feinstein had proposed a bill amendment that would permit the Commodity Futures Trading Commission to regulate OTC trading in energy and metals derivatives, in the wake of Enron’s collapse. But her proposals were defeated on a routine procedural vote.

“Enron may be gone, but its clones continue to amass market power that enables them to set the price of natural gas and electricity without any checks and balances whatsoever,” said a coalition spokesperson.

The International Swaps and Derivatives Association last week said it is preparing itself for further regulatory threats to the OTC energy market. “The proponents of new regulation still have not demonstrated a market failure [and] there is no convincing evidence that sufficient regulatory authority is not already in place,” said an Isda report condemning calls for OTC energy regulation.