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Trading Spaces? Will CFTC Move Into FERC's House?
as to where FERC jurisdiction may stand.
The CEA defines "commodity" at section 1(a)(4): [emphasis supplied]:
"The term 'commodity' means [a long series of agricultural products] except onions...
This is quite a broad spectrum. So if contracts for future delivery of electricity are being traded, and if electricity is not onions, electricity is considered by the CFTC to be a commodity for CEA purposes. The jurisdictional key is the fact that "contracts for future delivery are presently or in the future dealt in." Note, however, that there is a qualification as to "future delivery" in CEA section 1(a)(19):
"The term ''future delivery' does not include any sale of any cash commodity for deferred shipment or delivery."
The test for exclusion here seems to be a transaction where an immediate sale occurs but where, for the convenience of the parties or otherwise, the actual transfer of the commodity is deferred. These were known as "forward contracts" in the agricultural context, where, for example, grain merchants would commit to buy a portion of the farmers' plantings at a fixed price, but recognized that delivery would have to await the harvest. One might argue that bilateral traditional full or partial requirements service contracts for future delivery of electricity would fall within this section 1(a)(19) exclusion.
RTO: Just Another Futures Exchange?
As FERC has developed the concept, the institution known as an RTO-a regional transmission organization-is now seen in a key respect as an institution that develops a 24-hour-day-ahead, hour-ahead, and real-time balancing markets for buying and selling electricity. As to the day-ahead and hour-ahead markets, at least, the product sold may well constitute "futures." Importantly, this essential element of the current design of RTOs plays right into the jurisdiction of the CFTC, which might very well claim jurisdiction over RTO markets under the law as it is currently written, and even more strongly under the proposed terms of the proposed new Energy Policy Act.
For example, CEA section 1(a)(2) 10 defines a "Board of Trade" as "any organized exchange or other trading facility."
Further, CEA section 1a(27) 11 defines an "organized exchange" as a trading facility that:
- (A) permits trading-
- (i) by or on behalf of a person that is not an eligible contract participant; or
- (ii) by persons other than on a principal-to-principal basis; or
- (B) has adopted (directly or through another nongovernmental entity) rules that
- (i) govern the conduct of participants, other than rules that govern the submission of orders or execution of transactions on the trading facility; and
- (ii) include disciplinary sanctions other than the exclusion of participants from trading.
And finally, CEA section 1a(33)(A) defines "trading facility" as:
"[A] person or group of persons that constitutes, maintains, or provides a physical or electronic facility or system in which multiple participants have the ability to execute or trade agreements, contracts, or transactions by accepting bids and offers made by other participants that are open to multiple participants in the facility or system."
There is much more to the CEA, but these are the relevant jurisdictional elements. 12 One can see