On January 16, APGA submitted comments in response to proposed rules that are intended to align the U.S. with the Basel III Endgame Proposal (B3E) by modifying a number of financial regulations. The Board of Governors of the Federal Reserve System (Fed), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) issued these related rulemakings.
B3E is a set of rules that were agreed to by an international committee, which included representatives from the U.S. This packaging of three related rulemakings is intended to implement the committee’s final rules. However, APGA and many others that utilize the financial derivatives markets are extremely concerned with how the proposed changes could impact a number of different stakeholders.
As part of normal operations, public natural gas utilities (or their contracted purchasers) often enter into commodity derivative contracts, whether futures contracts or swaps, as a commercial risk-reducing activity. This activity is intended to both help minimize a customer’s exposure to market volatility in natural gas prices as well as keeps a customer’s gas utility bills low. Through the comments, APGA noted its concern that the proposed rules would raise the cost to hedge or discourage hedging and that associated costs would unfortunately be borne by public gas systems' customers.
APGA’s letter also noted our agreement with the concerns raised in the comments submitted by the Public Finance Network (PFN) and that APGA signed onto two additional comment letters: one from the Coalition of Derivatives End-Users (CDEU) and one jointly signed by a number of energy trade associations.
APGA is aware of and thanks the following members for engaging in this important rulemaking: Black Belt Energy; Clarke-Mobile Counties Gas District; Lower Alabama Gas; Memphis Light, Gas and Water (MLGW); Municipal Gas Authority of Georgia (MGAG); Public Energy Authority of Kentucky (PEAK); and Wilson Energy. If your system or organization also engaged, please let APGA staff know!
APGA’s comment letter is available here. The comment letter from the CDEU is available here, the joint energy trade associations' comments are available here, and the comments from the PFN are available here.
For questions on this article, please contact Stuart Saulters of APGA staff by phone at 202-802-0493 or by email at ssaulters@apga.org.