Senators Feinstein, Fitzgerald, Harkin, Lugar, Cantwell Introduce Bill to Provide Transparency and Oversight for Energy Transactions
July 11, 2002

Washington, DC - Senators Dianne Feinstein (D-Calif.), Peter Fitzgerald (R-IL) Tom Harkin (D-IA), Richard Lugar (R-IN), and Maria Cantwell (D-WA) today introduced legislation that would ensure that all energy transactions are subject to anti-fraud and anti-manipulation oversight by the Commodity Futures Trading Commission (CFTC) and the Federal Energy Regulatory Commission (FERC).

In addition, the legislation would require that electronic exchanges trading energy derivatives would be subject to registration, reporting, disclosure and capital requirements. These are the same requirements that were in place before 2000, when Congress exempted on-line energy and metals trading from regulatory oversight as part of the Commodity Futures Modernization Act.

"I want to thank the Chairman and Ranking Member of the Senate Agriculture Committee for joining the effort to ensure that the all energy transactions, including 'Wash Trades', are transparent and subject to regulatory oversight," Senator Feinstein said. "With their help, we can close the loopholes that allowed energy companies to conduct online energy trades with no regulatory oversight over the past two years. This type of trading was a major factor in forcing electricity and natural gas prices to skyrocket during the energy crisis in the West. It is my hope that we will have a mark up on this legislation by the time the Senate recesses in August."

"I am troubled by the wholesale exemption given to online energy trading ventures because it leaves investors largely in the dark and unprotected against schemes like wash trading. Closing the Enron exemption loophole will be an important step toward restoring public confidence in our capital markets," Fitzgerald said.

"The recent rash of corporate scandals have rocked the financial world and severely shaken the confidence of investors. In this atmosphere it is crucial that Congress and the Administration be diligent in our oversight duties. To that end this legislation will give CFTC the authority they need to close dangerous loopholes and increase market transparency in order to protect investors and energy consumers," said Harkin.

"Until we require open books and transparency from Enron and corporations like it, the public will not be protected from those who attempt to manipulate markets and gouge consumers. Senators Feinstein, Fitzgerald, Harkin, and Lugar are showing great leadership with this legislation to protect consumers," Cantwell said.

Legislation to provide oversight authority to energy trades was first introduced on February 14, 2002, and the bill was considered as an amendment to the Senate energy bill in March. At that time, some opponents argued that the amendment should not be included as part of the energy bill because of concerns that the legislation did not have a hearing in committee, and they contended there was little evidence of manipulation. The amendment was defeated by a vote of 48-50.

Since that time, however, it has been revealed that energy companies engaged in manipulative behaviors that exacerbated the Western energy crisis, including wash trades, megawatt laundering, and load shifting.

Specifically, legislation introduced today would:

1) Enable the CFTC to investigate allegations of fraud and manipulation in the energy and metals derivative markets.

2) Subject all electronic trading platforms (except those executing transactions in excluded commodities) to registration, transparency, disclosure, and reporting obligations.

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