nextera energy comment letter on position limits

8/8/2019 NextEra Energy comment letter on position limits

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XXVI-O0307

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Subject:Attach:

Hendry, Brent Friday, October 29, 2010 2 :28 PMPosLimits Graham Harper ; Scott Parsons; Jim New some < jnewsome@ deltastrat.com>;Stengle, Kate ; Silverstein, LarryCom ment on the Aggregation of Position LimitsPosition L imit Pre-Comm ent Letter.pdf

Attached please f ind pre-comm ent letter submitted by NextEra En ergy Power M arketing, LLC.

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~ ~ : : ~ ~ : ~ ; ~ ; : : ~ : : : ~ f i : : : ~ : : i ~ : i ~ i : : : ~ : ~ : : [ ~ : : ~ [ ~ : ~ : ~ ? ~ : ~ : ~ : ;FL A uthorized House CounselNot a M ember of the Florida BarInformation in this mess age is confidential and m ay be legally privi leged. It is intended solely for the person towhom it is addressed. If you are not the intended recipient, please notify the sender and please delete themessage from your system immediately.


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October 29~ 2010

David A. Stawick, SecretaryCom mo dity Futures Trading Com missionThree Lafayette Cen~e~1 i55 21st Street, N.X~ .W ashington, DC 20 58!

Dean Secretar ~ " Stawick:O n Oc tober 2 1, 20 t0, Ne xt[~ra Energy Power M arket ing~. LLC at tended several meet ings

at the Co minodity Futures Trading Con-m ~issio~ (CFTC), to discuss various rnlem aldngs ~!elevantto fl-~e Do dd-Frank Act. As a resu-lt of these m eetings~ it became clear that it wotfld be be ne~c iaito W ovide wri t- ten com ments out lining ~h e specific conc erns we raised with. respect " to Sec ::ion737 o:1 Tide VII oft lm Do ddWrank Ac~ ccnce ming dae possibility of fine aggregation o f posi t ion!im~ts applying across muttip]e aft~1 liates.We are specifically concerned-that an overly broad drafting of the rule ..... iaggregation of posi t ion limits pursum~t to fl~e re q~.fireme nt to e stablish rules t rader aec~ n , : ,7could have unintended consequences resulting iia violations of certai~ [bdera! and State lawsapplicabIe 1o ene~:gy companies. For exm-nple, eel:rain regMa~ory requiremen.ts imposed by finet ;ederal Energy Re gulatory Co mn~ iission (FERC ) that apply to traditionally regula;ted pub lic

utilities and its a.Nliated e~ergy marketers wouI:d ~e~.de~: fl~e aggregation of positions across thesetypes of a-tN .lia,es in vioiafion ot-" c m~ ain: FERC regulations.Spec ifically, interacti.o~ s be twee n a tradifio:~ ,al, l}rmsc llised pub lic utitity posse ssil~gcaptive customers mad its ~marke>regulated power sales affiliates" (Le., affiliated ene rgymarket~.~,) that are authorized to transact who lesale sa~es o f electric vnergy at mark~.t-bas~.d ratespurstmnt to Sec t ion 2 05 o f the Federal Powe r Act (FPA) are subject to the Affi t ia~e Re str ict ionsRegulations imposed b y FERC.~ I~t relevant t~m l, the Affiliate R.ei.~rictio ~S~ Regulations~ ~ requkethe Nnc tional separation and independent operation of such entitieso, mad at e intended to preventpote ntial, affiliate abuse ~ including cro ss,st~b sidizafion issues, that could b ene fit shareholders ~ othe de tr ime n. t of captive ratepayers.~ The violation of suc h re gulations c an result in an affiliated

e n e r g y , m a r k e t e r s l o s ~ . ~ o f ~ i t ~ , ~ m a r k e t o b a s e d , a t e , a u t t ,o r i tv . " .LI.S.C. ~ 824d; lg C:F,R, ,~ 35.39.Spec~ficahy, the FERC Affiliate R~a~ricfions Re~iations ~,eqa~re ~ublic ~{ ilities and *heir ~ ~,,,~rl~e t reaulated ~o~ e r

utili~:ies a~d their marl~e~:-regu~ated powe r sales atNliates~ are a,~so W ~liit,ite:d fiom sha~ing any senior o~X ~cers andsupervisory personnel that e~3ga:ge fi~ directing, organizing or executing generatio~ or ma~:l~eti~g !~mct!ions, ld35.39(c) (2)(i i) i Under FERCs AN iia te Res tr~c!i ions Regu:~a tio~3s~ a ~: radi t iom~ ! uti li ty may no~ s~mre any nonlx~bl ic"marke:t. information, witi~ employees ofmarket,regulated power sales affi!iates iftha.t in[brmation can be used ~o

7 0 0 U n i v e rs e B o : u le v a r d , C T R , ~ B , J u r ~ o B e a c h , F lo r id a 3 3 4 0 8


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As depic ted on the ch mt be low N extF: ra Energy, Inc. is the paren t of Flor ida Pow er &l .ight Co mpany ~.FP|,)o a ver t ical ly integraled public uti l ity located in f lorida. N extEra E nergy,Inc. is also the ul t imate parent of N extgra Energy Pow er M arketing., LL C~. ~ extEra) a merch anttrading affiliate that transacts ~n e nergy m arkets outside Flo rida.

Under t.l~e Dodd-Frar~k Act the CIrI C. ~ ow 1.as the authority to set I)osition limits not onlyo~~ contracts listed by desi.~znatcd contract m art~ets bin also acro ss swap co n.tracts-that pertbrm oraffect a significant price divcover~.. > functiot~ (Designated Contracts). Fo the exte nt that at~.a~ m on,I utility, such as FPL , and its marke~ -regulate.d pm,er sales afl]Iiate", such as N extE ra.t ransact in Designated Co ntracts and are forced to share po sit ion inIbrm ation or discuss how toalloc.ate an aggregated position limit in order to ensure that they are m "global~ cor]Doratecorn p liance ",,ith aggregate position limits t-br 1he relevant Designated Contracts, then each entitywould effec t ively be in violation o f F>:RCs Affil iate Restr ic t ions Regulations. 1-we of the keynotable A ff il ia te Res t r ic t ions Re gulat ions are th .e independent o pera t ion requirement and theprohibition o~.~ the sharing of market, m~orrnat~on.- The [hilure to comply with FERCs AffiliateRestrictions Regulations, even an inadvertent failure, could expose NextEra and FPL to civil,~o ~, t i .on per day a~ ?.d could resul t in th.e suspe.u.sion ore~alties of up to $1 million per " !" "revoca[ion of :their respec.tix~e authorizations to e n~ao~e i~-~ who lesale sales of ,,lecb ~c energy atmarket--based rates under FPA Secti~m 205.4

W e respec tful ly request that t l~e C FIC refrain from daaf t ing aggregation requireme ntsthat wo uld resul t in N exfEra o r FPI0 violating appl .icab]e fe deral nr state law. in the al ternative,and to pro vide ~:reater re gulal.orv c er tainl.% we suggest that the ( .FTC dra1"t language to includean exem ption [or ~)ar t ies whose effor ts to co mply with any t ]nal rules regarding the aggregationof po sition limits wo uld result in. a vitiation, of fe deral o r state l.aws, role s and regulations.the detriment o f captive customers, unless such information ;s sinmltm~eo usly disclosed to the tmb!ic, [d ~}5.39(d)(1).See ~?orid~ Po~.i,e;" Corp, et al.. ! ! l FERC ~ 6 !.243 (2005)(reqtming the reNad of apwoximately $6.5 million mratepayers, in relevant parr. for identified violations ofgae in.depen(ler~t funcfio,~ing ru~e s and prohibifio~ o n s.harit~gmarket i~gormatim~ as set fbrth in FERCs Code of Conduct requi.remen.ts (Vrecmsor ~o the Affiliate RestdctiousRegulatio,~s) applicable to fianchised public milffies and marketing aft51iates authorized ~o engage in who lesale salesof electr~c e~ergy at market-bused rates).4 16 U.S.C. ~ 825o-1 ~setting lbrth FERCs civil per, al) aulhori~v under Part 11 ogthc FPA).


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In addition to the concerns raised above regard.ir~g FERC Affiliate RestrictionsRegulations, there are also som e b roader c once rns about po tent ial aggregation rules disregardingthe strucmral and functional independence of affiliated, but separate, legal entities. Legal entitiesthat have not acted in conce rt in entering imo De signated Co ntracts and instead ac~ and o perateindependently f iom any other lega! enti ties within the co rporate ~am ily should com inue ~o betreated independently.Based on the tbregoir~g two sets of cot~ cerns, we re.spectfS.~lly submit fl-~_at tt-te roles shouldproide lhaL to the extent the trading activities of an energy company and its af{~liatest ransact i .ng in. the same D esignated Co ntracts are no t under taken at the direct ion, management orcontrol of a common corporate owner, they sho~ld be trea*ed as separate and indepe.~_dent traders

for purpose s of detenniai~g co mpliance with applicable t~deral position l imits. To addre ss thetS.ct that som e e, .~tit ies do no t maintain separate ope rations and co ntrol , the ab ove rule couldcontain an exception, which would allow for the aggregalio~ of position Iimi~s across such: : v control an ownership or equi~de interest of !0% o rffiliates, if such entities jointL (i) hold or~reater in the same po sition h~ Designated Contracts mad (ii) t ransac~ pursuant tc an express orimplied agreeme nt or understanding as if their separate posit ions in Designated Co ntracts wereheld by. or the tradin.g of such positions were done b y, a sin gle pe rson.5

Respectfi.~lly submitted.

Lawrence Silverstein~% nior l /ice President a~dManagi~ Director Power MarketingNexf l~ra EnerL~ Po wer Market i~

Dan Be rkovitz, Gene ral Counsel, Office of Ge neral CounselTerry Arbit, Dep~.tl.y General Com ~sel. Office of G eneral CounselDavid Van Wagner, Chief Co uu.sel, Division of M arkef. Ove rsigh{All Hosseinl, Attorney, Division of M arket O versightSteve Shen~o d. I)irectoro Market Sm~,~-eilIanceB ruce Fe krat; Attorney Advisor , Divisior~ of M arket Ove rsight

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nextera energy comment letter on position limits

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