Commodity Futures Trading Commission ♦ Division of Swap Dealer and Intermediary Oversight ♦ 202-418-6700

Commodity Futures Trading Commission

Office of Public Affairs

Three Lafayette Centre

1155 21st Street, NW

Washington, DC 20581

www.cftc.gov

Q & A – Utility Special Entity Rulemaking

What is the goal of the rulemaking the Commission is considering?

The Dodd-Frank Act provided special regulatory protections in connection with swap trading by certain federal agencies and 

states, political subdivisions of states, and certain of their agencies, instrumentalities and pension systems. These entities 

collectively were defined as “special entities.” Certain electric and natural gas utilities are special entities (because, for example, 

they are owned or operated by state or local governments or by instrumentalities of local governments).

Currently, a person comes within the definition of “swap dealer” (and is required to register as such) if the aggregate gross 

notional amount of the swap positions connected with the person’s swap dealing activity over the preceding twelve months 

exceeds $8 billion (General De Minimis Threshold). If, however, the person enters into swaps with special entities, a much 

lower threshold of $25 million applies (Special Entity De Minimis Threshold) so that the dealers entering into swaps with 

special entities are subject to certain statutory and regulatory requirements for registered swap dealers that provide greater 

protections for special entities.

The rulemaking that the Commission is considering adopting would permit a person that enters into “utility operations-related 

swaps” (as defined) with “utility special entities” (as defined) to exclude those swaps in calculating the aggregate gross notional 

amount of the person’s swap positions, but solely for purposes of the Special Entity De Minimis Threshold. The goal of the 

rulemaking is to encourage more counterparties to enter into utility operations-related swaps that utility special entities need to 

provide continuous service to their customers and more cost-effectively manage the commercial risks of their operations.

Who can take advantage of the exclusion in the proposed rulemaking from the Special Entity De 

Minimis Threshold?

Any person that is not otherwise required to register as a swap dealer, and that engages in utility operations-related swaps with 

utility special entities can take advantage of the exclusion.

What is a utility operations-related swap?

A “utility operations-related swap” is a swap to which one of the parties is a utility special entity, and the utility special entity is 

using the swap to hedge or mitigate commercial risk, as defined in Regulation 50.50(c). In addition, the swap must be related 

to an exempt commodity as that term is defined in Section 1a(20) of the Act, or to an agricultural commodity insofar as the 

agricultural commodity is used for fuel for generation of electricity or is otherwise used in the normal operations of the utility 

special entity. Finally, the swap must be an electric energy or natural gas swap, or the swap must be associated with: the 

generation, production, purchase or sale of natural gas or electric energy, the supply of natural gas or electric energy to a utility 

special entity, or the delivery of natural gas or electric energy service to customers of a utility special entity; fuel supply for the 

facilities or operations of a utility special entity; compliance with an electric system reliability obligation; or compliance with an 

energy, energy efficiency, conservation, or renewable energy or environmental statute, regulation, or government order 

applicable to a utility special entity.

What is a utility special entity?

A “utility special entity” is a special entity, as that term is defined in Section 4s(h)(2)(C) of the Act and Regulation 23.401 (for 

example a state or local government, a government agency, or an instrumentality, department or corporation established by a 

state), that:
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Commodity Futures Trading Commission ♦ Office of Public Affairs ♦ 202-418-5080

i. Owns or operates electric or natural gas facilities, electric or natural gas operations or anticipated electric or natural 

gas facilities or operations;

ii. Supplies natural gas or electric energy to other utility special entities;

iii. Has public service obligations or anticipated public service obligations under Federal, State or local law or regulation 

to deliver electric energy or natural gas service to utility customers; or

iv. Is a Federal power marketing agency as defined in Section 3 of the Federal Power Act.

Does a person seeking to rely on the exclusion in the rulemaking under consideration by the 

Commission have to file anything with the Commission or NFA?

The rule as proposed in June, 2014, would have required a person that used the exclusion to file a notice with the National 

Futures Association. After consideration of the comments received, the Commission determined to delete the notice 

requirement from the final rule.

How may a person determine that it qualifies to rely upon the exclusion?

A person may rely upon a written representation by the utility special entity that it is a utility special entity and that the swap is 

a utility operations-related swap.