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AMERICAN PUBLIC GAS ASSOCIATION 

TESTIMONY OF LAURA CAMPBELL 

ASSISTANT MANAGER OF ENERGY RESOURCES, 

MEMPHIS LIGHT, GAS & WATER 

ON BEHALF OF THE AMERICAN PUBLIC GAS ASSOCIATION 

BEFORE THE COMMODITY FUTURES TRADING COMMISSION

SEPTEMBER 18, 2007

ACTING CHAIRMAN LUKKEN AND MEMBERS OF THE COMMODITY 

FUTURES TRADING COMMISSION, I APPRECIATE THIS OPPORTUNITY TO 

TESTIFY BEFORE YOU TODAY AND I THANK THE COMMISSION FOR 

CALLING THIS HEARING TO EXAMINE THE CRITICALLY IMPORTANT 

ISSUES OF TRADING ON REGULATED EXCHANGES AND EXEMPT 

COMMERCIAL MARKETS. 

MY NAME IS LAURA CAMPBELL AND I AM THE ASSISTANT MANAGER OF 

ENERGY RESOURCES FOR MEMPHIS LIGHT GAS & WATER (MLGW). MLGW 

IS THE NATION’S LARGEST THREE-SERVICE MUNICIPAL UTILITY AND 

CURRENTLY PROVIDES SERVICE TO MORE THAN 420,000 CUSTOMERS. 

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201 Massachusetts Avenue, NE, Suite C-4 i Washington, DC 20002i 202.464.2742 i 202.464.0246 (fax) 
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I TESTIFY TODAY ON BEHALF OF THE AMERICAN PUBLIC GAS 

ASSOCIATION (APGA). APGA IS THE NATIONAL ASSOCIATION 

FOR PUBLICLY-OWNED NATURAL GAS DISTRIBUTION SYSTEMS. 

THERE ARE APPROXIMATELY 1,000 PUBLIC GAS SYSTEMS IN 36 

STATES AND ALMOST 700 OF THESE SYSTEMS ARE APGA 

MEMBERS. PUBLICLY-OWNED GAS SYSTEMS ARE NOT-FORPROFIT, RETAIL DISTRIBUTION ENTITIES OWNED BY, AND 

ACCOUNTABLE TO, THE CITIZENS THEY SERVE. 

APGA’S MEMBERS HAVE LOST CONFIDENCE THAT THE PRICES 

FOR NATURAL GAS IN THE FUTURES AND THE ECONOMICALLY 

LINKED OVER-THE-COUNTER (“OTC”) MARKETS ARE AN 

ACCURATE REFLECTION OF SUPPLY AND DEMAND CONDITIONS 

FOR NATURAL GAS. 

WITHOUT QUESTION, NATURAL GAS FUTURES CONTRACTS 

TRADED ON NYMEX AND FINANCIAL CONTRACTS FOR 

NATURAL GAS TRADED ON THE OVER-THE-COUNTER MARKETS 

ARE ECONOMICALLY LINKED. THE MARKET FOR FINANCIAL 
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NATURAL GAS CONTRACTS IS COMPOSED OF A NUMBER OF 

SEGMENTS, WHICH INCLUDE FUTURES CONTRACTS TRADED ON 

NYMEX AND FINANCIAL CONTRACTS FOR NATURAL GAS 

TRADED ON THE OTC MARKETS. OTC CONTRACTS MAY BE 

TRADED ON MULTI-LATERAL ELECTRONIC TRADING 

FACILITIES, KNOWN AS “EXEMPT COMMERCIAL MARKETS” OR 

“ECMS.” THEY ALSO MAY BE TRADED BILATERALLY ON 

ELECTRONIC PLATFORMS, THROUGH VOICE BROKERS AND IN 

DIRECT BILATERAL TRANSACTIONS BETWEEN 

COUNTERPARTIES. 

THE IMPACT OF LAST YEAR’S ACTIVITES OF THE AMARANTH 

ADVISORS HEDGE FUND EXEMPLIFIES THIS LINKAGE. WHEN 

THE POSITIONS ACCUMULATED BY AMARANTH BEGAN TO 

UNWIND, GAS PRICES DECREASED. UNFORTUNATELY, MANY 

OF APGA’S MEMBERS HAD ALREADY LOCKED-IN PRICES PRIOR 

TO THAT PERIOD AT LEVELS THAT DID NOT REFLECT CURRENT 

SUPPLY AND DEMAND CONDITIONS. AS A RESULT OF THE 

ELEVATED PRICES DURING THE PERIOD WHEN AMARANTH 

HELD THESE EXCEEDINGLY LARGE POSITIONS, MANY OF 
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APGA’S MEMBERS WERE FORCED TO PAY A PREMIUM WHICH 

WAS PASSED THROUGH TO THEIR CUSTOMERS ON THEIR GAS 

BILLS. 

THE CFTC HAS DONE A GOOD JOB IN CATCHING MARKET 

ABUSES AFTER THE FACT. HOWEVER, THE COMMISSION DID 

NOT HAVE A COMPLETE PICTURE OF THE FULL EXTENT OF 

AMARANTH’S TRADING POSITION UNTIL AFTER AMARANTH’S 

COLLAPSE. GREATER TRANSPARENCY WITH RESPECT TO 

TRADERS’ LARGE POSITIONS, WHETHER ENTERED INTO ON A 

REGULATED EXCHANGE OR ON THE OTC MARKETS FOR 

NATURAL GAS WILL PROVIDE THE COMMISSION WITH THE 

TOOLS TO DETECT AND DETER POTENTIAL MANIPULATIVE 

ACTIVITY BEFORE OUR MEMBERS AND THEIR CUSTOMERS 

SUFFER HARM. 

APGA BELIEVES THAT THERE ARE IMMEDIATE MEASURES THAT 

THE COMMISSION CAN, AND SHOULD, TAKE WITHIN ITS 

EXISTING AUTHORITIES TO IMPROVE THE CURRENT SITUATION. 

THE RECENT PROPOSED AMENDMENTS TO RULE 18.05 OFFER 
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THE COMMISSION BOTH THE MEANS AND THE OPPORTUNITY 

TO INCREASE TRANSPARENCY IN THESE MARKETS AND 

THEREBY BEGIN TO ADDRESS THE CURRENT LACK OF PUBLIC 

CONFIDENCE IN THEIR PRICE INTEGRITY. RULE 18.05 IS A 

POTENTIALLY POWERFUL TOOL TO SHED LIGHT ON A 

REPORTABLE FUTURES TRADER’S POSITION IN ALL SEGMENTS 

OF THE NATURAL GAS MARKET. APGA BELIEVES THAT THE 

COMMISSION SHOULD USE THIS AUTHORITY AGGRESSIVELY TO 

ISSUE SPECIAL CALLS TO ALL REPORTABLE TRADERS IN 

NATURAL GAS FOR INFORMATION WITH RESPECT TO THEIR 

OVER ALL POSITIONS IN ALL SEGMENTS OF THE FINANCIALLY 

TRADED NATURAL GAS MARKET. THIS WOULD BE AN 

IMPORTANT FIRST STEP IN MEETING THE “PURPOSE OF [THE 

COMMODITY EXCHANGE] ACT TO DETER AND PREVENT PRICE 

MANIPULATION OR ANY OTHER DISRUPTIONS TO MARKET 

INTEGRITY . . . .” 

HOWEVER, APGA ALSO RECOGNIZES THAT RULE 18.05 WOULD 

ONLY APPLY WHEN A TRADER HAS A REPORTABLE POSITION 

ON A REGULATED FUTURES MARKET AND THAT A LARGE 
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TRADER COULD THEREFORE EASILY EVADE THE REPORTING 

REQUIREMENT. FOR THIS REASON, LEGISLATION TO ENHANCE 

THE COMMISSION’S AUTHORITY BY PROVIDING A 

COMPREHENSIVE LARGE TRADER REPORTING SYSTEM THAT 

INCLUDES ALL SEGMENTS OF THE MARKET IS NECESSARY. 

SUCH A COMPREHENSIVE LARGE TRADER REPORTING SYSTEM 

WOULD HAVE ENABLED THE COMMISSION TO SPOT THE 

RELATIVE SIZE OF AMARANTH’S OTC POSITION PRIOR TO ITS 

COLLAPSE. 

APGA STRONGLY SUPPORTS THE MARKET TRUST ACT OF 2007 

INTRODUCED BY CONGRESSMEN BARROW AND GRAVES. THIS 

BI-PARTISAN LEGISLATION WOULD PROTECT CONSUMERS BY 

REQUIRING THE REPORTING OF LARGE POSITIONS IN 

FINANCIAL CONTRACTS FOR NATURAL GAS HELD IN ALL 

SEGMENTS OF THE MARKET. IT IS IMPORTANT TO NOTE THAT 

THE MARKET TRUST ACT IS NARROW IN SCOPE AND APPLIES 

ONLY TO FINANCIAL CONTRACTS, AGREEMENTS AND 

TRANSACTIONS FOR NATURAL GAS. 
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FINALLY, APGA COMMENDS THE COMMISSION ON HOLDING 

THIS HEARING AND BELIEVES THAT GREATER PUBLIC 

INVOLVEMENT WOULD ASSIST THE COMMISSION AS THE 

MARKET IN NATURAL GAS CHANGES AND AS THE 

COMMISSION’S POLICIES NECESSARILY EVOLVE TO MEET THE 

CHALLENGE OF THESE NEW CONDITIONS IN THE ENERGY 

MARKETS AND URGES THE COMMISSION TO ESTABLISH AN 

ADVISORY PANEL ON ENERGY MARKETS. 

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NATURAL GAS IS A LIFEBLOOD OF OUR ECONOMY AND 

MILLIONS OF CONSUMERS DEPEND ON NATURAL GAS EVERY 

DAY TO MEET THEIR DAILY NEEDS. IT IS CRITICAL THAT THE 

PRICE THOSE CONSUMERS ARE PAYING FOR NATURAL GAS 

COMES ABOUT THROUGH THE OPERATION OF A FAIR, ORDERLY 

AND TRASPARENT MARKETPLACE. WE BELIEVE THAT THE 

COMMISSION CAN DO MUCH WITHIN ITS EXISTING 

AUTHORITIES TO INCREASE TRANSPARENCY AND TO IMPROVE 

THE CURRENT SITUATION. MOREOVER, CONGRESS CAN 
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PROVIDE AMERICAN CONSUMERS WITH THE PROTECTION THEY 

DESERVE BY PASSING THE MARKET TRUST ACT OF 2007.