; '·--" 

FEDERAL ENERGY REGULATORY COMMISSION 

WASHINGTON, D. C. 20426 

OFFICE OF THE GENERAL COUNSEL 

November 4, 2009 

Mr. David Stawick, Secretary 

Commodity Futures Trading Commission 

Three Lafayette Centre 

1155 21st Street, NW 

Washington, DC 20581 

COMMENT 

Re: Notice of Intent, Pursuant to the Authority in Section 2(h)(7) of the 

Commodity Exchange Act and Commission Rule 36.3(c)(3), To Undertake 

a Determination Whether Certain Contracts Offered for Trading on the 

Natural Gas Exchange, Tile., Perform Significant Price Discovery Functions 

(Comment File 09-029) 

Comments of the Staff of the Federal Energy Regulatory Commission. 

Dear Mr. Stawick; 

On October 14, 2009, the Commodity Futures Trading Commission 

(CFTC) issued a notice of action and request for comment on whether certain 

natural gas contracts offered for trading on the Natural Gas Exchange, Inc. (NGX), 

an exempt commercial market (ECM), perform significant price discovery 

functions. 1 These are the comments of the staff of the Federal Energy Regulatory 

Commission (FERC). 

Under the CFTC's rules implementing the Reauthorization Act of2008, an 

ECM with significant price discovery contracts (SPDCs) is subject to certain selfregulatory and reporting requirements, as well as certain CFTC oversight 

authorities, with respect to those contracts. Specifically, such regulatory authority 

applies to agreements, contracts or transactions in exempt commodities (which 

includes natural gas) executed on an electronic trading facility by certain eligible . . ' ''. 

1 The contracts are: the Alberta Basis contract; the Union-Dawn Basis 

contract; the Alberta Fixed-" Price contract; the Union~ Dawn Fixed-Price contract; 

and the Alberta Index contract. 
Mr. David Stawick, Secretary 

November 4, 2009 

Page2 

commercial entities on a principal-to-principal basis if the CFTC determines, in its 

discretion, that any such agreement, contract or transaction performs a significant 

price discovery function. If the CFTC determines that a particular agreement, 

contract or transaction performs a significant price discovery function, the ECM 

must demonstrate, with respect to that contract, compliance with nine "core 

principles" set forth in section 2(h)(7)(C) of the Commodity Exchange Act (CEA) 

and the CFTC's rules thereunder. 

FERC understands that some entities may argue that designation of certain 

contracts as SPDCs could affect consumers adversely. FERC's regulatory role 

generally is to ensure an adequate supply of energy at reasonable prices for 

consumers. In our view, the statutory provisions on SPDCs can and should be 

implemented in a way helpful to consumers, and we recognize that the CFTC will 

give appropriate consideration to the interests of consumers. 

We also understand that the above-referenced NGX contracts call for 

physical delivery of natural gas at certain points within Canada, and thus do not 

appear to be in "interstate commerce" under the Natural Gas Act (NGA). While a 

determination by the CFTC that any of these contracts performs a significant price 

discovery function would not appear to conflict with FERC's exclusive 

jurisdiction under the NGA over certain sales of natural gas in interstate commerce 

for resale or with its other regulatory responsibilities under the NGA, the FERC 

staff will continue to monitor for any such conflict. Moreover, the FERC staff will 

monitor other similar determinations that could conflict with the FERC's 

regulation of wholesale natural gas markets. Accordingly, the FERC staff will 

advise the CFTC of any potential conflicts with the FERC' s exclusive jurisdiction 

over certain sales of gas in interstate commerce for resale. 
Mr. David Stawick, Secretary 

November 4, 2009 

Page 3 

The FERC staff thanks the CFTC for soliciting comments on its review of 

the ICE contracts. Any questions or comments on this submission may be directed 

to: 

The Federal Energy Regulatory Commission 

Office of the General Counsel 

888 First Street, NE 

Washington, DC 20426 

Attention: Andrew F. MacDonald 

Phone:202-502-6541 

Cc: Jon Wellinghoff, Chairman 

Suedeen G. Kelly, Commissioner 

Phillip D. Moeller, Commissioner 

Marc L. Spitzer, Commissioner 

Sincerely, 

Thomas R. Sheets 

General Counsel 

Office of the General Counsel 

Federal Energy Regulatory Commission