FEDERAL ENERGY REGULATORY COMMISSION 

WASHINGTON, D. C. 20426 

OFFICE OF THE GENERAL COUNSEL ~ 

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November 4, 2009 .c=t 

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Mr. David Stawick, Secretary 

Commodity Futures Trading Commission 

Three Lafayette Centre 

1155 21st Street, NW 

Washington, DC 20581 

COMMENT 

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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 Financial Basis Contracts Offered for 

Trading on the IntercontinentalExchange, Inc., Perform Significant Price 

Discovery Functions (Comment Files 09~027, 09-028 and 09-031) 

Comments of the Staff of the Federal Energy Regulatory Commission 

Dear Mr. Stawick: 

On October 14,2009, the Commodity Futures Trading Commission 

(CFTC) issued three separate notices of action and request for comment on 

whether certain natural gas financial contracts offered for trading on the 

IntercontinentalExchange, Inc. (ICE), 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 

1 The contracts are: the Henry Financial Swing, Henry Financial Basis 

and Henry Financial Index Contracts (Comment File 09-027); the Socal Border 

Financial Basis Contract (Comment File 09-028); and the NWP Rockies Financial 

Basis Contract (Comment File 09-031). 

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Mr. David Stawick, Secretary 

November 4, 2009 

Page2 

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

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

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

price discovery function. If the CPTC 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 CPTC's rules thereunder. 

PERC understands that some entities may argue that designation of certain 

contracts as SPDCs could affect consumers adversely. PERC'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 CPTC will 

give appropriate consideration to the interests of consumers. 

We also understand that all ofthe above-referenced contracts are cashsettled contracts and that none of them contemplates the actual physical delivery 

of natural gas. While a determination by the CPTC that any of these contracts 

performs a significant price discovery function would not appear to conflict with 

PERC's exclusive jurisdiction under the Natural Gas Act (NGA) over certain sales 

of natural gas in interstate commerce for resale or with its other regulatory 

responsibilities under the NGA, the PERC staff will continue to monitor for any 

such conflict. Moreover, the PERC staff will monitor other similar determinations 

that could conflict with the PERC's regulation of wholesale natural gas markets. 

Accordingly, the PERC staff will advise the CPTC of any potential conflicts with 

the PERC's exclusive jurisdiction over certain sales of gas in interstate commerce 

for resale. 
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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