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

Regulations to Exclude Utility Operations-Related Swaps with Utility Special 

Entities from the De Minimis Threshold for Swaps with Special Entities

The Commodity Futures Trading Commission is considering adopting amendments to the definition of the term 

“swap dealer” to permit a person to exclude certain types of swaps entered into with special entities that are utilities 

from the $25 million special entity de minimis threshold above which a person dealing in such swaps must register 

as a swap dealer.

Utility Special Entities

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). These utility special entities must provide continuous services to their 

customers and are important to public safety. To do so, these entities often rely on swaps associated with their 

electricity and/or natural gas operations to hedge or mitigate the risks of their business operations in a cost effective 

way.

Counterparties to Utility Special Entities

The market for such swaps is, in many cases, regional and localized. Persons and groups representing utility special 

entities have informed the Commission that the prospect of exceeding the de minimis threshold for swaps with 

special entities has restricted the number of counterparties that are willing to enter into such swaps.

The Regulations being considered by the Commission

The amendments to Regulation 1.3(ggg) would permit a person that deals in utility operations-related swaps (as 

defined) with utility special entities (as also defined) to exclude those swaps in calculating whether the person’s 

dealing activity is below the $25 million special entity de minimis threshold (provided that such swaps would still be 

included when calculating whether the person exceeds the general $8 billion threshold). These amendments would:

 Define the term “utility special entity” to mean 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:

o Owns or operates electric or natural gas facilities, electric or natural gas operations or anticipated 

electric or natural gas facilities or operations;

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

o 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

o Is a Federal power marketing agency as defined in Section 3 of the Federal Power Act;
Commodity Futures Trading Commission ♦ Division of Swap Dealer and Intermediary Oversight ♦ 202-418-6700

 Define the term “utility operations-related swap” to mean a swap:

o To which one of the parties is a utility special entity;

o That the utility special entity is using to hedge or mitigate commercial risk (as defined in Regulation 

50.50(c));

o That is 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; and

o That is an electric energy or natural gas swap, or that is 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;

 Permit a person to 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 and to require the person to keep any such 

representation in accordance with the general recordkeeping requirements of Regulation 1.31; and

 Delete a notice requirement that had been included in the proposed version of the rule for persons who 

seek to exclude utility-operations related swaps from their special entity de minimis threshold calculation.