CFTC Grants No-Action Relief to Utility Companies Hedging With Swaps

The Commodity Futures Trading Commission (CFTC) has granted no-action relief allowing an entity to deal in utility operations-related swaps without registering as a swap dealer, provided that the aggregate gross notional amount of swap dealing activity does not exceed $8 billion per year.

After receiving petitions from several utility organizations in 2012, the CFTC granted a similar no-action letter, but which had a threshold of $800 million. This no-action letter supersedes the previous one and provides relief for these swaps that public power companies rely upon to hedge risks arising from their electric or natural gas operations or obligations. The relief does not apply to swaps for which the underlying commodity is interest rates, credit, or equity or currency asset classes.