The Commodity Futures Trading Commission has proposed to issue guidance clarifying that certain electric power and natural gas contracts are not “swaps” for purposes of the Commodity Exchange Act. Specifically, the proposed guidance includes the following types of contracts:

• “capacity” contracts in electric power markets that are used in situations in which a state public utility commission obligates load serving entities and load serving electric utilities to purchase capacity from suppliers to secure grid management and deliverability of power; and

• “peaking supply” contracts that enable an electric utility to purchase natural gas from another natural gas provider on days when its local natural gas distribution companies curtail their natural gas transportation services.

The CFTC is requesting public comment regarding whether these contracts should be considered swaps. The comment period will close 30 days after the proposed guidance is published in the Federal Register.

The proposed guidance is available here.