The US Commodity Futures Trading Commission's Energy and Environmental Markets Advisory Committee held a meeting on 28 February in Nashville, Tennessee. This EEMAC meeting – the second under the sponsorship of CFTC Commissioner Summer Mersinger – focused on electricity.
At the outset of the meeting, Mersinger said "our electricity markets are changing in complexity, size, and scale. Additionally, commodities that we never thought of as being tied to the energy industry are proving to be vital sources of raw materials for the production, transmission, storage, and use of electric energy." She said the committee would examine how CFTC-regulated markets can support electrification and these new industry dynamics.
The CFTC's advisory committees have no rule-making authority, but they serve as a channel for communication between the agency and the markets that it regulates. The EEMAC members come from futures exchanges, energy producers, public utilities, trading firms and other market participants.
CFTC Commissioner Christy Goldsmith Romero used her opening statement to comment on the importance of hedging in the transition away from fossil fuels. "As we accelerate a transition to more renewable energy, it will be critically important to ensure that renewable energy producers have access to appropriate hedging tools for managing price risks relating to grid congestion."
The first panel discussion at the meeting focused on how electrification and increased use of renewable energy, which tends to be more intermittent than conventional sources of energy, could affect the electric grid and the trading of Financial Transmission Rights. FTRs are similar to futures in that they allow market participants to offset potential losses related to the price risk of delivering energy to the grid. The holder of an FTR contract is entitled to a stream of revenues (or charges) based on the day-ahead hourly congestion price difference across an energy path.
Several members of the advisory committee highlighted that FTRs are integrated with other markets regulated by the Federal Energy Regulatory Commission and that involvement of the CFTC in the FTR markets could create regulatory confusion. Mersinger acknowledged that FTRs are subject to exemptions issued by the CFTC, but she stressed the importance of "better understanding" the risks that FTRs pose to the CFTC-regulated markets for electricity derivatives.
The second panel included a discussion exploring how CFTC-regulated metal futures markets could grow and the potential for stress due to increases in electric vehicle production. The batteries used in electric vehicles depend on the supply of metals such as lithium, cobalt and nickel, and the rapid growth in demand for these batteries is creating volatility in the prices of these metals.
Dan Bowerson, a senior director at the Alliance for Automotive Innovation, a trade association whose members include battery makers, car companies and other companies in the transportation industry, emphasized that there is growing demand for electric vehicles. This is creating supply chain challenges that automakers cannot necessarily control.
Advisory committee members also raised questions about challenges related to electricity storage.
Advisory committee subcommittees
In September 2022, the EEMAC voted to establish subcommittees that will study physical energy infrastructure and the metals market. Lauren Fulks, secretary for the advisory committee, announced that the committee in the process of finalizing the membership of those subcommittees and it is anticipated that their workstreams will kick off in June.
Official statements and documents
- Event Details
- Meeting Agenda
- Statement of Commissioner Caroline Pham
- Statement of Commissioner Summer K. Mersinger
- Statement of Commissioner Christy Goldsmith Romero
- News & Commentary