Opening Statement of Commissioner Dan M. Berkovitz before the Energy and Environmental Markets Advisory Committee

November 7, 2019

Good morning, and welcome to the Energy and Environmental Markets Advisory Committee (EEMAC or Committee).

I would like to begin by welcoming our six new associate members.  Dr. John Parsons from MIT will serve the Committee as a Special Government Employee.  Dr. Parsons is a financial economist specializing in, among other things, risk management in energy and environmental markets and the process of decarbonization.  Sean Cota is the President and CEO of NEFI, a national association of retail heating fuel companies, and third-generation owner of a New England fuel marketing business.  Noha Sidhom is the CEO of TPC Energy, LLC, which trades power products in the organized markets and on CFTC regulated exchanges, and the co-founder and Executive Director of the Energy Trading Institute representing commercial energy market participants.  Kaiser Malik is Vice President and Assistant General Counsel for Calpine’s wholesale power, natural gas, and environmental trading and marketing operations, and leads the legal division for Calpine’s retail energy businesses.  Erik Heinle is an Assistant People’s Counsel with the Office of the People’s Counsel for the District of Columbia, representing District ratepayers before PJM and various federal regulators, and served as Co-Chair of the Energy Bar Association’s Renewable Energy Subcommittee.  And Dan Dunleavy is a former energy trader and the Manager of Energy Strategy for Ingevity Corporation, a specialty chemical company based in Charleston, S.C.  We are pleased welcome each of you and look forward to hearing your diverse perspectives.

I would also like to thank all of our returning Members and Associate Members for joining us today.  The insights you share with the Commission through your participation in the EEMAC are very valuable and much appreciated.

I would like to thank Dena Wiggins for her continued service to the Committee as our EEMAC Chair.  Ms. Wiggins is the President and CEO of the Natural Gas Supply Association, and has over 25 years of experience representing energy clients in federal regulatory matters.  This is her third meeting as EEMAC Chair and we are grateful for her leadership.

I am pleased to recognize Chairman Tarbert, and Commissioners Behnam and Stump, and appreciate their participation today.

I would like to thank the Commission staff that made today’s meeting possible, including Abigail Knauff, the EEMAC secretary; Margie Yates and Altonio Downing; Lucy Hynes and Erica Quinlan on my staff; Michelle Ghim in the Office of General Counsel, and everyone else that worked so hard behind the scenes to prepare for this meeting.

I now would like to recognize Sue Kelly, President of the American Public Power Association.  Sue has announced that she will be retiring at the end of this year.  This will be her last meeting on this advisory committee.  My relationship with Sue goes back many years, form our time working on the Dodd-Frank legislation and its implementing regulations.  I recall attending an APPA meeting in Seattle in 2013, at Sue’s invitation, to provide a tutorial on the CFTC’s new Dodd-Frank requirements.  Both then and now Sue has been a tireless—perhaps relentless is better word to describe Sue’s activity at the CFTC—and effective advocate for the interests of the public power utilities.  Sue is a true leader in the energy industry, and her strong voice will be missed at the CFTC.

The CFTC established this Committee in 2008 as the Energy Markets Advisory Committee, to advise the Commission on developments in energy markets that raise new issues for the CFTC, and to recommend appropriate regulatory responses to ensure market integrity and protect consumers.[1]  In 2009, under former Commissioner Bart Chilton’s leadership, the Commission expanded the scope of the Committee to include environmental markets.

Like the Committee’s inaugural meeting in 2009, we will focus today’s presentations on the environmental markets.  But in the intervening ten years, the landscape of energy generation has changed dramatically.  New technologies have enabled the U.S. to be the world’s largest producer of natural gas and crude oil, and energy generation from renewable sources such as solar and wind has doubled.[2]  As the mix of energy sources continues to diversify and firms continue to innovate, we can expect further changes in the physical markets, which may lead to corresponding changes in how market participants use derivatives to hedge their risks.

Today’s meeting will focus on how the evolving mix of energy generation resources—which includes coal, natural gas, nuclear, oil, and various renewable energy sources—is impacting the physical markets and may subsequently impact the energy and environmental derivatives markets regulated by the CFTC.

Panel I: The Global Energy Transition: Evolving Standards Impacting Physical Markets

Our first panel will explore the evolving state, federal, and global regulations that impose various renewable energy mandates and goals for energy production and procurement.  Tyson Slocum from Public Citizen will begin by discussing how regulation and market forces are affecting the deployment of renewable energy, and suggest ways in which the federal government can assist in the growth of renewable energy.  Jenny Fordham from the Natural Gas Supply Association, Sue Kelly from APPA, and Vincent Johnson from BP Energy Company will discuss some of the challenges of, and opportunities for, incorporating renewables into the power supply, including the shifts in capital investment, maintaining affordable prices, and managing risk.

Panel II: Exchange-Traded Environmental Derivatives Contracts

On the second panel, we will hear from Daniel Scarbrough of IncubEx, a partner of Nodal Exchange and EEX Group, and Michael Kierstead of ICE.  Dan and Mike will give us an overview of the current state of CFTC-regulated environmental futures markets, including emissions trading and Renewable Energy Certificate futures.  Dr. Richard Sandor, who is a global leader in successfully creating new financial products and markets, will explain how new products and markets are created.

Panel III: The Impact of the Global Energy Transition on Market Participants’ Use of the Energy and Environmental Derivatives Markets

Our third and final panel will discuss the effect of the energy transition on how market participants hedge risk using exchange-traded and OTC derivatives.  Our panelists include Matthew Picardi of the Commercial Energy Working Group, Lopa Parikh of Edison Electric Institute, Paul Hughes of Southern Company, Bill McCoy of Morgan Stanley, and Jackie Roberts of the Consumer Advocate Division of West Virginia.  The panelists will describe how they use CFTC-regulated exchanges and OTC markets to manage risks for renewable energy commodities and project financing, as well as limitations presented by those markets.

We look forward to hearing from our Members and Associate Members on these issues.