On June 17, APGA, the American Public Power Association and Large Public Power Council sent a letter to the members of the Financial Reform Conference Committee that expresses opposition to the fiduciary duty provision that is currently included in the financial reform legislation, entitled the Wall Street Reform and Consumer Protection Act, being considered in conference committee. The letter also communicates concern with any replacement of this language that would require public gas and power systems to hire a third-party advisor to approve all of their transactions or place a standard of care on the swap dealer that would make it difficult, if not impossible, for swap dealers to enter into transactions with those systems.

The fiduciary duty provision being considered by the conference committee would place a fiduciary duty on a swap dealer when their counter-party is a state or local government.  APGA is extremely concerned that swap dealers will be less inclined to make a deal with public gas systems if they have to act as their fiduciary.  The swap dealer takes the opposite side of a transaction from the end-user.  Accordingly, it is inconsistent with the fundamental structure of a swap transaction to provide that the dealer should also act as a fiduciary.  APGA is extremely concerned that the ultimate result of this provision would be that public gas systems would no longer be able to use these markets to hedge on behalf of their customers, thus subjecting them to greater price volatility and increased rates. 

The conference committee, formed to resolve differences between the House and Senate-passed versions of financial reform legislation, is pushing to get a final bill to the President prior to the upcoming July 4 recess. A copy of the letter referenced in this article is available on the APGA website at www.apga.org. If you have any questions on this article, please contact Dave Schryver of APGA’s staff by phone at 202-464-2742 or by email at dschryver@apga.org. 

Return to Archives