Head of U.S. energy panel backs FERC in natgas case

By Tom Doggett

WASHINGTON (Reuters) - The chairman of the U.S. Senate's energy committee on Tuesday backed the Federal Energy Regulatory Commission's legal action against defunct hedge fund Amaranth Advisors for market manipulation, saying the agency was carrying out the will of Congress.

A federal court is looking at whether FERC or the Commodity Futures Trading Commission has the authority to punish Amaranth after both agencies filed charges against the fund for allegedly manipulating natural gas futures prices.

Amaranth asked the court to rule that the CFTC, and not FERC, has the sole authority to regulate the gas futures market, where the fund's trading took place, and to strike down the FERC charges.

FERC regulates the buying and selling of natural gas that is transported by pipelines across state lines, while the CFTC regulates commodity exchanges, including the New York Mercantile Exchange NMX.N, which lists contracts for the delivery of natural gas in the future at specified prices.

Jeff Bingaman, who heads the Senate Energy and Natural Resources Committee, said FERC is carrying out the broad energy bill Congress passed in 2005 that gave the agency new authority to go after the manipulation of natural gas and electric markets and impose big fines on the wrongdoers.

Bingaman told the Reuters Environment Summit in Washington that Congress intended that "FERC had the authority it needed to go after any price manipulation, any manipulation, that resulted in affecting the price of (energy) commodities that consumers are having to pay."

"If that happens through manipulation of the futures market, then so be it," he said.

However, NYMEX President James Newsome told Congress last week that FERC's action has caused confusion and regulatory uncertainty among market participants.

Newsome said that if FERC prevailed, then the Agriculture Department could try to regulate futures market trading in corn, wheat and other grains and the Treasury Department might claim a role over bond, currency and other financial futures trading.

In a legal brief to the court, the CFTC said Congress gave the CFTC the "sole power and authority among federal regulatory agencies to adjudicate the lawfulness of futures trading on designated contract markets such as the NYMEX."

FERC said the powers granted by Congress also give it the authority to pursue Amaranth for manipulating gas futures prices, which affect the price of gas supplies sold off the exchange that are regulated by FERC.

A CFTC spokesperson pointed out that the CFTC and FERC "share a common goal" of making sure energy markets are not manipulated.

"Regardless of the outcome of the court's decision, no regulatory gaps will exist in the federal regulation of the energy markets," the spokesperson said.

Bingaman said there was a benefit in having two agencies going after market manipulators.

"If it's uncertainty about who's going to prosecute you, I don't know that that's a bad end result," he said. "I think the fact that more than one agency might choose to do that may be a good thing."

(Reporting by Tom Doggett)