FERC criticized in natgas mkt manipulation dispute

By Tom Doggett

WASHINGTON, Sept 26 (Reuters) - Lawmakers and industry leaders criticized FERC on Wednesday for overstepping its authority to fight manipulation in natural gas markets, claiming that this could lead to conflicting regulation for market participants.

The Federal Energy Regulatory Commission and the Commodity Futures Trading Commission in July brought separate cases against hedge fund Amaranth Advisors LLC for allegedly manipulating natural gas prices. The suits sought millions of dollars in fines and the return of illegal profits.

However, Amaranth has asked a federal court in New York to rule that the CFTC, and not FERC, has sole authority to regulate the gas futures market where much of the fund's trading took place and therefore drop the FERC case.

"There is a growing fear that recent FERC actions may be encroaching upon the CFTC's exclusive jurisdiction over the futures markets," said Rep. Bob Etheridge, chairman of a House Agriculture subcommittee, at a hearing on reauthorizing the federal commodities trading law.

"I do not know why the FERC chose to take an enforcement action which has called its own authority into question," Etheridge said.

FERC regulates the buying and selling of natural gas that is shipped by pipelines across state lines, while the CFTC regulates commodity exchanges, including the New York Mercantile Exchange (NMX.N: Quote, Profile, Research) which lists contracts for the delivery of natural gas in the future at certain prices.

In a broad energy bill passed by Congress in 2005, lawmakers said FERC could go after energy market manipulation and impose big fines for wrongdoing.

However, Etheridge said Congress intended for the CFTC to have exclusive jurisdiction over NYMEX and other futures markets.