Recently, I’ve been doing research on what Congress could do to help eastern North Carolina lower our electricity bills. Early on, I really believed that a financial bailout would have been the right choice. It would be easier to pay back the Feds at a much lower interest rate than to pay these bonds rates.

After talking with several Representatives, I realize this is not going to happen. Why? Well, not because the Government is out of money; not because our Reps don’t want to help. But because if our Representatives used political capital to make this happen (ie, sponsor a bill and get it to committee and on the House floor) every Northern State (New Jersey, New York, Conn., et. al.) would be wanting the same thing, and wanting there fair share of bailout money.  It is true that some northern States are paying over 23 cents per kWh.  Our 2.5 Billion of debt would be skewed into Billions more as these states came to collect their check.  Not to mention the west coast States. So, any reasonable person can see where this is going…no where.

But, there really is something Congress can do.

Congress could and should regulate to a greater degree the Wall Street speculation of crude oil, both in the CBOT and Nymex.

Why? If you remember last year, ElectriCities sited as a major reason of our 14% plus increases was the high and unexpected cost of oil.  Specifically, the price of a barrel of oil reached to over $150.

In essence, the price of crude oil today is really not made according to a traditional relationship of supply and demand. It is controlled by National and International speculative markets.

Case in point from Yahoo Financials:

I trended this up to 2006 to illustrate a point. Take a look at the 9/11 mark, the beginning of the Iraq War mark, and Katrina Mark.

A June 2006 US Senate Permanent Subcommittee on Investigations report on “The Role of Market Speculation in rising oil and gas prices,” noted, “…there is substantial evidence supporting the conclusion that the large amount of speculation in the current market has significantly increased prices.”

So here my point in a nutshell.

There are enough small blogs writing about utilities in eastern North Carolina, that if combined, would create a very powerful force to get attention to this matter.  Secondly, this is something that each citizen could take to their city council and get genuine support. I would assume ElectriCities would be on board with this, along with both Power Agencies: After all, their job is to buy at the cheapest price. This would certainly be good, not only for North Carolina, but for every State strapped for cash.

Please look at this Senate Report compiled from the same sourse as above.

“Until recently, US energy futures were traded exclusively on regulated exchanges within the United States, like the NYMEX, which are subject to extensive oversight by the CFTC, including ongoing monitoring to detect and prevent price manipulation or fraud. In recent years, however, there has been a tremendous growth in the trading of contracts that look and are structured just like futures contracts, but which are traded on unregulated OTC electronic markets. Because of their similarity to futures contracts they are often called “futures look-alikes.”

The only practical difference between futures look-alike contracts and futures contracts is that the look-alikes are traded in unregulated markets whereas futures are traded on regulated exchanges. The trading of energy commodities by large firms on OTC electronic exchanges was exempted from CFTC oversight by a provision inserted at the behest of Enron and other large energy traders into the Commodity Futures Modernization Act of 2000 in the waning hours of the 106th Congress.

The impact on market oversight has been substantial. NYMEX traders, for example, are required to keep records of all trades and report large trades to the CFTC. These Large Trader Reports, together with daily trading data providing price and volume information, are the CFTC’s primary tools to gauge the extent of speculation in the markets and to detect, prevent, and prosecute price manipulation. CFTC Chairman Reuben Jeffrey recently stated: “The Commission’s Large Trader information system is one of the cornerstones of our surveillance program and enables detection of concentrated and coordinated positions that might be used by one or more traders to attempt manipulation.”

In contrast to trades conducted on the NYMEX, traders on unregulated OTC electronic exchanges are not required to keep records or file Large Trader Reports with the CFTC, and these trades are exempt from routine CFTC oversight. In contrast to trades conducted on regulated futures exchanges, there is no limit on the number of contracts a speculator may hold on an unregulated OTC electronic exchange, no monitoring of trading by the exchange itself, and no reporting of the amount of outstanding contracts (“open interest”) at the end of each day.”

The bottom line is this could very well save our necks…if we act to pressure Congress to do the right thing and restructure Commodity and Futures Trading through the CEA and CFTC.