Dec. 2 (Bloomberg) -- Congress must explicitly limit the Commodity Futures Trading Commission’s authority over wholesale power markets, leaving that oversight to U.S. energy regulators, industry groups said.

The Electric Power Supply Association and Edison Electric Institute will tell a House of Representatives subcommittee today that the Federal Energy Regulatory Commission should have exclusive jurisdiction over those markets, according to their prepared testimonies. The organizations represent the largest U.S. power companies, including Exelon Corp. and Southern Co.

The groups, based in Washington, will testify before a panel of the House Energy and Commerce Committee on legislation that would subject trading in the $605 trillion over-the-counter derivatives market to new regulations, as part of a larger rewrite of government rules for the financial industry.

The legislation “should expressly not include the day- ahead, real-time and financial transmission rights products” traded on power markets managed by regional transmission organizations, John Shelk, chief executive officer of the Electric Power Supply Association, said in his written remarks.

Subcommittee Chairman Edward Markey, a Massachusetts Democrat, has said derivatives legislation approved by the House Financial Services and Agriculture Committees “needs to be fixed” to prevent it from “interfering” with power and natural gas markets.

‘Clear and Unambiguous’

Derivatives are contracts used to hedge against changes in stocks, bonds, currencies, commodities, interest rates and weather. The Agriculture Committee approved legislation on Oct. 21 to set capital and margin requirements, along with other restrictions to make trading more transparent. The House Financial Services Committee on Oct. 15 approved a similar bill.

Derivatives legislation was primarily conceived to target speculative Wall Street trading, partly to prevent a repeat of last year’s collapse of Lehman Brothers Holdings Inc. and American International Group Inc., which froze credit markets.

So-called end users including energy companies use forward contracts and other derivatives to lock in lower costs for coal, oil and commodities that can have frequent or extreme swings in prices. Both the Electric Power Supply Association and Edison Electric Institute said Congress should exempt power companies from requirements that derivatives transactions go through clearinghouses or regulated exchanges.

The added costs of having to meet margin requirements “could increase the power prices we charge utilities and other customers we serve by anywhere from 5 to 15 percent,” Elizabeth Moler, executive vice president for public affairs and government policy at Chicago-based Exelon, said in prepared testimony on behalf of the Edison Electric Institute.

“Clear and unambiguous authority for FERC to regulate these transactions is essential,” said Moler, a former chairman of FERC. “We see no reason for duplicative” regulation.

To contact the reporter on this story: Tina Davis Seeley in Washington at tseeley@bloomberg.net.

Last Updated: December 2, 2009 00:00 EST