US Considers Limits on Energy Trading

Yesterday’s AP wire brought with it a surprising article about a push to establish trading limits on energy futures contracts. See below:

US considers limits on Energy Trading
US regulator says limits on energy futures trading must be weighed due to hurtful price swings
By Marcy Gordon, AP Business Writer, Tuesday July 28, 2009.

I am not sure this will fly.

Unregulated energy markets are terribly efficient today.
Prior to the futures exchanges and otc markets it was far easier for a company or group of companies or OPEC to stockpile physical oil; squeezing the market and bagging the windfall. Today yes, the price can be bid up on speculation but it cuts both ways; someone's bluff can be called and/or the market produces more supply, higher mileage vehicles become vogue, and the consumer crushes demand. These non-physical markets took OPEC out of the drivers seat and have kept them out.

Since 1972 (and probably before that) every time the government, or quasi-government agency, has attempted to rescue the general public from the evil oil & gas companies (including the trading community) they have created unnatural and inefficient "rules" inconsistent with a free market economy. Example: the price controls following the 1979 second oil crisis led to unnecessary regional shortages of gasoline and a boom for oil producers; i.e. "new" oil vs "old" oil. Prices remained artificially high for a number of years. Finally  Regan decontrolled the oil & gas prices in 1986 letting the natural state of supply and demand take over dropping the price to the floor along with his critics.

If indeed limits on energy trading are set, look for it to be short-lived. New rules create new games and the trade will out fox the regulators every time.

FERC develops smart grid transmission system

FERC took a step yesterday regarding the development of a smart electric transmission system. The Smart Grid Policy Statement sets priorities for work on development of standards that could help make such a system more reliable.

FERC set out policy for recovery of costs by utilities that act early to adopt smart grid technology. FERC got lots of comments from interested groups (70) that shows broad support for a smart grid policy.

FERC wants these early development standards: (a) ensure the cyber-security of the grid; (b) provide two-way communications among regional market operators, utilities, service providers and consumers; (c) ensure that power system operators have equipment that allows them to operate reliably by monitoring their own systems as well as neighboring systems that affect them; and (d) coordinate the integration into the power system of emerging technologies such as renewable resources, demand response resources, electricity storage facilities and electric transportation systems.

One interesting side note, FERC said that it will not interfere with any state's ability to adopt whatever advanced metering or demand response program it chooses.

This policy will take effect 60 days after publication in the Federal Register. I can send the entire policy if people want to read it just let me know.

So my question is what group emerges as smart grid leaders? Will it be the technology companies or will it be utility/energy companies? Here are some of the smart grid stocks I am currently following: CSCO, IBM, GOOG, COMV, DGII, ELON, ESE, GE, ITRI, TLVT, and RUGGF.