In legislative language sent to Congress August 11, the Obama administration proposes to standardize over-the-counter (OTC) derivative trading and centralize its regulation. This would affect energy trades and hedges against volatile prices in California. “It’s comprehensive regulation . . . in order to reduce risk,” said Michael Barr, Assistant Treasury Secretary for Financial Institutions. The legislation would “permit flexibility for financial innovation.” Because trades would be made on a regulated exchange, he added that the legislation would increase transparency for price and volume. “It’s awful,” noted Gary Ackerman, executive director of the Western Power Trading Forum. "For electricity and natural gas, although the structure for the commodity regulation pending will be the same as all other commodities under the CFTC, there could be looser position limits given that these two commodities can be argued follow fundamentals (supply and demand) rather than as investment vehicles for pension funds and hedge funds. However, at present there is nothing the CFTC has released that would explicitly spell that out." Traders fear new regulation will strangle trading. They also worry their trading costs may increase. After the announcement, gas dropped to $3.56/MMBtu, a six-year low. The California Public Utilities Commission allows California utilities to hedge against volatile gas prices. The administration plans to push traders to the regulated exchange by making costs on unregulated platforms higher for non-standardized products. It includes “tools to deter market manipulators like [Commodities Futures Trading Commission] authority to set position limits,” said Barr. That is, financial firms could not corner a market. The language allows a one year transition period for existing contracts.