February 2006 Market Clearing in the Energy Industry 58 © Copyright 2006, CCRO. All rights reserved. (2) CONFORMING AMENDMENT- The table of sections for chapter 5 of title 11, United States Code, is amended by inserting after the item relating to section 560 the following: 561. Contractual right to terminate, liquidate, accelerate, or offset under a master netting agreement and across contracts proceedings under chapter 15. 11.1. Expanded Discussion of Relevant Cases Olympic Natural Gas Co. v. Androscoggin Energy LLC: Creating definitional conflicts for Commodity contact, forward contract, forward contact merchant, and settlement payment. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (the “Reform Act”) expands the Bankruptcy Code’s definitions of “forward contract”, “swap agreement”, “commodity contract” and “forward contract merchant”. Generally, the definitions now are much more harmonized. Mirant Corporation v. Kern Oil & Refining Company: Creating uncertainty as to who is a ‘forward contract merchant”. Kern entered into a fuel supply contract with Mirant to purchase natural gas to fuel its cogeneration facility. Kern stated that it was a forward contract merchant by virtue of it having entered into a fuel contract in connection with its business and therefore entitled to an exception to the §362 stay. The U.S. Bankruptcy Court for the Northern District of Texas ruled that simply entering into a fuel contract in connection with a person’s business does not make such person a forward contract merchant. The Bankruptcy Court lacked sufficient evidence to conclusively rule that Kern was not a forward contract merchant. However, the Bankruptcy Court held that for Kern to be a forward contract merchant and therefore properly invoke the safe harbor provisions, Kern must have entered into the gas agreement as a participant seeking profit in the forward contract trade. The Reform Act does not further address this issue. Mirant Corporation v. Bonneville Power Administration (BPA): Confirming that a government agency (BPA) is not a “person” and thus cannot be a “forward contract merchant” and cannot avail itself of the exception to the §362 stay. The U.S. Bankruptcy Court for the Northern District of Texas ruled that BPA could not terminate its contracts with Mirant and was to fulfill its obligations under those contracts. This is no longer the case under the Reform Act which amends §101(26) of the Bankruptcy Code to define a "forward contract merchant" to mean a federal reserve bank, or an entity (formerly, a "person" which excluded a governmental entity such as BPA or a governmental unit such as a municipality) the business of which consists in whole or in part of entering into forward contracts as or with merchants in a commodity or any similar good, article, service, right, or interest which is presently or in the future becomes the subject of dealing in the forward contract trade. NRG Energy v. Connecticut Light & Power: Creating uncertainty of interpretation among Sections §362 and §365 and §1129 between bankruptcy court and FERC jurisdiction. After NRG bought four power plants from CL&P, the power marketing unit of NRG Energy Inc., Power Marketing Inc. (“PMI”) in October 1999 entered into a four-year contract, effective from January 1, 2000 through December 31, 2003, to supply 45% of the daily power requirements of