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Page 32 of 37 <br />other form of credit enhancement entered into in connection with the <br />obligation. <br />(2) "Eligible project" has the meaning assigned by <br />Section 1371.001. <br />(3) "Hedging" means acting to protect against economic <br />loss due to price fluctuation of a commodity or related investment by <br />entering into an offsetting position or using a financial agreement <br />or producer price agreement in a correlated security, index, or other <br />commodity. <br />(b) This section prevails to the extent of any conflict between <br />this section and: <br />(1) another law; or <br />(2) an eligible entity's municipal charter, if applicable. <br />(c) The governing body of an eligible entity shall establish <br />the entity's policy regarding hedging transactions. <br />(d) An eligible entity may enter into hedging transactions, <br />including hedging contracts, and related security, credit, and <br />insurance agreements in connection with commodities used by an <br />eligible entity in the entity's general operations, with the <br />acquisition or construction of a capital project, or with an eligible <br />project. A hedging transaction must comply with the regulations of <br />the federal Commodity Futures Trading Commission and the federal <br />Securities and Exchange Commission. <br />(e) An eligible entity may pledge as security for and to the <br />payment of a hedging contract or a security, credit, or insurance <br />agreement any general or special revenues or funds the entity is <br />authorized by law to pledge to the payment of any other obligation. <br />(f) Section 1371.059(c) applies to the execution by an eligible <br />entity of a hedging contract and any related security, credit, or <br />insurance agreement. <br />(g) An eligible entity may credit any amount the entity <br />receives under a hedging contract against expenses associated with a <br />commodity purchase. <br />(h) An eligible entity's cost of or payment under a hedging <br />contract or agreement may be considered: <br />(1) an operation and maintenance expense of the eligible <br />entity; <br />(2) an acquisition expense of the eligible entity; <br />4/18/2018 <br />