Senate Banking OKs Stand-Alone Repeal of PUHCA
The Senate Banking Committee last week overwhelmingly voted to repeal the 65-year-old Public Utility Holding Company Act (PUHCA) that imposed limitations on investment and ownership in energy companies in an effort to prevent industry abuses.
By a vote of 19-1, with Sen. Debbie Stabenow (D-MI) as the lone opponent, the committee approved piece-meal legislation to rescind PUHCA and transfer oversight of public utility holding companies from the Securities and Exchange Commission (SEC) to the Federal Energy Regulatory Commission and certain state agencies.
Several amendments were attached to S. 206, sponsored by Sen. Richard Shelby (R-AL). One, offered by Sen. Mike Enzi (R-WY), seeks to establish the Electric Energy Market Competition Task Force to study competition in the wholesale and retail markets for electric energy nationwide. The task force would be comprised of representatives from FERC, the Department of Justice and the Federal Trade Commission, as well as non-voting representatives from the SEC and the Department of Agriculture.
The Enzi amendment also included a provision, co-sponsored by Sen. Paul Sarbanes (R-MD), that would preserve FERC's authority to ensure energy rates are reasonable and block the pass-through of holding company costs that are unrelated to energy.
Another amendment, sponsored by Sen. Jon Corzine (D-NJ), called for the General Accounting Office (GAO) to conduct a study of federal and state efforts to curb the anti-competitive practices of public utility holding companies, and promote competitive and efficient energy markets.
Committee Chairman Phil Gramm (R-TX, a long-time advocate of PUHCA repeal, said the law was "antiquated and redundant," a "barrier to...investment in power plants and transmission lines" that are needed nationwide, and "impede[d] the functioning of a competitive market" for energy.
"I think it [the law] hurts ratepayers. I think it hurts investors. When a regulation, now 65 or 66 years old, is deemed to be harmful to ratepayers and investing, the time has come to repeal it," Gramm said last Tuesday. He especially believes that rescinding the law will help spur investment in generation facilities in California, as well as promote plan investment elsewhere in the country.
Billionaire investor Warren E. Buffett signaled last week that he may invest up to $10 billion in utility companies through his company, Berkshire Hathaway Inc., if Congress should move to repeal PUHCA. Berkshire Hathaway made its foray into the energy business last year when it and other investors purchased MidAmerican Energy Holdings Co., a Des Moines, IA, holding company that owns MidAmerican Energy in the United States and Northern Electric in the United Kingdom. The companies serve 2.2 million electric customers and 1.2 million natural gas consumers worldwide.
But the committee's action last week was only the first step in what could be a drawn-out process. The legislation will likely face opposition when it reaches the Senate floor from lawmakers, who either are against repeal of PUHCA or would prefer to see it done as part of a comprehensive energy bill. The measure for years has been held hostage to overall electric restructuring legislation.
Gramm last week warned that he will resort to a "full-court press" to get the legislation through the full Senate this year. In fact, he said it's "distinctly possible" that PUHCA repeal legislation "could turn out to be the only energy bill passed this year or in this Congress."
Industry reaction to the Senate Banking Committee's approval of stand-alone repeal of PUHCA was mixed. The American Public Power Association (APPA), which represents community- and state-owned electric utilities, lobbied hard against the bill, saying that it instead favored repealing PUHCA as part of a larger, comprehensive energy measure that would promote "real wholesale competition" and create "meaningful consumer protections" in its place.
"PUHCA repeal now on a stand-alone basis will only make our current electricity problems worse, especially in light of a trend toward consolidation in the electric utility industry," said APPA President Alan H. Richardson. "California's experience with piece-meal, incomplete approaches to changes in the structure and regulation of the electricity industry should serve as a warning signal to inform members of the Senate with respect to the potential impacts of stand-alone PUHCA repeal."
S. 206 would repeal key features of PUHCA, eliminating geographic limitations on registered holding companies and "water" down federal agency access to company books and records, he noted. This bill "would essentially shift the consumer watchdog role from the federal arena to the states, which are just not equipped to deal with interstate issues."
An APPA report shows that the number of registered holding companies in the U.S. has more than doubled in the past nine years, expanding from 14 to 30. The 30 registered holding companies own 70 electric utilities that serve approximately 32% of all electricity customers, it said. The APPA report further noted that 13 of the 25 largest utilities (in terms of electric customers) are registered holding companies. The proliferation of registered holding companies, the power group believes, underscores the need for PUHCA to be succeeded by strong consumer protections.
But a representative of the Interstate Natural Gas Association of America (INGAA), which represents interstate gas pipelines, said it supported PUHCA repeal, regardless of how it's done. "Whatever gets it done, stand-alone or comprehensive [legislation]. We support PUHCA repeal."
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