Senate Banking Committee to vote on PUHCA repeal

By the OGJ Online Staff

HOUSTON, Apr. 23 -- The Senate Banking Committee Tuesday is scheduled to consider repeal of the Public Utility Holding Company Act (PUHCA), which controls corporate structure, diversification, and affiliate transactions in the utility industry.

Billionaire investor Warren Buffett has been one of the strongest and most vocal supporters of the effort to rescind PUHCA. Buffett made his first utility acquisition through Berkshire Hathaway last year, buying MidAmerican Energy Holdings Co.

If the bill passes, it will be up to Sen. Trent Lott, the majority leader to schedule a vote by the full Senate. However, industry sources Monday said prospects for markup of a stand alone bill are dimming. Some observers believe the proposal stands a better chance in an omnibus bill that incorporates repeal of PUHCA as well as other reform measures the industry is seeking.

Sen. Richard Shelby (R-Ala.) introduced SB. 206, the Public Utility Holding Company Act of 2001, Jan. 31. Repeal now on a stand-alone basis will only make current electricity problems worse, said Alan H. Richardson, CEO of the American Public Power Association (APPA).

Richardson said repeal should be part of a broader electricity bill that would promote "real" wholesale competition in the electric utility industry. An APPA study found the number of registered utility holding companies has more than doubled in the past 9 years, expanding to 30 from 14 since 1992. The 30 registered holding companies own 70 electric utilities that serve 32% of all electricity customers.

When measured by number of electric customers, 13 of the 25 largest utilities, including all affiliates and subsidiaries, are registered holding companies, APPA said.

SB. 206 would repeal key features of PUHCA, eliminating geographic limitations on registered holding companies, and changing access to company books and records. Richardson claimed the bills would shift the consumer watchdog role from the federal government to the states, which are "just not equipped to deal with interstate issues."

PUHCA was enacted in 1935 to simplify the structure of the electric utility industry and prevent consumer and stockholder abuses. Utility holding companies subject to PUHCA must register with the Securities and Exchange Commission, which is charged with enforcing PUHCA provisions. Utilities owned by a registered holding company must be part of a single integrated system.

Utility holding companies can receive an exemption from PUHCA if they serve customers in only one state or only in states that are contiguous to the holding company's home state. The act limits diversification activities and governs transactions between affiliate companies.

In addition to the 30 registered holding companies, there are another 37 exempt holding companies that own 52 electric utilities serving an additional 35% of the nation's electricity customers, APPA said.