Inside The Energy Bill: PUHCA Repeal

Friday, July 01, 2005

Tuesday the Senate voted 85-12 in favor of new energy legislation that would repeal PUHCA (Public Utility Holding Company Act). This legislation still has a few obstacles to overcome before it is passed onto the President, and now is the time to act. With a quick look at what PUCHA does, we can easily see why it is so important. First, we have to understand what a holding company is. A holding company owns or holds stock in another company. What PUCHA covers is:
1. limits the geographic spread of utility holding companies, the kinds of business they may enter, the number of holding companies over a utility in a corporate hierarchy, and their capital structure.
2. controls the amount of debt, dividends, loans and gaurantees based on utility subsidiaries, and the securities that parent companies may issue.
3. regulates self-dealing among affiliate companies and cross-subsidies of unregulated businesses by regulated business.
4. controls acquisitions of other utilities and other businesses.
5. limits common ownership of both electric and natural gas utilites.
6. limits the activites and campaign contibutions of officers and directors of holding companies, has control over their accounts, books and records, and regulates them in a number of other ways.
It may look a bit overwhelming but it is really simple, PUCHA does not allow a company to own and control utilites unless they give up their other businesses. Large corporations would like to take the steady reliable profit from the utilities to then invest in more high-risk ventures.
As of right now 5 oil companies control 50% of oil production in the United States. Would it be a good idea to allow them to start gobbling up utilites also? What would happen to the prices? What would happen when the other risky ventures fail as they did in the Great Depression era?
PUHCA was passed in 1935 during the great depression. It was enacted because from 1929 to 1936, 53 utility companies went bankrupt. I urge you to write your congressmen/women, write to the news outlets in your area and let them know you do not want PUCHA repealed.

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