Washington, D.C. - U.S. Senator Mike Enzi, R-Wyo., Chairman of the Banking Subcommittee on Securities and Investment, said Wyoming is in a "prime position" to help with the nation's energy needs, but the Public Utility Holding Act of 1935 may be a limit on the state's potential.
Enzi held a hearing in his committee today to discuss possible repeal of the Act. David M. Sparby, Vice President of Xcel Energy Inc., the company that acquired Cheyenne Light, Fuel and Power, also testified.
The following is a statement from Enzi. Sparby's 10-page testimony is also available by fax by contacting Enzi's press office.
Statement of Senator Michael B. Enzi
Chairman of the Senate Banking Subcommittee on Securities and Investment
Hearing on S.206, the Public Utility Holding Company Act of 2001
I would like to welcome everyone to the Senate Banking Subcommittee on Securities and Investment hearing on S. 206, the Public Utility Holding Company Act of 2001, a bill that is sponsored by my colleague Mr. Shelby from Alabama. This is my first hearing as chairman of this subcommittee. I look forward to addressing other issues of similar importance in the future. I also would like to thank the witnesses for their willingness to be here today and to share their insights on the role of this act in 21st Century energy markets.
A lot of things have changed since the Public Utility Holding Company Act, or PUHCA was first passed into law back in 1935. Our modern, high tech economy has placed such demand on our aging energy grids that we are now outpacing our ability to generate electricity. As a result, much of our nation is poised on a fine edge where we can expect more and more brownouts like those recently experienced in California. There is no other way to explain things other than to say we have failed to plan for our future energy needs and California's problems are only the beginning. By failing to develop a national energy policy we have allowed our dependence on foreign energy supplies to place our nation at great risk. By placing short-term gains ahead of long-term stability, -more-
we have caused energy prices to jump dramatically across the United States.
With the lines blurring between energy production, transportation and consumption in the new high tech economy, flexibility is going to become more and more important. Without flexibility, we place incredible limits on our energy markets and limit our ability to adapt to innovations that could revolutionize our children's futures. The question, before us today, therefore, is "Given the need for flexibility is there room for a statute like PUHCA?"
There are some considerable arguments that PUHCA has outlived it purpose. Created in 1935, PUHCA was designed to fill a regulatory void that had allowed electricity and gas holding companies to take advantage of the situation to place layer upon layer of corporations between themselves and their customers. Before PUHCA, holding companies could hide behind these corporate layers to avoid liability, and to manipulate consumer rates by requiring operating companies to contract services with each other at exorbitant prices. This self-dealing drove up consumer rates and threatened service when highly leveraged holding companies were unable to pay their debts after the stock market crash in 1929. PUHCA put an end to many of these unfair practices and abuses by stripping back the corporate shields and limited holding companies to just two levels. It then placed authority to monitor securities, mergers, and other activities within the companies with the Securities and Exchange Commission (SEC). Companies were then granted an exclusive service area in return for a requirement to provide reliable electric service to all customers at a regulated price.
As I said earlier, however, times have changed and the role played by the SEC and PUHCA in utility regulation has evolved. The Federal Energy Regulatory Commission now has jurisdiction over all interstate wholesale electricity generation, and state Public Utility Commissions are now controlling agencies that oversee state utility rates. The Department of Justice and the Federal Trade Commission now have authority over holding companies and share in regulating their structure and functions. The void that existed before PUHCA no longer exists.
This oversight redundancy has created a situation where even the SEC has agreed that PUHCA is no longer necessary to protect investors or the rate-paying public. In fact, PUHCA has become a barrier to competition in the energy marketplace and inhibits investment.
I have some very high hopes about the future of Wyoming. I see the need that exists in the United States for affordable, reliable energy and recognize that Wyoming is in a prime position to fill those needs. But I am also deeply concerned that without adequate flexibility, diversity, and planning, Wyoming's options for the future will be severely hamstrung. PUHCA has a chilling effect on Wyoming investments because it limits the number of companies allowed to participate in investing in Wyoming's future. It also limits the kinds of investments that are allowed. PUHCA repeal is an important first step in the development of a comprehensive, real-world energy policy. I look forward to hearing from our witnesses and hope they will be able to shed some light on what should be done with PUHCA.