Linkmeister

PUHCA

In its never-ending attempt to repeal the New Deal, the Republican Congress succeeded in adding a provision to the Energy Bill which repeals PUHCA, the Public Utilities Holding Companies Act. Big whoop, you say? Well, yeah. Do you remember a company named Enron? Repealing PUHCA will allow utilities to consolidate with little or no regulation. Their argument is that mergers would infuse capital into the industry, thus allowing them to update aging infrastructure. Sounds reasonable, right? We wouldn't want to have a repeat of that blackout from a few years ago. But...

The Petroleum Marketers Association (not a hotbed of consumer-friendly thought, one would imagine) says:

if PUHCA has become such a barrier to investment in generation and transmission as repeal supporters claim, why has the number of registered holding companies coming under its supervision nearly doubled to 30 over the past two years? Obviously, it has not stood in the way of mergers and consolidations.

Ironically, repealing PUHCA could actually impede competition as it would lift restrictions to the barriers place on utility mergers. As SEC Commissioner Hunt testified, this would ultimately lead to greater concentration in the industry, rather than opening it to more competition. Stand-alone PUHCA repeal would expose consumers to risks associated with risky financial transactions without sharing in any benefits of successful diversification.

That's bad enough, but there's more. Repeal takes regulatory authority away from the SEC and hands it over (in a reduced form) to the Federal Energy Regulation Commission. That body, you will recall, is the one which had to be forced to take action against Enron during the California energy crisis in 2000-2001, and (by testimony of its own economists) it wasn't up to the job. In fact, it didn't even try to to do the job. From PBS's Frontline, here's an excerpt from an interview with Stanford economics professor Frank Wolak:

It's an understatement that the FERC is not doing a good job?

Yes.

What do you mean?

They're doing horrible. They basically fail to enforce the law. How can you do anything worse than that?

That was in 2001. This is the same agency, run by the same kind of market-worshipping ideologues, which is going to "regulate" utilities as a result of the PUHCA repeal?

We consumers are so screwed.

Posted by Linkmeister at August 8, 2005 11:55 AM | TrackBack