I’m going to answer jdr’s comment about PUHCA from yesterday’s post about the Senate energy bill here instead of in comments. I am neither so foolish or so presumptuous that I think I can prognosticate the effects of PUHCA repeal, but based on some simple economics of organization and financial markets, I think it’s pretty clear that PUHCA impedes investment and duplicates other transparency and reporting functions that are performed better and more cheaply through organizations such as the SEC.
One person who I think consistently hits the nail on the head regarding the pernicious effects of PUHCA in a dynamic, complex, evolving industry is Pat Wood, FERC Chairman (for two more days). From testimony he delivered to the House Government Reform Subcommittee on Energy and Resources on 8 June 2005:
Finally, the repeal of PUHCA is necessary to spur investment in the transmission infrastructure and facilitate competition. PUHCA was enacted primarily to undo the harms caused by certain holding company structures that no longer exist. In the almost 70 years since PUHCA was enacted, utility regulation has increased substantially under the FPA, federal securities law and state laws, all of which ensure that customers are protected. The existing integration requirement of PUHCA actually encourages market structures that impede competition. In particular, under PUHCA, acquisitions by registered holding companies generally must tend toward the development of an “integrated public utility system.” To meet this requirement, the holding company’s system must be “physically interconnected or capable of physical interconnection” and “confined in its operations to a single area or region.” This requirement tends to create greater geographic concentrations of generation ownership, which may increase market power at a time when we want a diverse and competitive generation marketplace. Further, PUHCA may impede investment in transmission companies in more than one region by subjecting any owner of ten percent or more of a public utility to becoming a holding company and possibly being required to register under PUHCA. PUHCA is a statute that has served its usefulness and now needs to be repealed.