[Congressional Record Volume 143, Number 48 (Tuesday, April 22, 1997)]
[Senate]
[Pages S3419-S3422]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. D'AMATO (for himself, Mr. Murkowski, Mr. Dodd, Mr. 
        Sarbanes, Mr. Gramm, Mr. Shelby, Mr. Mack, Mr. Faircloth, Mr. 
        Allard, Mr. Lott, Mr. Domenici, Mr. Akaka, Mr. Inouye, Mr. 
        Coats, Mr. Cochran, Mr. Roberts, Mr. Brownback, Mr. Coverdell, 
        Mr. Specter, and Mr. Nickles):
  S. 621. A bill to repeal the Public Utility Holding Company Act of 
1935, to enact the Public Utility Holding Company Act of 1997, and for 
other purposes; to the Committee on Banking, Housing, and Urban 
Affairs.


             the public utility holding company act of 1997

  Mr. D'AMATO. Mr. President, today I introduce the Public Utility 
Holding Company Act of 1997. This legislation is substantively 
identical to S. 1317 which the Senate Banking Committee reported in the 
104th Congress. The bill would repeal the Public Utility Holding 
Company Act of 1935, [PUHCA] and would transfer residual regulatory 
authority from the Securities and Exchange Commission to the Federal 
Energy Regulatory Commission and State public service commissions.

  Mr. President, this bill is introduced with the bipartisan 
cosponsorship of Senators Murkowski, Dodd, Sarbanes, Gramm, Shelby, 
Mack, Faircloth, Allard, Lott, Domenici, Akaka, Inouye, Coats, Cochran, 
Roberts, Brownback, Coverdell, and Specter.
  Mr. President, this legislation would eliminate duplicative, 
unnecessary regulation which unfairly burdens a few utility holding 
companies. It would allow holding companies to improve service and 
possibly lower the costs of consumers' utility bills. The bill would 
enhance existing regulatory tools and provide State and Federal 
regulators new authority to ensure that they can protect energy 
consumers from unfair rate increases.
  PUHCA was originally enacted more than six decades ago to regulate 
public utility holding companies. At that time, this Federal statute 
was needed to fill the regulatory gap that enabled holding companies to 
conceal assets by creating and speculating in public utility companies.
  Mr. President, PUHCA has achieved the congressional purpose--it broke 
up the mammoth holding company structures that existed more than half a 
century ago. PUHCA is not only outdated, it is the relic of a different 
era. Today there is strong regulation of the energy industry at the 
State and Federal level. In addition, the Federal securities laws' 
registration and disclosure requirements have become effective tools 
for the SEC to protect investors and ensure the integrity of the market 
for public utility holding company securities.
  Originally enacted to protect consumers and investors, PUHCA has 
become an unnecessary impediment to efficient and flexible business 
operations. Currently, there are 180 public utility holding companies 
in the United States. Of these 180 companies, 165 are exempt from PUHCA 
and only 15 companies are subject to direct SEC regulation. As a 
result, PUHCA imposes a burdensome regulatory scheme on these 15 
registered holding companies and prevents them from diversifying into 
new business areas. PUHCA keeps these holding companies from 
diversifying, limits their growth opportunities and options, and 
requires the companies to apply for SEC permission to engage in almost 
all new business activities.
  PUHCA also hinders the growth of nonregistered, exempt holding 
companies. Once exempt companies expand their business across State 
lines they too become subject to PUHCA's restrictions. As a result, 
exempt companies refrain from expanding across State lines even when 
such a move would lead to cheaper and more efficiently produced energy 
for consumers. Similarly, PUHCA prevents non-utility holding companies 
from diversifying into utility business.

  Mr. President, PUHCA is more than just another example of Government 
overregulation--it is an impediment to both the deregulation of the 
energy industry and to the growth and diversification of existing 
businesses. Since many States have begun to deregulate the energy 
industry and Congress plans to review energy reform issues, the time 
for PUHCA reform is now. This year, in my own backyard, Long Island, 
two utility companies will merge.

[[Page S3420]]

 This merger is expected to reduce energy bills for Long Island energy 
customers who currently pay the highest rates for energy in the 
continental U.S. The merger will not only lead to lower rates, but it 
should also mean better service for customers.
  While Long Island's energy customers can finally look forward to 
lower rates, PUHCA prevents other utility companies from expanding, 
merging, and offering new services to consumers. Like any other utility 
merger, the State, the FERC and other Federal regulators will have to 
approve this merger. Under PUHCA, if either of these companies was a 
registered holding company or the merger involved companies from 
neighboring States, the companies would also have to seek SEC approval 
of the merger in advance and at all subsequent stages of restructuring. 
For example, if this merger included utility companies from New Jersey 
or Connecticut, PUHCA's restrictions on diversification and burdensome 
requirements, could have prevented a merger that would benefit 
consumers, investors, and business.
  As one of the leaders in energy deregulation, New York State provides 
an example of why PUHCA reform is necessary now. Without PUHCA reform, 
companies will choose alternative corporate structures to avoid PUHCA's 
restrictive requirements, preventing the efficient restructuring of the 
energy industry. Congress must reform PUHCA so that the energy industry 
will be efficient and consumers can realize the reduction in rates and 
improvement in services they deserve.
  Mr. President, the bill I introduce today follows the SEC's Division 
of Investment Management's 1995 recommendation to conditionally repeal 
PUHCA since ``the current regulatory system imposes significant costs, 
in direct administrative charges and foregone economies of scale and 
scope, that often cannot be justified in terms of benefits to utility 
investors.'' The legislation has been crafted in consultation with 
State and Federal utility regulators, public interest groups, the 
Senate Energy Committee, and both registered and non-registered utility 
companies.
  Mr. President, let me summarize the purpose of the bill. The Public 
Utility Company Act of 1997 would maintain the provisions of the 1935 
Act essential to consumer protection. In fact, the bill enhances 
consumer safeguards by enabling energy regulators to oversee all 
holding company operations. Specifically, the bill makes it easier for 
FERC and State public service commissions to protect consumers from 
paying nonutility related costs by giving the regulators expanded 
authority to review the books and records of all holding company 
activities to determine energy rates. At the same time, the bill would 
preserve FERC's authority to review transactions, acquisitions, and 
mergers of utilities and would clarify the FERC and state commission's 
authority to allocate costs when setting rates. The bill also gives 
state commissions vital enforcement backup to ensure that they can 
access all the books and records necessary to make rate determinations.

  Mr. President, the goal of PUHCA reform is increased competition--to 
make sure consumers ultimately pay lower utility rates not higher ones. 
While some would prefer to address PUHCA reform in the larger context 
of comprehensive energy deregulation, there is no reason to delay 
consideration of this separate bill I introduce today. Rather than 
package PUHCA with comprehensive reform of the federal energy laws, 
PUHCA reform can proceed, on a stand alone basis, as it does not affect 
the larger energy issues which my knowledgeable colleagues on the 
Energy Committee are considering.
  In fact, the experts in the energy field, lead by the distinguished 
chairman and former ranking member of the Energy Committee, Senators 
Murkowski and Johnston, who testified before the Banking Committee on 
this issue last year, believe that PUHCA reform should move 
independently of, and separate from, full energy deregulation. PUHCA 
reform is a necessary first step in creating an efficient energy 
industry.
  Mr. President, I have been a proponent of PUHCA reform for 16 years. 
Congress should allow consumers access to the cheapest power and the 
best services by repealing this burdensome and unnecessary law. The 
American people deserve and expect an efficient energy industry 
unfettered by unnecessary regulation. The legislation I introduce today 
accomplishes this by removing the energy industry from the 60-year-old 
regulatory shackles put in place by PUHCA. I urge my colleagues to 
support this legislation so that we may provide consumers with a highly 
efficient energy market that has better consumer protections.
  Mr. President, I ask unanimous consent that the full text of the bill 
be printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                 S. 621

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Public Utility Holding 
     Company Act of 1997''.

     SEC. 2. FINDINGS AND PURPOSES.

       (a) Findings.--The Congress finds that--
       (1) the Public Utility Holding Company Act of 1935 was 
     intended to facilitate the work of Federal and State 
     regulators by placing certain constraints on the activities 
     of holding company systems;
       (2) developments since 1935, including changes in other 
     regulation and in the electric and gas industries, have 
     called into question the continued relevance of the model of 
     regulation established by that Act;
       (3) there is a continuing need for limited Federal and 
     State regulation in order to ensure the rate protection of 
     utility customers; and
       (4) limited Federal regulation is necessary to supplement 
     the work of State commissions for the continued rate 
     protection of electric and gas utility customers.
       (b) Purposes.--The purposes of this Act are--
       (1) to eliminate unnecessary regulation, yet continue to 
     provide for consumer protection by facilitating existing rate 
     regulatory authority through improved Federal and State 
     commission access to books and records of all companies in a 
     holding company system, to the extent that such information 
     is relevant to rates paid by utility customers, while 
     affording companies the flexibility required to compete in 
     the energy markets; and
       (2) to address protection of electric and gas utility 
     customers by providing for Federal and State access to books 
     and records of all companies in a holding company system that 
     are relevant to utility rates.

     SEC. 3. DEFINITIONS.

       For purposes of this Act--
       (1) the term ``affiliate'' of a company means any company 5 
     percent or more of the outstanding voting securities of which 
     are owned, controlled, or held with power to vote, directly 
     or indirectly, by such company;
       (2) the term ``associate company'' of a company means any 
     company in the same holding company system with such company;
       (3) the term ``Commission'' means the Federal Energy 
     Regulatory Commission;
       (4) the term ``company'' means a corporation, partnership, 
     association, joint stock company, business trust, or any 
     organized group of persons, whether incorporated or not, or a 
     receiver, trustee, or other liquidating agent of any of the 
     foregoing;
       (5) the term ``electric utility company'' means any company 
     that owns or operates facilities used for the generation, 
     transmission, or distribution of electric energy for sale;
       (6) the terms ``exempt wholesale generator'' and ``foreign 
     utility company'' have the same meanings as in sections 32 
     and 33, respectively, of the Public Utility Holding Company 
     Act of 1935, as those sections existed on the day before the 
     effective date of this Act;
       (7) the term ``gas utility company'' means any company that 
     owns or operates facilities used for distribution at retail 
     (other than the distribution only in enclosed portable 
     containers or distribution to tenants or employees of the 
     company operating such facilities for their own use and not 
     for resale) of natural or manufactured gas for heat, light, 
     or power;
       (8) the term ``holding company'' means--
       (A) any company that directly or indirectly owns, controls, 
     or holds, with power to vote, 10 percent or more of the 
     outstanding voting securities of a public utility company or 
     of a holding company of any public utility company; and
       (B) any person, determined by the Commission, after notice 
     and opportunity for hearing, to exercise directly or 
     indirectly (either alone or pursuant to an arrangement or 
     understanding with one or more persons) such a controlling 
     influence over the management or policies of any public 
     utility company or holding company as to make it necessary or 
     appropriate for the rate protection of utility customers with 
     respect to rates that such person be subject to the 
     obligations, duties, and liabilities imposed by this Act upon 
     holding companies;
       (9) the term ``holding company system'' means a holding 
     company, together with its subsidiary companies;
       (10) the term ``jurisdictional rates'' means rates 
     established by the Commission for the

[[Page S3421]]

     transmission of electric energy in interstate commerce, the 
     sale of electric energy at wholesale in interstate commerce, 
     the transportation of natural gas in interstate commerce, and 
     the sale in interstate commerce of natural gas for resale for 
     ultimate public consumption for domestic, commercial, 
     industrial, or any other use;
       (11) the term ``natural gas company'' means a person 
     engaged in the transportation of natural gas in interstate 
     commerce or the sale of such gas in interstate commerce for 
     resale;
       (12) the term ``person'' means an individual or company;
       (13) the term ``public utility'' means any person who owns 
     or operates facilities used for transmission of electric 
     energy in interstate commerce or sales of electric energy at 
     wholesale in interstate commerce;
       (14) the term ``public utility company'' means an electric 
     utility company or a gas utility company;
       (15) the term ``State commission'' means any commission, 
     board, agency, or officer, by whatever name designated, of a 
     State, municipality, or other political subdivision of a 
     State that, under the laws of such State, has jurisdiction to 
     regulate public utility companies;
       (16) the term ``subsidiary company'' of a holding company 
     means--
       (A) any company, 10 percent or more of the outstanding 
     voting securities of which are directly or indirectly owned, 
     controlled, or held with power to vote, by such holding 
     company; and
       (B) any person, the management or policies of which the 
     Commission, after notice and opportunity for hearing, 
     determines to be subject to a controlling influence, directly 
     or indirectly, by such holding company (either alone or 
     pursuant to an arrangement or understanding with one or more 
     other persons) so as to make it necessary for the rate 
     protection of utility customers with respect to rates that 
     such person be subject to the obligations, duties, and 
     liabilities imposed by this Act upon subsidiary companies of 
     holding companies; and
       (17) the term ``voting security'' means any security 
     presently entitling the owner or holder thereof to vote in 
     the direction or management of the affairs of a company.

     SEC. 4. REPEAL OF THE PUBLIC UTILITY HOLDING COMPANY ACT OF 
                   1935.

       The Public Utility Holding Company Act of 1935 (15 U.S.C. 
     79a et seq.) is repealed, effective 18 months after the date 
     of enactment of this Act.

     SEC. 5. FEDERAL ACCESS TO BOOKS AND RECORDS.

       (a) In General.--Each holding company and each associate 
     company thereof shall maintain, and shall make available to 
     the Commission, such books, accounts, memoranda, and other 
     records as the Commission deems to be relevant to costs 
     incurred by a public utility or natural gas company that is 
     an associate company of such holding company and necessary or 
     appropriate for the protection of utility customers with 
     respect to jurisdictional rates for the transmission of 
     electric energy in interstate commerce, the sale of electric 
     energy at wholesale in interstate commerce, the 
     transportation of natural gas in interstate commerce, and the 
     sale in interstate commerce of natural gas for resale for 
     ultimate public consumption for domestic, commercial, 
     industrial, or any other use.
       (b) Affiliate Companies.--Each affiliate of a holding 
     company or of any subsidiary company of a holding company 
     shall maintain, and make available to the Commission, such 
     books, accounts, memoranda, and other records with respect to 
     any transaction with another affiliate, as the Commission 
     deems to be relevant to costs incurred by a public utility or 
     natural gas company that is an associate company of such 
     holding company and necessary or appropriate for the 
     protection of utility customers with respect to 
     jurisdictional rates.
       (c) Holding Company Systems.--The Commission may examine 
     the books, accounts, memoranda, and other records of any 
     company in a holding company system, or any affiliate 
     thereof, as the Commission deems to be relevant to costs 
     incurred by a public utility or natural gas company within 
     such holding company system and necessary or appropriate for 
     the protection of utility customers with respect to 
     jurisdictional rates.
       (d) Confidentiality.--No member, officer, or employee of 
     the Commission shall divulge any fact or information that may 
     come to his or her knowledge during the course of examination 
     of books, accounts, memoranda, or other records as provided 
     in this section, except as may be directed by the Commission 
     or by a court of competent jurisdiction.

     SEC. 6. STATE ACCESS TO BOOKS AND RECORDS.

       (a) In General.--Upon the written request of a State 
     commission having jurisdiction to regulate a public utility 
     company in a holding company system, and subject to such 
     terms and conditions as may be necessary and appropriate to 
     safeguard against unwarranted disclosure to the public of any 
     trade secrets or sensitive commercial information, a holding 
     company or its associate company or affiliate thereof, 
     wherever located, shall produce for inspection books, 
     accounts, memoranda, and other records that--
       (1) have been identified in reasonable detail in a 
     proceeding before the State commission;
       (2) the State commission deems are relevant to costs 
     incurred by such public utility company; and
       (3) are necessary for the effective discharge of the 
     responsibilities of the State commission with respect to such 
     proceeding.
       (b) Effect on State Law.--Nothing in this section shall 
     preempt applicable State law concerning the provision of 
     books, records, or any other information, or in any way limit 
     the rights of any State to obtain books, records, or any 
     other information under Federal law, contract, or otherwise.
       (c) Court Jurisdiction.--Any United States district court 
     located in the State in which the State commission referred 
     to in subsection (a) is located shall have jurisdiction to 
     enforce compliance with this section.

     SEC. 7. EXEMPTION AUTHORITY.

       (a) Rulemaking.--Not later than 90 days after the date of 
     enactment of this Act, the Commission shall promulgate a 
     final rule to exempt from the requirements of section 5 any 
     person that is a holding company, solely with respect to one 
     or more--
       (1) qualifying facilities under the Public Utility 
     Regulatory Policies Act of 1978;
       (2) exempt wholesale generators; or
       (3) foreign utility companies.
       (b) Other Authority.--If, upon application or upon its own 
     motion, the Commission finds that the books, records, 
     accounts, memoranda, and other records of any person are not 
     relevant to the jurisdictional rates of a public utility 
     company, or if the Commission finds that any class of 
     transactions is not relevant to the jurisdictional rates of a 
     public utility company, the Commission shall exempt such 
     person or transaction from the requirements of section 5.

     SEC. 8. AFFILIATE TRANSACTIONS.

       Nothing in this Act shall preclude the Commission or a 
     State commission from exercising its jurisdiction under 
     otherwise applicable law to determine whether a public 
     utility company may recover in rates any costs of an activity 
     performed by an associate company, or any costs of goods or 
     services acquired by such public utility company from an 
     associate company.

     SEC. 9. APPLICABILITY.

       No provision of this Act shall apply to, or be deemed to 
     include--
       (1) the United States;
       (2) a State or any political subdivision of a State;
       (3) any foreign governmental authority not operating in the 
     United States;
       (4) any agency, authority, or instrumentality of any entity 
     referred to in paragraph (1), (2), or (3); or
       (5) any officer, agent, or employee of any entity referred 
     to in paragraph (1), (2), or (3) acting as such in the course 
     of his or her official duty.

     SEC. 10. EFFECT ON OTHER REGULATIONS.

       Nothing in this Act precludes the Commission or a State 
     commission from exercising its jurisdiction under otherwise 
     applicable law to protect utility customers.

     SEC. 11. ENFORCEMENT.

       The Commission shall have the same powers as set forth in 
     sections 306 through 317 of the Federal Power Act (16 U.S.C. 
     825d-825p) to enforce the provisions of this Act.

     SEC. 12. SAVINGS PROVISIONS.

       (a) In General.--Nothing in this Act prohibits a person 
     from engaging in or continuing to engage in activities or 
     transactions in which it is legally engaged or authorized to 
     engage on the effective date of this Act, if that person 
     continues to comply with the terms of any such authorization, 
     whether by rule or by order.
       (b) Effect on Other Commission Authority.--Nothing in this 
     Act limits the authority of the Commission under the Federal 
     Power Act (16 U.S.C. 791a et seq.) (including section 301 of 
     that Act) or the Natural Gas Act (15 U.S.C. 717 et seq.) 
     (including section 8 of that Act).

     SEC. 13. IMPLEMENTATION.

       Not later than 18 months after the date of enactment of 
     this Act, the Commission shall--
       (1) promulgate such regulations as may be necessary or 
     appropriate to implement this Act; and
       (2) submit to the Congress detailed recommendations on 
     technical and conforming amendments to Federal law necessary 
     to carry out this Act and the amendments made by this Act.

     SEC. 14. TRANSFER OF RESOURCES.

       All books and records that relate primarily to the 
     functions transferred to the Commission under this Act shall 
     be transferred from the Securities and Exchange Commission to 
     the Commission.

     SEC. 15. EFFECTIVE DATE.

       This Act shall take effect 18 months after the date of 
     enactment of this Act.

     SEC. 16. AUTHORIZATION OF APPROPRIATIONS.

       There are authorized to be appropriated such funds as may 
     be necessary to carry out this Act.

     SEC. 17. CONFORMING AMENDMENT TO THE FEDERAL POWER ACT.

       Section 318 of the Federal Power Act (16 U.S.C. 825q) is 
     repealed.

  Mr. MURKOWSKI. Mr. President, I rise to cosponsor the Public Utility 
Holding Company Act of 1997. Enactment of this legislation is long 
overdue.
  Mr. President, the Public Utility Holding Company Act was enacted in 
1935 to curb serious abuses by utilities that hurt consumers. Back then 
it was needed, but since then much has

[[Page S3422]]

changed. As a result, PUHCA now does more harm than good.
  This legislation will eliminate unnecessary regulation. It will also 
streamline and make more effective the regulation that is still needed. 
By doing so, it will promote competition in the electric power industry 
without jeopardizing consumer protections.
  Over the past six decades, a comprehensive State-Federal regulatory 
system has been developed to protect consumers. In a nutshell, State 
public utility commissions regulate transactions that are intrastate in 
nature, and the Federal Energy Regulatory Commission regulates those 
that are interstate in nature. State commissions perform their 
regulatory activities pursuant to State law, and the FERC performs it 
pursuant to the Federal Power Act.
  With the maturity of both State and Federal utility regulation, PUHCA 
is now at best superflouous, but in some instances it actually 
interferes with appropriate regulation. For example, the Ohio Power 
court case held that decisions by the Securities and Exchange 
Commission under PUHCA preempt FERC's regulatory authority over 
utilities under the Federal Power Act. This legislation solves that 
problem by giving the FERC clear and exclusive authority to address 
matters within its jurisdiction and expertise. It will also enhance the 
ability of State regulatory agencies to do their jobs. In short, the 
streamlining of the regulatory system proposed by this legislation will 
not diminish needed consumer protection, and in several important ways 
it will actually enhance it.
  If the regulatory system created by PUHCA were necessary for consumer 
protection, then the regulatory burdens it imposes might be justified. 
But as everyone now acknowledges, PUHCA is not needed to protect 
consumers. As a result, regulatory costs caused by PUHCA are simply 
passed on to consumers in the form of higher rates without any 
offsetting consumer benefits.
  Congress has long recognized that PUHCA creates problems. In 1978, 
the Public Utility Regulatory Policies Act provided an exemption from 
PUHCA for certain types of electric power generators. In 1992, the 
Energy Policy Act gave additional exemptions to certain other types of 
electric power generators. These were Band-Aid fixes to PUHCA; needed, 
but not a complete solution. Fundamental reform of PUHCA is needed and 
is justified. The time is ripe to streamline and modernize the act. It 
is for these reasons that I am cosponsoring Senator D'Amato's 
legislation.
  Mr. President, there may be some who will try to use this legislation 
as a vehicle to restructure the electric utility industry, including to 
impose retail wheeling or to federally preempt State public utility 
commissions. I will strenuously resist any such effort. I have received 
assurances that Senator D'Amato is of like mind. This is not the place 
to do this. Retain wheeling and other utility competitive issues are 
not linked to the issues involved in PUHCA reform. Moreover, retail 
wheeling and other Federal Power Act matters are entirely within the 
jurisdiction of the Committee on Energy and Natural Resources, not the 
Committee on Banking, Housing and Urban Affairs, to which this 
legislation will be referred. Electric utility issues are very complex, 
and they are very significant not only to consumers but also to this 
Nation's competitiveness and economic well-being. These kinds of 
changes cannot, and will not be made without careful and complete 
consideration by the Committee on Energy and Natural Resources of all 
aspects of the issues and questions they raise. That is why the 
Committee on Energy and Natural Resources is now in the process of 
reviewing the factors that affect the competitiveness of the electric 
power industry.
  Mr. President, it is for these reasons that I am today cosponsoring 
this legislation and I hope that it will soon be on the President's 
desk for his signature.
                                 ______