Laws are falling which limit utilities

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April 25, 2001

Senate Committee Votes to Repeal a Law Limiting Utilities

By JOSEPH KAHN

ASHINGTON, April 24 A Senate committee voted today to repeal a Depression-era law that restricts the ownership and operations of utilities, a perennial mission of large electricity providers that has gathered momentum because of California's power crisis.

The 19-to-1 vote by the Senate Banking Committee pushes forward what supporters hope will be the first national legislative response to a tumultuous energy market that has brought brownouts and price increases. President Bush, who has called it a national energy crisis, has supported repeal of the measure and overturning the law is expected to be a central element of a national energy strategy that Vice President Dick Cheney is drafting.

But repeal of the 66-year-old legislation faces stiff opposition from consumer groups and community-owned power plants that fear a return of the electricity behemoths that dominated the industry in its early days. Before the law's enactment during the New Deal, multistate utilities sometimes used reliable profits from the regulated electricity business to help finance risky investments in other industries.

The utility industry argues that the law is an antiquated barrier to investment in the $300 billion electricity and natural gas sectors. An aging infrastructure of transmission lines, gas pipelines and generating plants is the major factor behind skyrocketing electricity prices in California, industry officials say.

Phil Gramm, a Texas Republican and the committee chairman, said repeal of the law was the best way to address California's woes and to assure that the problems did not afflict other states. "This committee has an opportunity to pass an important bill directly related to the problems of California," Mr. Gramm said. "This can solve the problem in California and prevent similar problems elsewhere."

Congress enacted the Public Utility Holding Company Act in 1935 to shackle utility companies, seen at the time as dangerously powerful pyramid companies with excessive debt, inadequate financial disclosure and loose accounting practices. The law mandates that utility holding companies register with the Securities and Exchange Commission, which oversees their finances and restricts their geographical areas of operation.

Utility executives say most of the law's provisions are outdated because other federal and state agencies now oversee utility companies. They compare it to the Glass-Steagall Act, another Depression-era law that separated banks from securities and insurance companies. Congress overturned that law in 1999.

Analysts who follow the stocks of utility companies say that if the utility law was repealed, they would expect some electricity companies to become national brand names.

Repeal may also attract money from outside the industry because large-scale investors would no longer have to register as utility holding companies subject to potentially intrusive federal rules.

Warren E. Buffett, the billionaire investor, promised last week to invest up to $15 billion in the utility industry across the country if Congress strips the law from the books. His company, Berkshire Hathaway Inc., has a stake in the industry after it helped finance the $1.6 billion privatization of the MidAmerican Energy Holdings Company, an Iowa- based utility.

Mr. Buffett has said that he sees opportunities to expand nationally if the geographical and financial restrictions on utility investments are lifted.

Many opponents of the bill say it should be repealed only as part of a broader legislative package that transfers protections it offers consumers to competent federal and state agencies. They also say that California's problems offer a warning that the government should proceed slowly on regulatory change.

The bill as amended and passed by the committee today would transfer some authority under the utility law to the states and the Federal Energy Regulatory Commission. The energy commission would inherit the mandate to ensure that utilities do not use profits from regulated electricity rates to subsidize other businesses.

But Alan Richardson, president of the American Public Power Association, which represents 2,000 community-owned nonprofit utilities, said that he did not trust the federal agency to police the finances of utilities. He said the agency had failed to fulfill its existing mandate to ensure "just and reasonable" electricity rates in California and other states where prices had risen sharply in recent months.

"They would have to insist that F.E.R.C. become a cop on the beat and stop abuses in the market first," Mr. Richardson said.

Even if the utility law is repealed, state-level regulators could still pose an obstacle to the formation of national utility companies. Roughly half of the states have allowed some form of wholesale competition in power generation and only a handful have experimented with open competition at the retail level.

The Senate Banking Committee has backed repeal of the law before. But the step was part of a broader energy package that did not end up becoming law. Mr. Gramm and Paul S. Sarbanes of Maryland, the ranking Democrat on the committee, said they planned to push this bill as a stand-alone measure.

But its fate is not certain. Trent Lott of Mississippi, the Senate majority leader, has not indicated when he intends to bring the measure to the floor and some lobbyists pushing for the repeal said that Mr. Lott had been cool to overturning the utility law in the past.

The bill will also face numerous amendments from lawmakers on the left and right, who may envision it as a vehicle for other priorities in the energy field.

Copyright 2001 The New York Times Company

-- Cherri (jessam5@home.com), May 31, 2001

Answers

Last week, I got something in the mail about the new deregulation in Texas. It was actually a promotional offer by someone associated with Enron, stating that I could save money on electricity costs [guaranteed lower for two years], but that if I didn't move quickly, I would have to wait until 2002 for such savings.

The odd thing was that this came to ME. I don't own this house, and I don't have an account with TXU. SO never got this "offer".

-- Anita (Anita_S3@hotmail.com), June 03, 2001.


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