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The Securities and Exchange Commission's Division of Investment Management has proposed repeal of the Public Utility Holding Company Act of 1935 (PUHCA), with consumer safeguards preserved and transferred to the Federal Energy Regulatory Commission (FERC). Safeguards would include state access to holding company books and records, federal audit authority, and oversight of affiliate transactions.

The Division's report, The Regulation of Public Utility Holding Companies, the culmination of a year-long study, actually suggests three legislative options for Congress to consider. Repeal plus safeguards is the number one recommendation. The second option is unconditional repeal, although another SEC study indicates that some state commissions have neither the authority to review records of holding company affiliates, nor the resources to make such audits. If the second option is chosen, the report recommends that states be given a reasonable transition period to adapt to the new regulatory environment. The third option is to expand the SEC's exemptive authority, enabling the agency to grant relief from PUHCA where affected state regulators so agree.

The study also advocates regulatory changes that would make it easier for utility subsidiaries to issue securities. And proposed administrative reforms would eliminate almost two-thirds of the holding company applications filed with the SEC under PUHCA. These reforms would free up FERC resources to be redirected to assist federal and state regulators in auditing registered holding companies.

James R. Leva, chairman and CEO of General Public Utilities Corp. (GPU) said the recommendations would make it easier for GPU to compete in the new electric industry. Leva pointed to GPU's announcement of a major restructuring last year, which included formation of a separate generation subsidiary, GPU Generation. While the Pennsylvania and New Jersey commissions have already approved the subsidiary, GPU still awaits SEC approval.

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