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Perspective

Fortnightly Magazine - January 15 1996

president of Commonwealth and Southern Corp., a holding company that owned almost 130 electric and natural gas utility companies in 1934, Willkie became the spokesman for holding companies in their attempt to prevent enactment of PUHCA.

He met personally with FDR, appeared before congressional committees, and argued his case against PUHCA in the court of public opinion. He might have won his case but for revelations that substantial public opposition to the legislation had been manufactured by some public utilities.

Willkie lost his fight against PUHCA but, in the process, acquired the national prominence and public esteem that launched his "career" in politics. Opposition to PUHCA propelled Willkie into presidential politics.

A New Crusade

The structure that has characterized the electric and natural gas utility industries for the past 60 years is the product of PUHCA. The electric utility industry, for example, consists largely of intrastate electric utility holding companies and a handful of interstate holding companies that are subject to the numerous restrictions and rigorous requirements of PUHCA.

Some argue that PUHCA is an anachronism that has stunted the growth and development of the electric utility industry. Intrastate holding companies are unable to acquire electric utilities outside of their state boundaries. Interstate holding companies are unable to diversify freely into other businesses.

Last year, in response to these arguments, the SEC initiated an assessment of the need to modernize PUHCA. For almost a year, the SEC studied the need to deregulate holding companies. It considered, for example, the telecommunications industry, which already has been somewhat deregulated.

This past summer, the SEC issued a report proposing repeal of PUHCA, albeit with certain

consumer-protection safeguards in place. Those safeguards would be administered not by the SEC, but by the Federal Energy Regulatory Commission. That report prompted hearings in August to examine the proposal, held by two subcommittees (em Energy and Power, and Telecommunications and Finance (em within the House Committee on Commerce. A second hearing was held in October.

In part on the strength of the SEC proposal, Sen. Alfonse M. D'Amato (R-NY), chairman of the Senate Committee on Banking, Housing, and Urban Affairs, has introduced legislation to repeal PUHCA. The bill is co-sponsored by Sen. Robert Dole (R-KS), Senate majority leader; Sen. Frank H. Murkowski (R-AK), chairman of the Senate Committee on Energy and Natural Resources; and, significantly, Sen. J. Bennett Johnston, ranking minority member of the Senate Committee on Energy and Natural Resources.

When the bill was introduced, Sen. Murkowski observed: "PUHCA was needed in the 1930s, but now we live in a different world." Sen. Johnston agreed: "Times have clearly changed," he said. The Senate Committee on Energy and Natural Resources is expected to conduct a hearing on the bill in the near future.

Election Year Hopes

Willkie would be pleased to know that legislation he opposed, setting the stage for his GOP nomination for President, might be repealed in the 104th Congress. The repeal of PUHCA would be his ultimate revenge on the New Deal.

It has been suggested that Congress will not act to repeal PUHCA in the