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After PUHCA Repeal: The State Response

Will the industry be able to meet capital investment and growth expectations?

Fortnightly Magazine - May 2006

all utilities, requiring, among other things, the formation of holding companies and structural protections by utilities owning non-utility assets (or earning revenues attributable to them) greater than 10 percent on a single-state basis or 20 percent on a multi-state basis. This proposal has drawn the strenuous opposition of several utilities, asserting that the commission lacks legal authority.

When Congress repealed PUHCA 1935, it strove to advance two interests: continued ratepayer protection from holding company abuses, and attraction of needed capital to the electric utility sector from a more diversified class of investors. Balancing both interests will require the deft management of seemingly divergent public policies. How well the state commissions manage this new role, in concert with FERC, will determine whether Congress struck the right balance.



1. Section 1264 of the Energy Policy Act of 2005 (EPACT).

2. See the accompanying table.

3. Section 1264 of EPACT.

4. Section 1275(b) of EPACT.

5. Section 1279(a) (4) of EPACT.

6. Section 1269 of EPACT.

7. A recently issued report by Standard & Poor’s assessing the potential impact of PUHCA repeal anticipated that states would become “more active” in reviewing holding company operations. However, it found that this enhanced scrutiny would vary by jurisdiction. Although EPACT “grants state commissions considerable leeway,” the larger staffed commissions will be “better able to review cost allocation where the potential for subsidization is high.” Jeffrey Wolinsky, “PUHCA Is Dead—What Now For U.S. Utilities?,” Standard & Poor’s, Jan. 10, 2006.

8. NARUC Compilation of Utility Regulatory Policy, 1995-1996. Following the NARUC survey, a fourth state commission (Indiana) was found lacking merger approval authority by its state supreme court. See also Briefing Paper, Implications of EPACT 2005 for State Commissions, The National Regulatory Research Institute, October 2005 (NRRI Briefing Paper), at p. 9.

9. NRRI Briefing Paper at 6.

10. U.S. Utilities Survey of State Public Service Commissions (Utilities Survey), Fitch Ratings, February 2004 at p. 2.

11. Utilities Survey at p. 4.

12. Utilities Survey at p. 2.

13. “Ring-Fencing, A State-By-State Summary, Regulatory Research Associates-Regulatory Focus,” Oct. 15, 2003.

14. Utilities Survey at p. 5.

15. Commission Staff Analysis of Ringfencing Measures for Investor-Owned Electric and Gas Utilities, Maryland Public Service Commission, Feb. 18, 2005, at pp. 18-19. Among other things, the report would provide a: (1) summary of all measures intended to protect the utility's financial strength and credit ratings from the activities of core service and non-core service affiliates; 2) corporate organization chart identifying the utility and its core service and non-core service affiliates; and) description of each core service and non-core service affiliate’s business.

16. Concurrently, the commission also decided to adopt a code of conduct governing relations between the utility and its affiliates. See the accompanying table.

17. Wisconsin Statutes Sec.196.795.

18. Alliant Energy Corporation, et al. v. Bie, et al., 330 F.3d 904 (7th Cir. 2003). The U.S. Supreme Court denied the utilities’ petition for certiorari, thereby declining to hear an appeal of the lower federal court decision.

19. State-Federal Utility Regulatory Issues: An Assessment of Investor Perceptions, J.M. Cannell Inc.,