GHG rules are coming soon. What happens next will depend on how states react.
After PUHCA Repeal: The State Response
Will the industry be able to meet capital investment and growth expectations?
- streams as collateral for upstream or affiliate loans; and
- Transfer pricing between a utility and its subsidiaries or affiliates engaging in business practices with one another, with a risk that the utility will be charged prices in excess of market for goods and services.
For now, four states—California, Kansas, Maryland, and New Jersey—have opened proceedings to address measures for ratepayer protection within a utility holding-company structure. 2 Although the steps by these four states do not necessarily signal a trend, it is widely assumed that other states are in a monitoring mode, weighing their own options as a consequence of the new legislation.
“Among the states, there have been two schools,” says North Carolina Commissioner Sam J. (Jimmy) Ervin IV, also chairman of the Committee on Electricity for the National Association of Regulatory Utility Commissioners (NARUC). “One group believed that PUHCA repeal was OK so long as there was adequate access by regulators to holding company books and records. Another group thought that repeal was not a good thing.”
Despite this divergence of opinion, Ervin believes that most NARUC members keenly are interested in learning more about what is being done to address the full panoply of issues that could arise with a more complex corporate structure. Because these are difficult questions, Ervin does not see most states jumping to adopt a particular approach. Rather, “for those that can take the time, they are thinking about it.”
Ervin sees NARUC providing an educational resource for members to decide for themselves how best to ensure ratepayer protection, rather than the organization dictating any single approach or set of approaches. “Because one size does not fit all,” he doubts that NARUC will take a prescriptive stance.
Other reasons are legal and practical. Ervin says NARUC members could be called upon to decide what type of conditions to adopt in merger applications before them. “Voting for a preferred approach or condition in a NARUC resolution could subject a commissioner to a claim of predecisional bias—grounds for disqualification.”
A Whole New World: PUHCA 2005
When Congress repealed PUHCA, it did not simply wipe the slate clean. Rather, it transferred to the Federal Energy Regulatory Commission (FERC) utility holding company oversight authority previously held by the Securities and Exchange Commission (SEC), providing FERC with access to books and records of utility holding companies “relevant to costs incurred” by the public utility affiliated with a holding company and “necessary or appropriate” to protect utility customers. 3 In addition, it gave FERC new substantive authority to review and allocate costs of certain non-power goods and services provided by affiliated companies within a utility holding company system upon request of the holding company or state commission having jurisdiction over the utility. 4 Collectively, these new provisions are referred to as PUHCA 2005.
Moreover, in revising and strengthening FERC’s merger review authority, Congress authorized it to allow a given transaction conditioned upon it finding the transaction consistent with the public interest, and not resulting in cross-subsidization of a non-utility associate company or the pledge or encumbrance of utility assets for the