On a purely intellectual level, it is difficult to justify the Public Utility Holding Company Act of 1935 (PUHCA). Sixty years after passage, PUHCA has become an anachronism (em a fact well articulated in comments filed in response to the Concept Release on the modernization of the Act issued last November by the Securities and Exchange Commission (SEC).1 More recently, the SEC's Division of Investment Management actually recommended a conditional repeal (see sidebar). Changes have occurred in financial markets, accounting, and securities ratings, and in vastly improved regulation by states and the Federal Energy Regulatory Commission (FERC). The issue is not whether the Act has some "utility." Rather, is the industry so unique or its consumers or investors so in need that the Act should be retained?
Today, many sides argue both for and against repeal of PUHCA. Risks abound, including court challenges,2 changes in the composition of Congress (if the Democrats regain one or both houses), or a change in SEC attitude at the commission or staff level. But while I believe the odds lie against full repeal, a reinterpretation of the Act is in full swing. Since PUHCA arrived as part of the "New Deal,"3 I'll refer to this new effort as the "re-deal."
Why the Odds Lie Against Repeal ¬
That the odds lie against repeal relates more to the process than the subject. First, the new Republican Congress has mapped out a big agenda (em one that does not currently include PUHCA. Second, passage of legislation favorable to a single industry generally requires a consensus (em a condition lacking among electric utilities. Third, most legislation simply never passes.