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45 Public Interest Organizations Call on Congress to Save Important Consumer Protection Act in Energy Bill

Oct. 14, 2003

45 Public Interest Organizations Call on Congress to Save Important Consumer Protection Act in Energy Bill


WASHINGTON, D.C. – Forty-five public interest organizations today urged Congress to save the Public Utility Holding Company Act (PUHCA), which protects consumers from high prices and other abuses by electric utility companies. The majority of the groups are state-based organizations concerned that if PUHCA is repealed, their state regulators will have little to no ability to regulate large utilities.

Enacted in 1935, PUHCA is one of the most successful and important consumer and investor protection acts of the 20th century. The act limits the investment of utility profits in unrelated business ventures, which prohibits expansion-minded executives from siphoning off profits to engage in risky investment schemes that do nothing to improve service reliability or keep rates low. The act also prohibits conglomerates from owning utilities unless they give up their other businesses.

“For more than 50 years, the United States’ electrical system was the envy of the industrialized world for its reliable and affordable service, and our utilities were the model of stability and profitability,” the groups wrote in a letter sent to lawmakers. “PUHCA protects the financial health of public utilities that supply our electricity and retail natural gas by controlling their parent companies.”

Prior to PUHCA’s enactment, states had little ability to regulate sprawling, multistate utility holding companies. Between 1929 and 1936, 53 utility holding companies that had made risky investments went bankrupt after the banks called in their loans. A similar bubble burst recently with Enron and other energy companies that took advantage of congressional weakening of PUHCA during the 1990s – weakening the industry lobbied for – to allow utilities to invest in the telecommunications industry.

“We’re in a vicious cycle of repeating history if we allow PUHCA to be repealed,” said Wenonah Hauter, director of Public Citizen’s Critical Mass Energy and Environment Program. “Enron-style abuse in the 1920s was the very reason that this consumer protection act was created. Nearly 70 years later, another crisis occurs because of corrupt energy companies, and Congress’ response is to repeal this act. What they should be doing is strengthening it.”