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Energy Bill Contradicts Push to Corporate Reform

July 23, 2002

Energy Bill Contradicts Push to Corporate Reform

Congress Rails Against Corporate Crime One Minute, Deregulates Corporations the Next

WASHINGTON, D.C. ? Even as Congress is cracking down on corporate wrongdoing in the accounting realm, it is moving to gut pro-consumer regulations for some of the nation?s largest and most powerful corporations and give them more latitude to embark on questionable deals, Public Citizen said today.

As part of the ongoing conference over House and Senate energy legislation, conferees are discussing the Senate version?s electricity title, which includes language that will repeal the Public Utility Holding Company Act (PUHCA). If lawmakers repeal this key consumer protection law, they will further deregulate the energy industry and allow more Enron-like manipulations.

Enacted decades ago to protect consumers from rapacious electric companies, PUHCA is one of the few remaining federal laws regulating the nation?s giant power corporations. Repealing the law will allow those companies to embark on another frenzy of mergers and acquisitions and encourage corporate financial escapades in far-flung, risky ventures that have nothing to do with providing reliable and affordable electricity service to consumers ? an essential commodity.

“Members of Congress are touting themselves as reformers while simultaneously giving in to yet more corporate demands for less regulation and less accountability,” said Wenonah Hauter, director of Public Citizen?s Critical Mass Energy and Environment Program. “The nauseating political enthusiasm for deregulating corporate America and acceding to corporate demands is what got us into this mess in the first place. By blasting corporate crime one minute and deregulating energy companies the next, Congress is putting its hypocrisy and disregard for public interest on blazing display.”

PUHCA prohibits utility holding companies from investing ratepayers? money in areas that will not directly contribute to low bills and reliable service, such as out-of-region power plants or non-electricity industries.

Both the Senate and House versions of energy legislation were heavily influenced by the Bush administration?s energy agenda, an agenda developed in secret between Vice President Dick Cheney and some of the nation?s most powerful energy executives.

Identical or similar portions of the House and Senate energy bills mirror Bush-Cheney energy proposals on several industry giveaways, including hundreds of millions of dollars in taxpayer subsidies for the nuclear and fossil fuel industries. Neither bill takes serious steps to increase automobile fuel economy. The Senate measure requires utilities to obtain a portion of their power from renewable energy sources, but the renewable standard was severely watered down prior to passage. And the conference will consider the Senate?s renewal of the taxpayer-backed insurance scheme for the nuclear power industry, an industry that still can?t get insurance coverage in the private market and so must rely on government financial protection for its very existence.

Instead of lifting regulations on the energy industry, Public Citizen urges the conference committee to:

  • Mandate strict enforcement of PUHCA and close loopholes that allowed Enron and other traders to obtain market power over consumers;
  • Reject taxpayer-backed subsidies and lavish tax breaks for the energy industry;
  • Revoke market-based rates (which have become virtual monopoly rates) and order cost-based pricing in all wholesale electricity markets;
  • Re-regulate wholesale power marketers to require disclosure to the Securities and Exchange Commission;
  • Grant federal and state regulators the authority to order holding companies to divest assets, expand anti-trust investigations and enforcement, and create non-profit, consumer-owned regional transmission councils;
  • Allow the government?s insurance scheme for the nuclear power industry to expire as scheduled Aug. 1. Existing reactors would still be covered. But if the insurance industry won?t cover the risks of new power plants, taxpayers shouldn?t either.

“Enron, WorldCom, Global Horizon and the rest have reminded everyone yet again that corporations serve society only if they are properly monitored and regulated,” Hauter said. “Members of Congress are scouring Washington right now for television cameras, so they can look into them and profess their passionate commitment to reforms that will protect the public from greedy, dishonest corporations. Those lawmakers who sit on the energy bill conference committee have an excellent opportunity to put their words into action.”