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Public Citizen Releases “PUHCA for Dummies” – Nutshell Guide to Public Utility Holding Company Act

Sept. 3, 2003

Public Citizen Releases “PUHCA for Dummies” – Nutshell Guide to Public Utility Holding Company Act


Threatened Repeal of Law Would Pave Way for More Blackouts, Corporate Fraud


WASHINGTON, D.C. – Public Citizen today released an easy-to-read primer explaining how the Public Utility Holding Company Act (PUHCA), now under attack in Congress, shields electricity ratepayers from unfair rate increases and service disruptions while protecting investors and the economy from losses due to Enron-style corporate fraud and self-dealing by corporate executives.

The guide, PUHCA for Dummies, was written by Lynn Hargis, a lawyer who served as assistant general counsel for electric rates at the Federal Energy Regulatory Commission in the 1980s and later advised clients on energy matters. She joined Public Citizen’s energy program this year.

PUHCA was enacted in 1935 after the collapse of dozens of highly leveraged utility holding companies caused severe damage to the economy and helped deepen and prolong the Great Depression. Among its many consumer and shareholder safeguards, the law limits the investment of utility profits in unrelated business ventures. It regulates the size, geographic spread, types of businesses and finances of utility holding companies. This prohibits expansion-minded executives from endangering the essential service delivered by utility subsidiaries by siphoning off profits to engage in risky investment schemes that do nothing to improve service reliability or keep rates low.

The law has been substantially eroded over the past decade through loopholes, many of which were enacted at the behest of Enron lobbyists and which aided the company in its fraudulent behavior.

“If this key consumer protection law is repealed, we will likely see more price-gouging and far worse scandals and corporate meltdowns than those involving Enron, Williams, NRG, Mirant, Dynegy and others, which resulted from partial repeals,” Public Citizen President Joan Claybrook said.

Both the House and Senate have passed sweeping energy legislation that repeals PUHCA and the Bush administration is pushing further deregulation of the energy market. A conference committee will negotiate the differences in the passed legislation. But the recent blackout and scandals in the energy sector, such as those involving Enron and Westar, illustrate a stronger need than ever to beef up consumer and shareholder protections, not eliminate them.

“Electricity service is too important to our economy, national security and basic services to encourage utility executives to run roughshod over consumers and investors – as they undoubtedly will if PUHCA is repealed,” Hargis said.

To read PUHCA for Dummiesclick here.