Public Utility Holding Company Act (PUHCA)
PUHCA (the Public Utility Holding Company Act of 1935) is one of the most important federal consumer protection laws ever passed. It regulates the parent or “holding” companies (that hold the stock of) electric and natural gas utilities, so that such owners can’t raise rates by charging high fees to utilities for services from their affiliates, and can’t speculate in riskier businesses with the ratepayer’s money, since such speculation harms utilities’ credit and raises their cost of borrowing money, thereby raising customers’ utility bills.
PUHCA requires utility parent companies to incorporate in the same state where the utility operates, so that the state can regulate them, or to be regulated by the Securities and Exchange Commission (SEC) if they operate in several states. PUHCA does not allow non-utilities, such as oil companies or investment banks, to own utilities. It also requires the SEC to approve any merger or utility acquisition by a holding company, to prevent the reappearance of the huge electric and natural gas cartels of the 1920s that abused their customers and went bankrupt in large numbers because of Enron-like speculation and accounting scams.
The utility industry and would-be owners of utilities have lobbied Congress heavily to repeal PUHCA, claiming it’s outdated. On August 8th, the Energy Policy Act of 2005 passed both houses of Congress and was signed into law, repealing PUHCA, despite consumer, environmental, union and credit rating agency objections. The repeal becomes effective on February 8, 2006.