PUHCA Repeal in Energy Bill

By Published On: May 27, 2005

After two weeks of haggling, the U.S. Senate Energy and Natural Resources Committee put language into the national energy bill that would repeal the Public Utility Holding Company Act and replace it with ?merger review reform? coordinated by the Federal Energy Regulatory Commission. The bill also added nuclear, hydropower, and loan guarantee amendments this week. ?We are sending a bill to the floor that does more for conservation and efficiency than Congress has ever done before,? stated committee chair Pete Domenici (R-NM). If PUHCA were eliminated, FERC would have authority over any transaction worth more than $50,000. FERC would be required to notify the local governments involved and allow an ?opportunity? for a hearing. As long as the merger or acquisition is ?consistent with the public interest, taking into account the effect of the transaction on competition in the electricity markets, electric rates, and effective regulation,? it may be approved. The provision also would prevent cross-subsidization of a nonutility company?prohibiting the use of utility profits for sister companies?unless the commission finds that cross-subsidy not harmful. Were not to act on a request for six months, it would be deemed approved. The commission?s expanded authority is expected to balance repealing the 1935 Act. That act in its original language was an attempt to ?eliminate the evils? of utility consolidation that were deemed ?injurious to investors, consumers and the general public.? The original legislation eliminated public utility holding companies with some exceptions. A raft of new mergers and acquisitions could benefit from the repeal. In addition to last week?s amendments (<i>Circuit</i>, May 20, 2005), changes this week include:<ul><li>?Next generation? nuclear plants: This language authorizes $1.25 billion for developing nuclear power plant technology. It includes the potential for hydrogen production from nuclear plants, reactor and plant design, and market analysis.<li> <li>Hydroelectricity: The amendment modifies the relicensing process to allow consideration of alternatives?by both the applicant and others?in energy efficiency and conservation in place of mandatory operating conditions imposed by the Departments of Interior, Commerce, and Agriculture. It would permit an opportunity for an expedited trial-type hearing for disputed issues.</li> <li>Loan guarantees: It establishes loan guarantees for new technology development. It requires the cost of the guarantee to be paid in advance through appropriations or payment from those seeking the loan guarantee in the amount determined by the budget office to reflect the risk of default.</li> <li>LNG jurisdiction:</li>The Federal Energy Regulatory Commission would have exclusive jurisdiction under the Natural Gas Act for siting, construction, expansion, and operation of import/export facilities located onshore or in state waters. It does not provide FERC eminent-domain authority over siting LNG facilities. It directs the secretary of energy, in cooperation and consultation with the secretary of transportation, the secretary of homeland security, FERC, and governors of coastal states, to convene at least three forums to discuss LNG issues such as siting, safety, and emergency response. According to the committee, the purpose of the forums is to identify and develop best practices related to LNG and to foster cooperative efforts.

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