News 
2006
| Statement: April 20, 2006 | 
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| Docket Nos: RM05-32-001 & RM06-11-000 | |
Chairman Joseph T. Kelliher's statement on Public Utility
Holding Company Act (PUHCA)
“In this order we deny in part and grant in part the various requests
for rehearing received by the Commission, and amend our regulations
accordingly.
As a general matter, the Commission's order on rehearing recognizes
Congress' clear intent to repeal the regulatory regime established
by the Public Utility Holding Company Act (PUHCA) of 1935. Congressional
intent is quite plain, since subtitle F of the Energy Policy Act
of 2005 was titled "Repeal of PUHCA."
The PUHCA repeal rehearing order should facilitate investment
in the electricity business by traditional utilities, nontraditional
utilities, and financial institutions. It also accommodates efficient
day-to-day financial operations of utility systems, while ensuring
captive customers are protected.
The order on rehearing improves and clarifies our new regulations
for implementing the Commission's new authorities concerning access
to the books and records of holding companies and other companies
in holding company systems, and our review and authorization of
the allocation of costs for non-power goods or services. These
new authorities were provided to the Commission under section
1264 and section 1275 of the Energy Policy Act of 2005, which
although entitled the Public Utility Holding Company Act of 2005
(PUHCA 2005), is a very different regulatory regime than the 1935
Act.
Contemporaneously with the Order on Rehearing, we are issuing
a Notice of Proposed Rulemaking proposing a new Uniform System
of Accounts and new record retention requirements necessary for
implementing repeal of the 1935 Act and enactment of PUHCA 2005.
On rehearing of its final rules on PUHCA repeal and merger review,
the Commission has harmonized discrepancies in its PUHCA and merger
regulations. There is considerable overlap in the Commission's
determinations in the PUHCA 2005 regulations and merger regulations,
particularly with respect to new section 203(a)(2). The determination
of whether an entity is a "public utility holding company" or
an "electric utility company" under the Commission's PUHCA 2005
regulations may affect whether holding company acquisitions of
securities require section 203 authorization. There is also overlap
with respect to protecting captive customers.
In the PUHCA repeal rehearing order, we affirm our determination
in the final rule that persons that own only exempt wholesale
generators (EWGs), qualifying facilities (QFs), or foreign utility
companies (FUCOs) are public utility holding companies. The rehearing
order reaffirms these holding companies receive a blanket exemption
from the PUHCA 2005 books and records requirements and the Commission's
PUHCA regulations and clarifies that this is a self-effectuating
exemption.
In addition, we require service companies that do not file Form
No. 60 to file annually a description of their functions to be
identified as FERC Form No. 61. In response to concern over self-certification
of EWGs and FUCOs, such certifications will be noticed in the
Federal Register, allowing interested persons an opportunity to
object in particular cases. The PUHCA repeal rehearing order also
adds a new requirement that persons with a waiver or exemption
notify the Commission if facts or circumstances change.
In the Order on Rehearing, we find that many of the requests for
rehearing addressed issues beyond the scope of the authority granted
to us under PUHCA 2005; concerned matters that we believe are
better handled under our existing authorities; or asked the Commission
to require holding companies to provide information that is made
available through other means, including FERC Form No. 1 and SEC
Form 10-K.
For example, with respect to the argument that the exemption for
transactions independent of public utilities should be interpreted
to "ring fence" jurisdictional utilities from the holding-company's
non-utility operations, we note that Order No. 667 rejected requests
that urged the Commission to adopt new rules on cross-subsidization,
encumbrances of utility assets, and diversification into non-utility
businesses. We did so there, which we uphold here, because PUHCA
2005 gives the Commission no authority to issue additional rules
in these areas and because we believe rules under the Federal
Power Act and the Natural Gas Act are sufficient to prevent cross-subsidization.
With respect to the argument that the Commission should adopt
regulations to prohibit public utilities from providing financial
support to the non-utility businesses of their parent holding
companies, the order notes PUHCA 2005 is primarily a books and
records access statute and does not give the Commission any new
substantive authorities, other than the requirement regarding
review of certain non-power goods and services cost allocations.
In addition, PUHCA 2005 does not give the Commission the authority
to pre-approve holding company activities.
In addition to requests for rehearing that we decline to accept,
there are certain matters raised on rehearing that the Commission
revises, clarifies, or indicates will be addressed during a technical
conference, to be held after we have had some experience with
PUHCA 2005.”
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