Mr. Chairman and Members of the Committee, thank you for allowing me to testify in support of this legislation. I want to commend Chairman D'Amato for introducing this bill, and the Members of this Committee who are cosponsors. Repeal of PUHCA is the right thing to do: It is pro-consumer and pro-competition.
As you are aware, the electric power industry is undergoing dramatic change, and it is seeking ways to become even more competitive. This is driven by the recognition of everyone that competition benefits consumers. If there is to be robust competition, we must get rid of unnecessary Federal constraints that prevent companies from adapting quickly and responding flexibly to changing market circumstances. That is exactly what PUHCA prevents and why PUHCA must go.
When we talk about PUHCA repeal, we always think first about how it restricts the 15 registered electric and gas utility holding companies. But that is just a small part of the story. PUHCA also limits the competitive activities of hundreds of PUHCA exempt utilities and the numerous non-utilities, all of whom want to participate fully in the electric power market. These companies won't take a variety of pro-competitive actions out of fear of becoming classified as a registered holding company. To them it's not worth getting tangled in PUHCA's sticky web of restrictions and requirements.
Congress has long recognized that PUHCA creates competitive problems, but so far we have addressed them only on a piecemeal basis. For example-
In 1995, after conducting a year-long study of the electric utility industry, the Securities and Exchange Commission reported that the public interest is no longer served by PUHCA. The SEC recommended its repeal. The bill before the Committee today is a direct outgrowth of the SEC's report and recommendations to Congress.
Some have claimed that this legislation will create a "regulatory gap" that will allow consumers to be harmed. That is simply not true. Over the past sixty years, a comprehensive State-Federal regulatory system has been developed. State public utility commissions regulate retail electric rates under State law. The FERC regulates wholesale rates under Federal law. The SEC has broad powers to regulate securities under laws other than PUHCA. And we have the Federal Trade Commission, the U.S. Department of Justice, and State attorneys general to deal with anti-competitive behavior.
As I am sure you will agree, this legislation does not, nor is it Intended to, allow utilities to evade appropriate regulation at the Federal and State level. I believe that in conjunction with other existing Federal and State consumer protection laws, this legislation allows the full protection of consumers. The bill before the Committee is the result of improvements suggested by the FERC, by State utility commissioners, by consumer groups, and by others to the legislation introduced in the last Congress. But having said that, like you, I am open to improvements to the bill's consumer protection provisions so long as they are within the context of the legislation.
Just as you did last year, today you may hear from some that Congress should act on this bill only as a part of "comprehensive" legislation to restructure the entire electric power industry. You may also hear from others who want to use this bill as a vehicle to move highly controversial matters, such as Federal preemption of the States, Federally-ordered retail wheeling, or mandatory utility break-up. You should reject those calls. This legislation can, and should, proceed on a stand-alone basis. These other issues are not linked to action on PUHCA repeal. Pro-consumer PUHCA reform must not be held "hostage" to unacceptable proposals. Each should rise or fall on their own merits.
Some have also asserted that PUHCA should not be repealed because of concerns about "market power" and fears that we will see a few large companies dominating the electric sector. This assertion is based on fears, not facts. First it ignores the fact that the FERC and State public utility commissions must approve any merger before it can take place.. If either FERC or a State regulator finds that a utility merger is not in the public interest, they can either require the merging companies to take certain actions, or they can simply reject it. Second, the generation and wholesale transmission segments of the electric power industry are already competitive; FERC's open access transmission rule is working. Third, even if PUHCA is repealed, FERC and state public utility commissions will continue to have jurisdiction over the transmission and distribution of electricity, as well as retail rates to consumers.
As you may be aware, the Energy Committee is holding a comprehensive series of hearings and workshops on competitive change in the electric power industry. Six were held last Congress. Three have been held so far this year, with three more scheduled. Through this process the Energy Committee will determine what changes, if any, are necessary to the utility laws that are jurisdictional to our Committee. The Energy Committee will continue this process and we will legislate if and when we are convinced that legislation will benefit consumers, as will PUHCA repeal.
In conclusion, PUHCA is a sixty year old statute that was designed to cure the
problems of a now long-gone, depression-era industry structure. Having done its job, it is
time to retire PUHCA.
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