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To: bigbuk who wrote (17061)	9/21/2002 12:49:29 PM
From: StockDung	Read Replies (1) \| Respond to of 18998

Repeal of utility act not such a bright idea Don Bauder September 21, 2002 What do you do about a law that bans greed-driven acquisitions and phony accounting in the energy industry? Why, if you're Congress, you try to repeal it, despite everything the voters know about Enron and its soul mates these days. Of course, members of Congress are far more interested in lobbyists' pocketbooks than the public's well-being, so it's easy to understand why they want to eliminate the 1935 Public Utility Holding Company Act (PUHCA), that was intended to rein in financial hanky-panky by energy companies. Since 1999, energy companies, particularly Enron, have spent $100 million lobbying Congress for repeal of PUHCA and for other related measures. The Senate has already voted 88-11 to repeal PUHCA. The House passed an energy package in August, but did not consider many of the matters now covered – however weakly – by PUHCA. Now a House-Senate conference committee is working on a compromise that will likely repeal PUHCA. This month, Public Citizen's energy and environment group said that such a repeal "could have devastating consequences for consumers and investors by leading to further Enron-style meltdowns, consumer price-gouging and market manipulations." I'm not sure that repeal of a bill that has already been ignored and emasculated would be devastating, but it certainly would be a step in the wrong direction. PUHCA should be modernized and toughened. It could even be repealed, if its aims of preventing energy industry depredations were carried out in a new law. Some history is in order. Enron wasn't the first energy company that knew how to hide the pea under a million fog-enveloped shells. In the early 20th century, Samuel Insull pyramided utilities into two tangled holding companies – an unfathomable corporate maze. Enron thought it was cute by setting up hundreds of subsidiaries offshore. But Insull, after he was indicted, personally fled the country – eventually being returned from Turkey, jailed and acquitted. PUHCA was the result. Its aims were noble: preventing utility acquisitions that aren't justified by operational efficiencies; limiting crap-shoot investments; reining in misleading accounting (greatly from interaffiliate transactions) and instituting rules that put utilities on a sound footing. The Securities and Exchange Commission is supposed to carry out PUHCA's goals. But the SEC has simply dropped the ball, and deliberately, says Maryland attorney Scott Hempling, an expert in utility regulation. Also, the legislation was not tightly written. "There are very few actual flat prohibitions, discouragements, reviews, hurdles, standards," says Hempling. "A motivation of the planning departments of utilities is to take advantage of that looseness." That's why utility stocks are risky investments these days. You look for a stock with a cozy monopoly and a high, secure dividend. Then the utility turns around and makes some damned-fool acquisition, or dives headlong into a thieves' den such as energy trading. Your stock plummets. The dividend is suspended. "We really don't have widows and orphans investments anymore," says Hempling. It's encouraging that Public Citizen mentioned both consumers and investors. Utility acquisitions and trading schemes are fleecing everyone except the insiders who pull the strings. The repeal of PUHCA "will lead to further industry consolidation, more deregulation and the creation of sprawling, non-transparent corporate structures that leave consumers and investors at the mercy of unaccountable, growth-hungry conglomerates," says Public Citizen, which was founded by Ralph Nader. Rep. John D. Dingell, D-Mich., ranking member on the Energy and Commerce Committee, points out that it was PUHCA that kept Enron from buying more utilities. It would have been up against PUHCA if it had bought utilities in more than one state. "Repealing PUHCA simply opens the door to more abuse," says Mark Cooper of the Consumer Federation of America. PUHCA "provides the cornerstone of consumer and investor protection. Rather than repeal PUHCA, Congress should modernize and strengthen it." Some parts of PUHCA are bad, says Hempling. It keeps a state from encouraging outside utilities to come in and offer competition. That should be changed. Hempling says that new legislation, enforced by the Federal Energy Regulation Commission rather than the SEC, should ensure that any acquisition does not reduce competition; should produce measurable benefits for ratepayers; should not weaken the financial strength of either the acquirer or acquiree and should make certain that nonutility acquisitions do not lead to even more financial calamities. But some say FERC couldn't screw in a light bulb. -------------------------------------------------------------------------------- Union-Tribune library researcher Beth Wood assisted with this column.