The Public Utility Holding Company Act
Understanding the struggle to keep electricity affordable starts with a review of PUHCA. The Public Utility Holding Company Act of 1935 (PUHCA) was one of the most important federal consumer protection laws ever passed. Unfortunately, the utility industry and would-be owners of utilities lobbied Congress heavily to repeal PUHCA, claiming it was outdated. On August 8th, 2005, 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 became effective on February 8, 2006. View Public Citizen’s response.
The Fight to Save PUHcA
What PUHcA Meant for Consumer Protection
It regulated the parent or “holding” companies (that hold the stock of) electric and natural gas utilities, so that such owners could not raise rates by charging high fees to utilities for services from their affiliates, and could not 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 required utility parent companies to incorporate in the same state where the utility operates, so that the state could regulate them, or to be regulated by the Securities and Exchange Commission (SEC) if they operated in several states. PUHCA did not allow non-utilities, such as oil companies or investment banks, to own utilities. It also required 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.