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For more than a decade, Congress’ failure to repeal the Public Utility Holding Company Act of 1935 has hampered dealmaking among U.S. utilities. That could finally change in the coming year. The Bush administration is confident that with bigger Republican majorities in the Senate and House, there will be enough votes to pass a broad energy bill, which includes retiring the Depression-era law. PUHCA restricts the types of businesses in which utilities can invest, places strict capital controls on their debt structure and shareholder composition, and limits their geographic reach. If PUHCA is scuttled, supporters and critics of the move expect an explosion in energy investments from traditional and non-traditional investors. Billionaire financier Warren Buffett, for instance, has said he is prepared to invest $10 billion to $15 billion in the sector if the law is repealed. Lynn Hargis, a former staff attorney with the Federal Energy Regulatory Commission who now works for the advocacy group Public Citizen, said rescinding the law would put an estimated $1 trillion in energy assets into play. That’s the main administration argument. “It is critically important for PUHCA to be repealed,” argued David Garman, U.S. assistant secretary for energy efficiency and renewable energy, in testimony before Congress. “The investment community needs regulatory certainty.” But repeal of PUHCA faces stiff opposition from consumer groups and community-owned power plants that fear a return of the electricity behemoths that once dominated the industry. Alan H. Richardson, president and chief executive of the American Public Power Association, a service organization that represents community-owned electric utilities, says PUHCA is no impediment to investment in the industry. He cited a report Standard & Poor’s put out last year that said the “argument does not seem to hold much water” and investors have a solid appetite for companies with stable and regulated revenues. House Democrats are also resistant and would like to see the measure excised from the bill. In a letter dated Jan. 27, energy committee ranking member John Dingell, D-Mich., urges his colleagues to “oppose” PUHCA repeal. Dingell says that without PUHCA’s restrictions, the Enron debacle might have had a much wider reach. Dingell added that an end to the law would erode federal consumer and investor protections “by opening the floodgates to utility purchases by investors who lack experience in the utility business,” and have little interest in serving consumers. Democrats in the Senate also have concerns about repeal. Sen. Jeff Bingaman, D-N.M., ranking member of the Energy and Natural Resources Committee, says that while he supports repealing the statute, he does so provided additional consumer protections are put in place. “Certain aspects of the law still have merit,” said Bill Wicker, Bingaman’s spokesman. “Senator Bingaman wants language included [in the energy bill] that will protect the consumer.” Nevertheless, the decision to repeal PUHCA will likely hinge on political complexities tied to the energy overhaul proposal. A major sticking point remains whether to immunize from lawsuits manufacturers of the controversial gasoline additive MTBE, or methyl tertiary butyl ether. MTBE has been found to pollute drinking water in a number of communities across the country. House Majority Leader Tom DeLay, R-Texas, insists on retaining the provision, but it is not expected to be in the Senate’s version of the bill. Whether the two chambers can agree when they meet to hash out their differences remains to be seen. Copyright �2005 TDD, LLC. All rights reserved.

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