[Federal Register Volume 72, Number 37 (Monday, February 26, 2007)]
[Rules and Regulations]
[Pages 8277-8278]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-3234]


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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Parts 365 and 366

[Docket No. RM05-32-003, Order No. 667-C]


Repeal of the Public Utility Holding Company Act of 1935 and 
Enactment of the Public Utility Holding Company Act of 2005

Issued February 20, 2007.
AGENCY: Federal Energy Regulatory Commission, DOE.

ACTION: Final order; order denying rehearing.

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SUMMARY: By this order, the Federal Energy Regulatory Commission denies 
rehearing of Order No. 667-B. Order No. 667-B addressed requests for 
clarification and rehearing of prior orders that implemented repeal of 
the Public Utility Holding Company Act of 1935 and enactment of the 
Public Utility Holding Company Act of 2005.

DATES: Effective Date: This order is effective on March 28, 2007.

FOR FURTHER INFORMATION CONTACT:
Lawrence Greenfield (Legal Information), Federal Energy Regulatory 
Commission, 888 First Street, NE., Washington, DC 20426, (202) 502-
6415.
Laura Wilson (Legal Information), Federal Energy Regulatory Commission, 
888 First Street, NE., Washington, DC 20426, (202) 502-6128.
James Guest (Technical Information), Federal Energy Regulatory 
Commission, 888 First Street, NE., Washington, DC 20426, (202) 502-
6614.

SUPPLEMENTARY INFORMATION:
    Before Commissioners: Joseph T. Kelliher, Chairman; Suedeen G. 
Kelly, Marc Spitzer, Philip D. Moeller, and Jon Wellinghoff.
    Subtitle F of Title XII of the Energy Policy Act of 2005 (EPAct 
2005) repealed the Public Utility Holding Company Act of 1935 (PUHCA 
1935) and enacted the Public Utility Holding Company Act of 2005 (PUHCA 
2005).\1\ In Order No. 667, the Federal Energy Regulatory Commission 
(Commission) issued regulations to implement Subtitle F.\2\ In Order 
No. 667-A, the Commission denied rehearing in part and granted 
rehearing in part of Order No. 667.\3\ In Order No. 667-B, the 
Commission granted clarification in part, denied rehearing in part and 
granted rehearing in part of Order No. 667-A.\4\ In the present order, 
we deny rehearing of Order No. 667-B.
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    \1\ Energy Policy Act of 2005, Pub. L. 109-58, 119 Stat. 594 
(2005).
    \2\ Repeal of the Public Utility Holding Company Act of 1935 and 
Enactment of the Public Utility Holding Company Act of 2005, Order 
No. 667, 70 FR 75592 (Dec. 20, 2005), FERC Stats. & Regs. ] 31,197 
(2005).
    \3\ Repeal of the Public Utility Holding Company Act of 1935 and 
Enactment of the Public Utility Holding Company Act of 2005, Order 
No. 667-A, 71 FR 28446 (May 16, 2006), FERC Stats. & Regs. ] 31,213 
(2006).
    \4\ Repeal of the Public Utility Holding Company Act of 1935 and 
Enactment of the Public Utility Holding Company Act of 2005, Order 
No. 667-B, 71 FR 42750 (July 28, 2006), FERC Stats. & Regs. ] 31,224 
(2006).
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    1. American Public Power Association together with National Rural 
Electric Cooperative Association (APPA/NRECA) and Florida Municipal 
Power Agency together with Seminole Electric Cooperative, Inc. (FMPA/
Seminole) raise one issue on rehearing of Order No. 667-B: whether 
PUHCA 2005's accounting, record retention and reporting requirements 
should apply to a holding company system whose traditional utility 
operations are confined substantially to one state but that holds 
significant interests in out-of-state exempt wholesale generators 
(EWGs), foreign utility companies (FUCOs), and qualifying facilities 
(QFs). They assert that these requirements should apply because, they 
claim, regulators would not otherwise have access to relevant accounts 
and records and therefore would be unable to prevent inappropriate 
cross-subsidization or other misallocations of costs within the holding 
company system. We deny rehearing as discussed below.

Background

    2. Under the Commission's regulations under PUHCA 2005, a ``single-
state holding company system'' is eligible for waiver of the 
Commission's PUHCA 2005 accounting, record retention and reporting 
requirements.\5\ In Order No. 667-A, the Commission defined ``single-
state holding company system'' as a system that derives no more than 13 
percent of its ``public-utility company'' revenues from outside a 
single state.\6\ In Order No. 667-B, the Commission clarified that 
revenues from EWGs, FUCOs or QFs do not constitute public-utility 
company revenues for purposes of determining status as a single-state 
holding company system.\7\ As a result, a single-state holding company 
system as defined in Order Nos. 667-A and 667-B may hold interests in 
EWGs, FUCOs and QFs without, by virtue of those interests, being 
subject to the Commission's PUHCA 2005 accounting, record retention and 
reporting requirements.
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    \5\ 18 CFR 366.3(c)(1).
    \6\ Order No. 667-A, FERC Stats. & Regs. ] 31,213 at P 28.
    \7\ Order No. 667-B, FERC Stats. & Regs. ] 31,224 at P 20.
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    3. The Commission reasoned that this approach follows the approach 
taken under section 3(a) of PUHCA 1935, which exempted a holding 
company from plenary oversight under PUHCA 1935 if the holding 
company's traditional utility operations were largely confined to one 
state.\8\ The exemption in section 3(a) reflected Congress' assessment 
that other state and federal corporate and rate regulation was 
sufficient to protect against abuse in those circumstances. Further, 
the 13 percent standard adopted by the Commission in Order Nos. 667-A 
and B to determine who qualifies for the single state holding company 
waiver was the same standard applied by the SEC under PUHCA 1935, thus 
resulting in no more onerous regulatory requirements than those in 
place under PUHCA 1935. In Order No. 667-B, the Commission found that 
other state and federal regulation continues to be sufficient to 
protect against abuse, without subjecting a holding company system to 
the Commission's PUHCA 2005 accounting, record retention and

[[Page 8278]]

reporting requirements due to the holding company system's ownership of 
out-of-state EWGs, FUCOs and QFs.\9\
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    \8\ U.S.C. 79c(a); see 15 U.S.C. 79z-5a and 79z-5b.
    \9\ Order No. 667-B, FERC Stats. & Regs. ] 31,224 at P 20-22.
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Requests for Rehearing

    4. APPA/NRECA and FMPA/Seminole envision a holding company system 
whose traditional utility operations are confined to one state but that 
has EWGs, FUCOs and QFs in multiple jurisdictions. They assert that, if 
such a holding company system is not subject to the Commission's PUHCA 
2005 accounting, record retention and reporting requirements, 
regulators will have insufficient access to the holding company 
system's accounts and records and therefore will be unable to protect 
against misallocations of costs and other potential abuses within the 
holding company system.

Decision

    5. In adopting the SEC's 13 percent of revenue standard (and 
exclusion of EWGs, FUCOs and QFs from consideration in the 13 percent 
of revenue calculation) for purposes of determining who qualifies for 
the single state holding company waiver of the Commission's PUHCA 2005 
accounting, record retention and reporting requirements, the Commission 
sought to be consistent with the general intent of Congress, in 
repealing PUHCA 1935, to remove unnecessary regulatory burdens and not 
to create new ones in PUHCA 2005. Furthermore, APPA/NRECA and FMPA/
Seminole have presented no convincing argument that other state and 
federal regulation will be insufficient to protect against abuse in the 
circumstances envisioned by APPA/NRECA and FMPA/Seminole, without 
imposition of the Commission's PUHCA 2005 accounting, record retention 
and reporting requirements. The Commission will still have full access 
under the FPA to the accounts and records of the traditional public 
utility within the holding company system (i.e., the utility with 
captive customers and traditional regulated rates) and of the holding 
company and any other company controlled by the holding company, 
insofar as they relate to transactions with or the business of the 
public utility.\10\ From those accounts and records, the Commission 
will be able to discern whether the public utility is attempting to 
recover, from its captive customers, costs that are properly 
attributable to other businesses within the holding company system.
    6. Moreover, with respect to state regulatory authority access to 
books and records of holding companies and their associate and 
affiliate companies, nothing in our waivers affects section 1265 of 
PUHCA 2005, which expressly provides for such access.\11\ We add that 
no state regulatory authority has suggested that it has insufficient 
authority in the circumstances envisioned.
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    \10\ 16 U.S.C. 824d-e, 825; Order No. 667, FERC Stats. & Regs. ] 
31,197 at P 3-6; accord 15 U.S.C. 717c-d, 717g (identifying 
Commission authority with respect to natural gas companies).
    \11\ 42 U.S.C. 16453. The Federal Power Act, in particular 
section 201(g), 16 U.S.C. 824(g), also grants state regulatory 
authorities certain access to books and records.
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    7. For these reasons, we deny rehearing.

The Commission Orders

    APPA/NRECA's and FMPA/Seminole's requests for rehearing are hereby 
denied.

    By the Commission.
Magalie R. Salas,
Secretary.
 [FR Doc. E7-3234 Filed 2-23-07; 8:45 am]
BILLING CODE 6717-01-P