II

Calendar No. 23

106TH CONGRESS

1ST SESSION S. 313

[Report No. 106–7]

To repeal the Public Utility Holding Company Act of 1935, to enact the

Public Utility Holding Company Act of 1999, and for other purposes.

IN THE SENATE OF THE UNITED STATES

JANUARY 27, 1999

Mr. SHELBY (for himself, Mr. DODD, Mr. GRAMM, Mr. SARBANES, Mr. MURKOWSKI, Mr. LOTT, Mr. MACK, Mr. CRAIG, Mr. BROWNBACK, Mr. COCHRAN, and Mr. COVERDELL) introduced the following bill; which was read

twice and referred to the Committee on Banking, Housing, and Urban

Affairs

MARCH 2, 1999

Reported by Mr. GRAMM, without amendment

A BILL

To repeal the Public Utility Holding Company Act of 1935,

to enact the Public Utility Holding Company Act of

1999, and for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,
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1 SECTION 1. SHORT TITLE.

2 This Act may be cited as the ‘‘Public Utility Holding

3 Company Act of 1999’’.

4 SEC. 2. FINDINGS AND PURPOSES.

5 (a) FINDINGS.—The Congress finds that—

6 (1) the Public Utility Holding Company Act of

7 1935 was intended to facilitate the work of Federal

8 and State regulators by placing certain constraints

9 on the activities of holding company systems;

10 (2) developments since 1935, including changes

11 in other regulation and in the electric and gas indus12 tries, have called into question the continued rel13 evance of the model of regulation established by that

14 Act;

15 (3) there is a continuing need for State regula16 tion in order to ensure the rate protection of utility

17 customers; and

18 (4) limited Federal regulation is necessary to

19 supplement the work of State commissions for the

20 continued rate protection of electric and gas utility

21 customers.

22 (b) PURPOSES.—The purposes of this Act are—

23 (1) to eliminate unnecessary regulation, yet

24 continue to provide for consumer protection by facili25 tating existing rate regulatory authority through im26 proved Federal and State commission access to
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1 books and records of all companies in a holding com2 pany system, to the extent that such information is

3 relevant to rates paid by utility customers, while af4 fording companies the flexibility required to compete

5 in the energy markets; and

6 (2) to address protection of electric and gas

7 utility customers by providing for Federal and State

8 access to books and records of all companies in a

9 holding company system that are relevant to utility

10 rates.

11 SEC. 3. DEFINITIONS.

12 For purposes of this Act—

13 (1) the term ‘‘affiliate’’ of a company means

14 any company, 5 percent or more of the outstanding

15 voting securities of which are owned, controlled, or

16 held with power to vote, directly or indirectly, by

17 such company;

18 (2) the term ‘‘associate company’’ of a company

19 means any company in the same holding company

20 system with such company;

21 (3) the term ‘‘Commission’’ means the Federal

22 Energy Regulatory Commission;

23 (4) the term ‘‘company’’ means a corporation,

24 partnership, association, joint stock company, busi25 ness trust, or any organized group of persons,
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1 whether incorporated or not, or a receiver, trustee,

2 or other liquidating agent of any of the foregoing;

3 (5) the term ‘‘electric utility company’’ means

4 any company that owns or operates facilities used

5 for the generation, transmission, or distribution of

6 electric energy for sale;

7 (6) the terms ‘‘exempt wholesale generator’’

8 and ‘‘foreign utility company’’ have the same mean9 ings as in sections 32 and 33, respectively, of the

10 Public Utility Holding Company Act of 1935, as

11 those sections existed on the day before the effective

12 date of this Act;

13 (7) the term ‘‘gas utility company’’ means any

14 company that owns or operates facilities used for

15 distribution at retail (other than the distribution

16 only in enclosed portable containers or distribution

17 to tenants or employees of the company operating

18 such facilities for their own use and not for resale)

19 of natural or manufactured gas for heat, light, or

20 power;

21 (8) the term ‘‘holding company’’ means—

22 (A) any company that directly or indirectly

23 owns, controls, or holds, with power to vote, 10

24 percent or more of the outstanding voting secu-
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1 rities of a public utility company or of a holding

2 company of any public utility company; and

3 (B) any person, determined by the Com4 mission, after notice and opportunity for hear5 ing, to exercise directly or indirectly (either

6 alone or pursuant to an arrangement or under7 standing with one or more persons) such a con8 trolling influence over the management or poli9 cies of any public utility company or holding

10 company as to make it necessary or appropriate

11 for the rate protection of utility customers with

12 respect to rates that such person be subject to

13 the obligations, duties, and liabilities imposed

14 by this Act upon holding companies;

15 (9) the term ‘‘holding company system’’ means

16 a holding company, together with its subsidiary com17 panies;

18 (10) the term ‘‘jurisdictional rates’’ means

19 rates established by the Commission for the trans20 mission of electric energy in interstate commerce,

21 the sale of electric energy at wholesale in interstate

22 commerce, the transportation of natural gas in inter23 state commerce, and the sale in interstate commerce

24 of natural gas for resale for ultimate public con-
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1 sumption for domestic, commercial, industrial, or

2 any other use;

3 (11) the term ‘‘natural gas company’’ means a

4 person engaged in the transportation of natural gas

5 in interstate commerce or the sale of such gas in

6 interstate commerce for resale;

7 (12) the term ‘‘person’’ means an individual or

8 company;

9 (13) the term ‘‘public utility’’ means any person

10 who owns or operates facilities used for transmission

11 of electric energy in interstate commerce or sales of

12 electric energy at wholesale in interstate commerce;

13 (14) the term ‘‘public utility company’’ means

14 an electric utility company or a gas utility company;

15 (15) the term ‘‘State commission’’ means any

16 commission, board, agency, or officer, by whatever

17 name designated, of a State, municipality, or other

18 political subdivision of a State that, under the laws

19 of such State, has jurisdiction to regulate public util20 ity companies;

21 (16) the term ‘‘subsidiary company’’ of a hold22 ing company means—

23 (A) any company, 10 percent or more of

24 the outstanding voting securities of which are

25 directly or indirectly owned, controlled, or held
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1 with power to vote, by such holding company;

2 and

3 (B) any person, the management or poli4 cies of which the Commission, after notice and

5 opportunity for hearing, determines to be sub6 ject to a controlling influence, directly or indi7 rectly, by such holding company (either alone or

8 pursuant to an arrangement or understanding

9 with one or more other persons) so as to make

10 it necessary for the rate protection of utility

11 customers with respect to rates that such per12 son be subject to the obligations, duties, and li13 abilities imposed by this Act upon subsidiary

14 companies of holding companies; and

15 (17) the term ‘‘voting security’’ means any se16 curity presently entitling the owner or holder thereof

17 to vote in the direction or management of the affairs

18 of a company.

19 SEC. 4. REPEAL OF THE PUBLIC UTILITY HOLDING COM20 PANY ACT OF 1935.

21 The Public Utility Holding Company Act of 1935 (15

22 U.S.C. 79a et seq.) is repealed.

23 SEC. 5. FEDERAL ACCESS TO BOOKS AND RECORDS.

24 (a) IN GENERAL.—Each holding company and each

25 associate company thereof shall maintain, and shall make
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1 available to the Commission, such books, accounts, memo2 randa, and other records as the Commission deems to be

3 relevant to costs incurred by a public utility or natural

4 gas company that is an associate company of such holding

5 company and necessary or appropriate for the protection

6 of utility customers with respect to jurisdictional rates for

7 the transmission of electric energy in interstate commerce,

8 the sale of electric energy at wholesale in interstate com9 merce, the transportation of natural gas in interstate com10 merce, and the sale in interstate commerce of natural gas

11 for resale for ultimate public consumption for domestic,

12 commercial, industrial, or any other use.

13 (b) AFFILIATE COMPANIES.—Each affiliate of a hold14 ing company or of any subsidiary company of a holding

15 company shall maintain, and make available to the Com16 mission, such books, accounts, memoranda, and other

17 records with respect to any transaction with another affili18 ate, as the Commission deems to be relevant to costs in19 curred by a public utility or natural gas company that is

20 an associate company of such holding company and nec21 essary or appropriate for the protection of utility cus22 tomers with respect to jurisdictional rates.

23 (c) HOLDING COMPANY SYSTEMS.—The Commission

24 may examine the books, accounts, memoranda, and other

25 records of any company in a holding company system, or
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1 any affiliate thereof, as the Commission deems to be rel2 evant to costs incurred by a public utility or natural gas

3 company within such holding company system and nec4 essary or appropriate for the protection of utility cus5 tomers with respect to jurisdictional rates.

6 (d) CONFIDENTIALITY.—No member, officer, or em7 ployee of the Commission shall divulge any fact or infor8 mation that may come to his or her knowledge during the

9 course of examination of books, accounts, memoranda, or

10 other records as provided in this section, except as may

11 be directed by the Commission or by a court of competent

12 jurisdiction.

13 SEC. 6. STATE ACCESS TO BOOKS AND RECORDS.

14 (a) IN GENERAL.—Upon the written request of a

15 State commission having jurisdiction to regulate a public

16 utility company in a holding company system, the holding

17 company or any associate company or affiliate thereof,

18 other than such public utility company, wherever located,

19 shall produce for inspection books, accounts, memoranda,

20 and other records that—

21 (1) have been identified in reasonable detail in

22 a proceeding before the State commission;

23 (2) the State commission deems are relevant to

24 costs incurred by such public utility company; and
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1 (3) are necessary for the effective discharge of

2 the responsibilities of the State commission with re3 spect to such proceeding.

4 (b) LIMITATION.—Subsection (a) does not apply to

5 any person that is a holding company solely by reason of

6 ownership of one or more qualifying facilities under the

7 Public Utility Regulatory Policies Act.

8 (c) CONFIDENTIALITY OF INFORMATION.—The pro9 duction of books, accounts, memoranda, and other records

10 under subsection (a) shall be subject to such terms and

11 conditions as may be necessary and appropriate to safe12 guard against unwarranted disclosure to the public of any

13 trade secrets or sensitive commercial information.

14 (d) EFFECT ON STATE LAW.—Nothing in this sec15 tion shall preempt applicable State law concerning the pro16 vision of books, records, or any other information, or in

17 any way limit the rights of any State to obtain books,

18 records, or any other information under any other Federal

19 law, contract, or otherwise.

20 (e) COURT JURISDICTION.—Any United States dis21 trict court located in the State in which the State commis22 sion referred to in subsection (a) is located shall have ju23 risdiction to enforce compliance with this section.
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1 SEC. 7. EXEMPTION AUTHORITY.

2 (a) RULEMAKING.—Not later than 90 days after the

3 effective date of this Act, the Commission shall promul4 gate a final rule to exempt from the requirements of sec5 tion 5 any person that is a holding company, solely with

6 respect to one or more—

7 (1) qualifying facilities under the Public Utility

8 Regulatory Policies Act of 1978;

9 (2) exempt wholesale generators; or

10 (3) foreign utility companies.

11 (b) OTHER AUTHORITY.—If, upon application or

12 upon its own motion, the Commission finds that the books,

13 records, accounts, memoranda, and other records of any

14 person are not relevant to the jurisdictional rates of a pub15 lic utility or natural gas company, or if the Commission

16 finds that any class of transactions is not relevant to the

17 jurisdictional rates of a public utility or natural gas com18 pany, the Commission shall exempt such person or trans19 action from the requirements of section 5.

20 SEC. 8. AFFILIATE TRANSACTIONS.

21 Nothing in this Act shall preclude the Commission

22 or a State commission from exercising its jurisdiction

23 under otherwise applicable law to determine whether a

24 public utility company, public utility, or natural gas com25 pany may recover in rates any costs of an activity per26 formed by an associate company, or any costs of goods
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1 or services acquired by such public utility company from

2 an associate company.

3 SEC. 9. APPLICABILITY.

4 No provision of this Act shall apply to, or be deemed

5 to include—

6 (1) the United States;

7 (2) a State or any political subdivision of a

8 State;

9 (3) any foreign governmental authority not op10 erating in the United States;

11 (4) any agency, authority, or instrumentality of

12 any entity referred to in paragraph (1), (2), or (3);

13 or

14 (5) any officer, agent, or employee of any entity

15 referred to in paragraph (1), (2), or (3) acting as

16 such in the course of his or her official duty.

17 SEC. 10. EFFECT ON OTHER REGULATIONS.

18 Nothing in this Act precludes the Commission or a

19 State commission from exercising its jurisdiction under

20 otherwise applicable law to protect utility customers.

21 SEC. 11. ENFORCEMENT.

22 The Commission shall have the same powers as set

23 forth in sections 306 through 317 of the Federal Power

24 Act (16 U.S.C. 825d–825p) to enforce the provisions of

25 this Act.
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1 SEC. 12. SAVINGS PROVISIONS.

2 (a) IN GENERAL.—Nothing in this Act prohibits a

3 person from engaging in or continuing to engage in activi4 ties or transactions in which it is legally engaged or au5 thorized to engage on the effective date of this Act.

6 (b) EFFECT ON OTHER COMMISSION AUTHORITY.—

7 Nothing in this Act limits the authority of the Commission

8 under the Federal Power Act (16 U.S.C. 791a et seq.)

9 (including section 301 of that Act) or the Natural Gas

10 Act (15 U.S.C. 717 et seq.) (including section 8 of that

11 Act).

12 SEC. 13. IMPLEMENTATION.

13 Not later than 18 months after the date of enactment

14 of this Act, the Commission shall—

15 (1) promulgate such regulations as may be nec16 essary or appropriate to implement this Act (other

17 than section 6); and

18 (2) submit to the Congress detailed rec19 ommendations on technical and conforming amend20 ments to Federal law necessary to carry out this Act

21 and the amendments made by this Act.

22 SEC. 14. TRANSFER OF RESOURCES.

23 All books and records that relate primarily to the

24 functions transferred to the Commission under this Act

25 shall be transferred from the Securities and Exchange

26 Commission to the Commission.
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1 SEC. 15. EFFECTIVE DATE.

2 This Act shall take effect 18 months after the date

3 of enactment of this Act.

4 SEC. 16. AUTHORIZATION OF APPROPRIATIONS.

5 There are authorized to be appropriated such funds

6 as may be necessary to carry out this Act.

7 SEC. 17. CONFORMING AMENDMENT TO THE FEDERAL

8 POWER ACT.

9 Section 318 of the Federal Power Act (16 U.S.C.

10 825q) is repealed.

Calendar No. 23

106TH CONGRESS

1ST SESSION S. 313

[Report No. 106–7]

A BILL

To repeal the Public Utility Holding Company Act

Company Act of 1999, and for other purposes.of 1935, to enact the Public Utility Holding

MARCH 2, 1999

Reported without amendment