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Utility overhaul dropped from energy bill

A plan to repeal a Depression-era law curbing utility monopoly abuses was dropped from a draft Senate energy bill unveiled on Friday after controversial remarks from the head of the Federal Energy Regulatory Commission (FERC), a Senate aide said.
/ Source: Reuters

A plan to repeal a Depression-era law curbing utility monopoly abuses was dropped from a draft Senate energy bill unveiled on Friday after controversial remarks from the head of the Federal Energy Regulatory Commission (FERC), a Senate aide said.

The House of Representatives last month passed a wide-sweeping energy bill that would repeal the law, the Public Utility Holding Company Act (PUHCA) of 1935.

Similar language was included in previous versions of Senate energy legislation that stalled during the past four years. However, the repeal was dropped from a draft bill the Senate Energy Committee released on Friday, Senate aides said.

The utility industry has long lobbied for PUHCA to be repealed, while consumer groups contend the law is needed to ensure fair competition in the electricity market.

Some Democrats on the Senate Energy Committee insisted PUHCA could be repealed only if the energy bill gave the FERC more power to review utility mergers.

But alarm bells went off among some committee members when FERC Chairman Pat Wood this week said his agency should order Duke Energy Corp. to join a regional grid group as a condition for FERC to approve its $9 billion merger with Cinergy Corp., according to a panel aide.

Cinergy belongs to the Midwest’s independent grid operator. but Duke has not made a commitment to join one. FERC has pushed utilities to put their transmission grids under the supervision of an independent party to allay anti-competitive concerns.

Passed amid Congress’ trust-busting push, PUHCA clipped public utility holding companies’ monopoly power by requiring them to be physically connected to the transmission grid and to limit their operations to a single area or region.

Alex Flint, the committee aide, said the Republican and Democratic heads of the panel decided to leave PUHCA intact.

“Pat Wood’s comments about using merger review to force divestiture of transmission assets ... raised concern about vesting significant merger review authority at FERC,” he said.

A FERC spokesman said Flint “mischaracterized” Wood’s comments. Duke would maintain ownership of its grid assets even if it joined a regional grid group, the spokesman said.

“This simply means that the transmission assets can’t be used to discriminate in wholesale markets,” the FERC spokesman said. The Justice Department and Federal Trade Commission have repeatedly asked FERC to order divestitures as conditions for previous mergers but FERC has declined, the spokesman said.

A Duke Energy spokesman was not available for comment.

Last week, an administrative law judge with the Securities and Exchange Commission rejected the 2000 merger of American Electric Power and Central and South West Corp., saying it does not meet PUHCA’s requirement that the merged company operate in a single area.