Madam President, I ask unanimous consent that the pending amendment be set aside. Yes. My attempt was to set aside what I thought was a pending amendment to your amendment and then to offer a different amendment to your amendment. And I…
Madam President, I ask unanimous consent that the pending amendment be set aside.
Yes.
My attempt was to set aside what I thought was a pending amendment to your amendment and then to offer a different amendment to your amendment. And I make that request again.
Madam President, I ask that in the form of a unanimous consent request, that the pending amendment to the Domenici amendment be set aside.
I yield to the Senator from Nevada.
Thank you, Madam President.
Amendment No. 1416 To Amendment No. 1412
Madam President, I have an amendment at the desk.
Madam President, I ask unanimous consent that reading of the amendment be dispensed with.
Madam President, I rise today to offer an amendment on behalf of myself and the Senator from Kansas, Mr. Brownback. I am pleased that the Senator from Kansas is joining me in this effort, and he has done so because I know he shares my view that the repeal of the Public Utility Holding Company Act in the underlying bill creates a serious regulatory void and market flaw that Congress should correct.
I am so pleased this is a bipartisan effort. I believe we have broad support in this body and beyond for these amendments.
These amendments would improve on the bill by making clear the actions that the Federal Energy Regulatory Commission--or FERC--must take to ensure that deregulated holding companies do not outcompete our small businesses, damage their financial standing, and then pass the costs of bad investments to consumers.
Our amendment is supported by a wide and impressive coalition of business, labor, financial, and consumer groups which include: the Independent Electrical Contractors, Air Conditioning Contractors of America, Plumbing-Heating-Cooling Contractors, Associated Builders and Contractors, National Electrical Contractors Association, Mechanical Contractors, Sheet Metal Air Conditioning Contractors, the International Brotherhood of Electrical Workers, the National Alliance for Fair Competition, the Small Business Legislative Council, Consumers for Fair Competition, and the Association of Financial Guaranty Insurors.
The Senator from Kansas and I are concerned because electricity is not like other commodities. Electricity is essential to public well- being. When this bill is enacted and the Public Utility Holding Company Act is repealed, a strong incentive will exist for large utilities with the financial resources and the potential to exercise market power to get larger. Already, the electric utility industry is undergoing rapid consolidation. In the past 3 years alone, there have been more than 30 major utility mergers and acquisitions, creating large multistate holding companies, including several in my own home State and with utilities in Minnesota that serve Wisconsin. Many companies have seen their stock plunge and credit ratings downgraded, and these companies are now prime buy-out targets.
I acknowledge that deregulation is not inherently bad and should not always be prevented. It can produce efficiencies, economies of scale and cost savings for electrical consumers. However, it can also reduce competition, increase costs, and frustrate effective regulator oversight. This amendment protects consumers from assuming the costs and risks of utility diversification into non-utility businesses, prevents utilities from subsidizing affiliate ventures and competing unfairly with independent businesses, and protects utility investors. It does so by requiring FERC to issue regulations that require affiliate, associate, and subsidiary companies to be independent, separate, and distinct entities from public utilities; maintain separate books and records; structure their governance in a manner that would prevent creditors from having recourse against the assets of public utilities; and prohibit cross-subsidizing, or shifting costs from affiliate, associate, or subsidiary companies to the public utilities.
The Public Utility Holding Company Act was enacted in 1935 to rein in the pervasive economic and political sway that holding companies held over the Nation's public utilities at that time. Studies conducted by the Federal Trade Commission and the U.S. House of Representatives at the time demonstrated that the holding companies, which controlled approximately 80 percent of the Nation's gas and electric utilities, were exploiting both consumers and investors. At the time PUHCA was passed, 16 major holding companies and their utility subsidiaries produced more than three-quarters of the electric energy in this country.
Individual States and localities enacted their own laws, but were unable to control these multi-State holding companies--many of which also held investments in foreign countries--and their utility subsidiaries. Holding companies created organizational structures that extended across State lines, specifically to place the holding companies beyond the regulatory reach of the individual State commissions. In fact, registered holding companies were formed specifically for the purpose of avoiding regulation. Holding companies leveraged their utility assets to gain financing for risky investment ventures and engaged in anticompetitive behavior.
PUHCA requires that proposed investments benefit the utility system, and not harm ratepayers, shareholders or the public interest.
PUHCA requires that holding companies seeking to acquire utilities obtain preapproval from the Securities and Exchange Commission. In addition, a particular class of holding companies, known as ``registered holding companies,'' those holding companies with utility subsidiaries in more than one State, must obtain SEC approval also for acquisitions of nonutility businesses. The SEC has authority to oversee and provide advance approval for the complicated financial transactions of the registered holding companies,
including intrasystem transactions and diversification into unregulated businesses.
PUHCA does these things, but the bill before us repeals PUHCA. As a result, registered holding companies will be able to freely diversity into unregulated businesses, and to engage in interaffiliate transactions in which the holding company and nonutility businesses drain financial resources and key assets from the utility businesses.
In California, for example, holding company maneuvers have left California utilities in a weakened financial condition. Billions of dollars have been moved out of their utility companies into the holding company and then into their unregulated affiliates which are protected by laws that now put this cash beyond the reach of even the holding company. As a result, the utilities have had too little cash to carry out their utility obligations.
In addition, even with PUHCA, we are already experiencing concerns about utilities expanding into electricity-related services and outcompeting small businesses in my State. Small contractors can't compete against big utilities in areas like energy efficiency upgrades to private homes, when big utilities can use existing assets like personnel, equipment, and vehicles to perform those services. When PUCHA is repealed, utilities will be able to expand into other business areas, and we should make certain that we protect small businesses.
This amendment is good public policy, and it will strengthen the Senate's position in Conference with the House of Representatives. I urge my colleagues concerned about ensuring fairness in a deregulated system to support this amendment.
Let me say how delighted I am to be working with the Senator from Kansas who I know has a deep and abiding commitment to small businesses as well.
Madam President, I thank the Senator from Kansas for his excellent work. It is an excellent example of why this is so important. I appreciate his support in working with me on it.
I ask unanimous consent that the Senator from Oregon, Mr. Wyden, be added as a cosponsor of the amendment.
Madam President, I ask unanimous consent that a list of organizations in support of the amendment be printed in the Record at this time.
Madam President, I am pleased that the ranking member of the committee, Senator Bingaman, is indicating positive remarks about this amendment as well. I wonder if he may wish to make some remarks in support at this time.
Madam President, I do not expect a great deal of time at all. I would like the opportunity to respond to any comments the chairman of the committee might make.
First, I thank the Senator for the kind remarks. I do not believe we disagree with the goals with regard to the underlying amendment. In fact, I regard this, and I think Senator Brownback regards this, as a friendly amendment; that is, an attempt to make sure this dramatic change, the repeal of PUHCA, gets off the ground properly and does not, in effect, throw out the baby with the bathwater.
My amendment does not attempt to repeal the repeal. I think if one was listening to the remarks of the Senator from New Mexico they might have gotten the impression we were sort of pretending we were repealing PUHCA and then putting it back in effect. That is not in any way, shape, or form what we are trying to do.
We are trying to address a very specific problem the Senator from Kansas laid out very well, the cross-subsidization problem, when a utility holding company owns other affiliated entities and the problems that occur when those assets are moving back and forth in a way I and many people think threatens ratepayers as well as investors.
Specifically, the Senator from New Mexico talks about the fact that there are those who are poised and ready to invest in the utility industry if changes are made, presumably such as the repeal of PUHCA. It is my belief that is exactly what our amendment helps do. I think it helps create a scenario that will make investors more positive rather than less positive.
The Senator's argument about somehow our amendment will scare off investors is really a 5-year-old argument. PUHCA repeal, without the bottom-up regulation these ring-fencing provisions of this amendment provide, will continue to keep capital away. We do not have some kind of insurance for investors in utilities that the resources of those utilities will not be spirited away to these affiliates. Then they will not have the confidence in investing, and I want that investment to happen.
Regulatory insulation, and that is what the Feingold-Brownback amendment does, will help restore investor confidence. It will actually help achieve the chairman's goal. Our belief, and our hope, is our amendment will help bring order to what is a beleaguered sector, not that it will wreak havoc.
Utilities provide an essential public service. Our amendment insulates these utilities wherever they are in a corporate family. So what we are doing is providing a clear distinction of what entities are regulated or not.
Now, if we are looking at investments, that is what we want to see. We want to know exactly what we are getting into. We want to know what our dollars are going to be used for and it helps restore investor confidence and consumer confidence, not the reverse.
This is a good amendment. It has strong bipartisan support. There have not been a lot of Feingold-Brownback amendments over the years, even though I thoroughly enjoy working with the Senator. I think what it represents is a powerful commitment on the part of those of us who are working on this to protect small businesses in our State.
I will not read again the list of the contractors and small business organizations that support this effort, but it is the kind of mainstream people that made my State. It is the kind of mainstream people that made the Chair's State. It is the kind of mainstream people that made the Senator from Kansas's State. They do not want to be driven out of business by utilities able to somehow move these assets back and forth through affiliates that are not properly regulated. That is a reasonable request.
Even more importantly and in response to the Senator from New Mexico, we are trying to make sure investors feel comfortable so it will help the utility industry. The worst thing we can do is raise the specter of another Enron. The phrase ``cooking the books'' dominated our headlines a year ago, and our amendment is about making sure there will not be any accusations or reality of cooking the books when it comes to a utility and its affiliates, that they will have two separate sets of books.
Yes, the Senator's underlying amendment is good. It allows FERC to look at the books. If they look at the books and there are no standards or rules about keeping the entities separate, what is the good? There need to be some teeth in it. That is what our amendment does.
I suggest this is a reasonable, fairly modest amendment that will make the Domenici substitute even better. I urge my colleagues to support it.
I yield the floor.
Madam President, I want to bring this debate to a close, but I want to quickly respond to a couple of comments from the Senators from New Mexico and Idaho.
When the Senator from New Mexico was making his comments he talked about the fact the State commissions, public service commissions, and others would be able to sort of take care of these kinds of problems that would exist in a post-PUHCA repeal era. I don't think that is an adequate answer.
The fact is, as I mentioned in my opening remarks, in many cases these are interstate utility entities, and it is that very fact that has made it so difficult, prior to PUHCA, for there to be any appropriate regulation at all. So we do need some kind of appropriate law that homes in on this problem of utility holding companies and affiliates and the cross-subsidization problem that exists. That is the first point I want to make, that the State level is simply not going to do it.
The second point relates to the comments of the Senator from Idaho. The premise of the remarks of the Senator is that somehow my amendment undoes the repeal of PUHCA. It does not do that. Our amendment is necessary and helpful and good for investors and consumers and ratepayers and small business, whether PUHCA is repealed or not. The argument is a red herring. The argument has no relationship to the issue of whether these provisions are needed.
Maybe we could put it this way: The Senator from Idaho believes that a 1933 law known as PUHCA is no longer the right law for this time. We are proposing what we believe to be the appropriate, measured, consumer confidence and investor confidence provision for 2003, not 1935. So we are accepting in the amendment the repeal of PUHCA, but we are adding this provision that is necessary in 2003, not 1935.
The only other alternative, if we do not do at least our amendment, is we are going to be returning to the environment that we are just coming out of, the environment that everyone admits was a disaster for consumers and that it destroyed consumer confidence and investor confidence because of the recklessness and the cooking of the books that went on all over this country, particularly in the utility industry.
We have to make sure what we do here does not undercut the confidence we want to increase for consumers and for investors. That is the purpose of our amendment. We are not trying to undo the chairman's primary purpose of his amendment.
I yield the floor. Assuming that is the end of the debate, I yield the floor.