Electricity Supply:

Regulating Utility Holding Companies in a Changing Electric Industry

RCED-92-98: Published: Apr 9, 1992. Publicly Released: May 11, 1992.

Additional Materials:


Office of Public Affairs
(202) 512-4800

Pursuant to a congressional request, GAO reviewed the adequacy of consumer and investor protection in the electric utility industry, focusing on: (1) recent changes within the electric utility industry involving holding companies; (2) the effect of those changes on the Securities and Exchange Commission's (SEC) administration of the Public Utility Holding Company Act (PUHCA) of 1935; and (3) the relationship between SEC, the Federal Energy Regulatory Commission (FERC), and state regulators in protecting consumer and investor interests in the changing industry.

GAO found that: (1) within the past decade, significant restructuring occurred within the electric utility industry, due to economic, legislative, and other related factors; (2) restructuring activities included formation of holding companies by electric utilities, mergers or acquisitions of electric utilities by other utilities, and development of nonutility wholesale generators; (3) because those structural changes involved utility holding companies that were exempt from most PUHCA regulations, SEC administration of the act has not been greatly affected; (4) SEC relied largely on states to regulate the exempt holding companies, as provided by PUHCA; (5) over the past decade, FERC and state regulators had a greater role than SEC in protecting consumer and investor interests; (6) FERC reviews certain mergers and acquisitions to ensure that they are consistent with the public interest, and approves wholesale rates; (7) most state commissions do not directly regulate utility holding companies, but they may review such utility transactions as security issuances and mergers and acquisitions; (8) state commissions can generally protect consumers from adverse impacts of holding-company diversification through their retail ratemaking authority; and (9) regulation of utilities and holding companies, as well as the number and operations of such companies, varies among states.