Electricity Supply: Regulation of the Changing Electric Industry Under the Public Utility Holding Company Act

GAO discussed the Securities and Exchange Commission's (SEC) administration of the Public Utility Holding Company Act of 1935 (PUHCA), focusing on: (1) industry changes involving electric utility holding companies; (2) the SEC regulatory response to such changes; and (3) the relationship between SEC, the Federal Energy Regulatory Commission (FERC), and states in protecting consumer and investor interests in light of those changes. GAO noted that: (1) the number of exempt electric utility holding companies has increased from 45 to 97, mainly resulting from electric utilities reorganizing and forming parent holding companies for diversification purposes; (2) the number of nonutility subsidiaries of exempt holding companies grew from 113 to 1,040, mainly concentrated in a few states and companies; (3) utility holding companies and other companies have developed independent power producers (IPP) to provide wholesale power to regulated utilities; (4) SEC has continued to rely largely on state utility commissions to regulate exempt holding companies, as provided by the act; (5) SEC has attempted to accommodate IPP development within the confines of PUHCA and facilitated IPP where the law permits; (6) SEC regulates utility acquisitions and certain securities transactions of holding companies, whereas FERC does not directly regulate utility holding companies, but reviews transactions between utilities and affiliated companies; and (7) the extent of states regulation varies in diversification activities and utility transactions involving IPP.