The Public Utility Holding Company Act of 1935 (PUHCA), which is administered by the Securities and Exchange Commission (SEC), subjects public utility holding companies to federal regulation. Some recent events have raised concerns about SEC's administration of the act. GAO was asked to review SEC's administration of PUCHA. GAO's objectives included determining the nature and the extent to which SEC regulates registered holding companies and the results of its regulation, the extent to which SEC reviews claims of exemption and the results of these reviews, and how SEC determines whether companies have a controlling influence over public utilities or holding companies.
Recommendations for Executive Action
|United States Securities and Exchange Commission||As long as SEC continues to have the responsibility to administer PUHCA, the Chairman, SEC, to improve the timeliness and quality of SEC's activities related to its oversight of registered holding companies, should implement the SEC Inspector General's recommendation for establishing time frames and target dates for assigning, reviewing, and issuing notices and orders on a case-by-case basis.|
|United States Securities and Exchange Commission||As long as SEC continues to have the responsibility to administer PUHCA, the Chairman, SEC, to improve the timeliness and quality of SEC's activities related to its oversight of registered holding companies, should develop an action plan to establish and meet time frames for making improvements to existing PUHCA forms and developing a system to collect and analyze information contained in PUHCA filings to enhance SEC's ability to better monitor registered holding companies, while reducing the overall regulatory burden on these companies.|
|United States Securities and Exchange Commission||Although SEC has recently conducted a review of all companies exempt by self-certification, the Chairman, SEC, should further enhance SEC's monitoring of exempt companies by expediting the evaluation of the different legal options and obtaining the necessary legal authority for requiring companies that are exempt by order to provide additional information on their operations.|
|United States Securities and Exchange Commission||Although SEC has recently conducted a review of all companies exempt by self-certification, the Chairman, SEC, should further enhance SEC's monitoring of exempt companies by creating a formal strategy to conduct comprehensive reviews of companies claiming exemptions on a periodic basis and expand the focus of these reviews to include companies that claim exemption by order.|
|United States Securities and Exchange Commission||In light of the growing number of consent rights that utility investors have acquired over operational matters of holding companies and public utilities, the Chairman, SEC, should develop and publish general guidelines that articulate minimum standards that an investor seeking to acquire an interest in a holding company or public utility must satisfy in order to receive a no-action letter. Examples of these minimum standards could include that a majority of the members of the public utility's or holding company's board of directors not be affiliated with the investor or that any consent rights be limited to those necessary to protect the investor from unilateral action by a majority investor.|
|United States Securities and Exchange Commission||Finally, given the changes that are taking place in the utility industry and current debates about SEC's actions in administering PUHCA, including the agency's interpretations of the single area requirement and its interpretations of a controlling influence, the Chairman, SEC, should conduct a study on the impact of SEC's administration of PUHCA in the last decade and, if necessary, make legislative proposals. The study should examine whether its decisions and flexible interpretations facilitate consumer and investor protection and enable companies to provide energy to the nation's consumers in an efficient and competitive manner. In conducting this study, SEC should gather the views of the utility industry, consumer groups, trade associations, investment banks, rating agencies, economists, and relevant state and federal regulators.|