May 21, 2001
On April 25 the Senate Banking Committee voted 19 to 1 to recommend repeal of what remains of the PUHCA (Public Utility Holding Company Act) of 1935. Congress already in 1978 and 1992 repealed important parts of the PUHCA. The 1992 measure, especially, opened the door to the deregulation fiasco now unfolding.
The PUHCA was adopted in 1935, in the middle of the "Great" Depression as a response to the disastrous situation privately owned public utilities had created. The holding companies which Congress regulated produced no electricity themselves. They simply owned publicly regulated electric utility companies (or other holding companies that owned utility companies), as well as unregulated coal companies, financial services companies, construction companies, and so on. They used their control of companies in various phases of the electric power generation process and their hidden concentration of control over many utility companies around the country to escape all public regulation.
The ownership of all these holding companies, subsidiary companies, affiliated companies and interlocking companies was so complicated, it was impossible to know what was going on. The result was, the utilities themselves, whose rates supposedly were regulated, in fact could charge whatever they thought they could get away with.
What was worse, was that these holding company "pyramids" –as they were called –allowed a very tiny number of capitalists to control the electric power industry in the whole country.
During the 1930s, it was estimated that 16 holding companies controlled 85% of all the electric generating capacity of the country. And these 16 companies were in some cases owned by the same person or group of people who conspired with each other. J.P. Morgan alone, one of the leading financial manipulators of that time, is estimated to have directly or indirectly controlled over 50% of all generating capacity.
After the stock market crash, most holding companies which had been built up on speculation went belly up. Not only did hundreds of thousands of small stockholders in these holding companies lose their money, but electricity was cut off to whole cities, whole areas of the country. In many rural areas, electric service had never been established to begin with because it had never been profitable enough for the barons of the power industry to bother with it.
It was to prevent the recurrence of such financial speculation in public utilities that Congress passed the PUHCA in 1935. A number of regulations set limits on how much a single holding company could own and where it could own it.
But to restore electric service required many cities to build their own system and the federal government to extend electricity to rural areas. Private capital wouldn't do it. Its goal was the production of profits, not of electricity.
Today Congress stands on the verge of repealing what's left of this law, even as the new barons of the energy industries are gearing up to concentrate ownership and control of gas and electric utility companies, pipeline and electric power transmission companies in their hands –only this time on a much grander scale than anything that happened in the earlier part of the 20th century.
According to the U.S. Department of Energy (DoE), in 1992, the ten largest investorowned utilities owned 36% of all generating capacity in the country. By the end of 2000, according to DoE estimates, the top ten owned 51% of all such capacity. John Bryson, current CEO of Edison International, the holding company which owns Southern California Edison, recently predicted that there will be only 10 energy conglomerates left worldwide in ten years. The current disaster in California gives a hint of what that will mean for the prices we will pay for electrical power, with decreasing access to it. These 10 monopolies will roll up enormous profits.
The federal and state deregulation laws of this last quarter of a century, bending to capital's voracious appetite for profit, are now turning the clock backwards and doing it under the banner of what the U.S. Department of Energy recently called "a new school of thought."