U.S. Investment in Foreign Utilities under the Public Utility Holding Company Act of 1935 and the Energy Policy Act of 1992

By Moeller, James W. | Law and Policy in International Business, Winter 1993 | Go to article overview

U.S. Investment in Foreign Utilities under the Public Utility Holding Company Act of 1935 and the Energy Policy Act of 1992


Moeller, James W., Law and Policy in International Business


INTRODUCTION

On October 24, 1992, President Bush signed into law the Energy Policy Act of 1992,(1) amending the Public Utility Holding Company Act of 1935 (PUHCA).(2) In particular, section 715 of the new law amends PUHCA to facilitate and promote the expansion and increase of U.S. investment in foreign electric and gas utility companies.(3)

The amendment of PUHCA in this regard was precipitated by an explosion of opportunities for U.S. investment in foreign utilities in 1992.(4) For example, in March 1992, the government of Argentina announced the privatization of several state-owned utilities.(5) In August 1992, the government of Brazil similarly announced the privatization of its state-owned electric utility company.(6) To promote the development of additional electric power facilities, Columbia, Costa Rica, and Honduras all legislated the removal of legal barriers to private and foreign investment in their electric utilities.(7)

As in Latin America, in Eastern Europe several nations initiated the privatization of their state-owned electric and gas utility companies in 1991 and 1992.(8) Poland, for example, is expected to privatize thirty-four electric power companies.(9)

Finally, numerous additional opportunities for U.S. investment in foreign utilities arose in 1992 in the Far and Near East and in the Pacific. The need for electric power facilities in China is expected to result in the removal of legal barriers to private and foreign investment.(10) The governments of Malaysia and Pakistan both have decided to proceed with privatization of their state-owned electric utility companies.(11) The governments of South Korea and Thailand announced their promotion and development of new electric power facilities through foreign investment.(12) The governments of Australia and New Zealand also decided to privatize their electric utility companies.(13)

PUHCA, which is administered by the U.S. Securities and Exchange Commission (SEC), regulates the acquisition and ownership by U.S. companies of electric and gas public utility companies. A public utility holding company is basically a company that owns a U.S. or foreign electric or gas utility company.(14) In the absence of an exemption--several of which are provided by PUHCA--A public utility holding company, as well as its public utility and non-utility subsidiaries, is subject under PUHCA to a complex maze of legal requirements. It was argued in 1992 that those legal requirements would pose obstacles to U.S. investment in foreign utilities.(15)

During the same time the Energy Policy Act was under consideration in Congress, the SEC granted several landmark exemptions from the legal requirements of PUHCA to U.S. public utility holding companies wishing to invest in foreign utilities. The exemptions suggested a recognition of unprecedented opportunities for U.S. investment but nonetheless require the resolution of several legal issues unencountered in the administration of PUHCA by the SEC in almost sixty years. The exemptions establish a precedent that is certain to dictate to a significant extent the future course of U.S. investment in foreign public utility companies.

This article describes and discusses the development of the new legal regime under PUHCA for U.S. investment in foreign utilities. Part I provides an overview of the complex regulatory framework PUHCA imposes on public utility holding companies and addresses the several exemptions from those legal requirements provided by PUHCA. Part II discusses the recent exemptions granted by the SEC to public utility holding companies investing in foreign utilities. Part III describes the recent amendment to PUHCA intended to facilitate and promote an expansion in U.S. investment in foreign utilities and discusses the development of the National Energy Strategy and the legislation fashioned to implement it. It also discusses the adoption of the Foreign Investment Amendment. This article concludes with the observation that the Foreign Investment Amendment could actually compromise a principal objective of the National Energy Strategy and the Energy Policy Act, that is, the development of new electric power facilities in the United States.

I. PUHCA REQUIREMENTS AND EXEMPTIONS

A. Regulation Under PUHCA

PUHCA establishes an extensive, complex, and arguably burdensome regime for the regulation of public utility holding companies.(16) The purpose of the regime is to prevent a recurrence of the financial abuses for which the electric and gas utility industries and their holding companies were notorious in the two decades prior to enactment of PUHCA.(17) Those abuses are enumerated within the statute(18) and detailed in its extensive legislative history.(19)

In the absence of an exemption,(20) all public utility holding companies are subject to four general and fundamental requirements. First, each public utility holding company is required to register with the SEC(21) and is required to file an annual report with the SEC.(22)

Second, PUHCA requires prior SEC approval of sale of securities and acquisition of securities and utility assets by registered companies and their subsidiaries. Generally, a proposed issuance or sale of securities requires a declaration which describes the proposed transaction to be filed with the SEC.(23) The declaration will become effective within a reasonable period of time unless the SEC issues an order to show cause and provides an opportunity for administrative adjudication on the order.(24) The public is also provided with notice of the declaration and an opportunity for administrative adjudication thereon.(25) The conditions under which the SEC is to allow the declaration to become effective are detailed in Sections 7(c)-(g).(26) The SEC will issue an order that authorizes or prohibits the proposed transaction either when the declaration becomes effective or after an administrative adjudication.(27)

The requirements for prior SEC approval of acquisition of securities and utility assets are quite similar to those for sale of securities. Under PUHCA, a proposed acquisition of securities or utility assets requires an application describing the proposed transaction to be filed with the SEC.(28) The SEC will issue an order that either approves or denies the application but will provide the applicant with an opportunity for administrative adjudication before denial of the application.(29) The public, again, is provided with notice of the application and an opportunity for administrative adjudication thereon.(30) The conditions under which the SEC is to approve or deny the application are detailed in Sections 10(b)-(c).(31)

Third, PUHCA establishes numerous requirements for prior SEC approval of certain other financial transactions among registered companies and their subsidiaries as well as among subsidiaries within the same holding company system.

Section 12 is largely concerned with certain financial transactions between registered companies and their subsidiaries(32) and imposes a prohibition on loans to registered companies from their public utility subsidiaries.(33) The purpose of the prohibition is "to prevent undesirable upstream loans being made to a top holding company of an operating utility system by its subsidiaries and the consequent milking of the latter."(34) The statute similarly imposes a prohibition on direct or indirect loans, without prior SEC approval, from Registered Companies to their subsidiaries.(35) Section 12 also prohibits the payment of dividends and the redemption of securities by registered companies and their subsidiaries without prior SEC approval.(36) In addition, the statute prohibits the sale of securities in or assets of public utility companies by registered companies without prior SEC approval.(37) The prohibition is "designed to protect investors against any sacrifice of their equity in the sale of their assets."(38)

Section 13 is concerned exclusively with service, sales, and construction contracts between companies within the same holding company system.(39) It imposes an absolute prohibition on contracts with registered companies for the performance of services or construction for or sale of goods to public utility companies within the same holding company system,(40) and requires SEC approval if the contract is with a subsidiary of a registered company. The approval is intended "to insure that such contracts are performed economically and efficiently for the benefit of such . . . companies at cost, fairly and equitably allocated among such companies."(41) The SEC has determined that the cost of service, sales, and construction contracts is generally fair and equitable if it is equal to the cost of the performance of the contracts.(42)

Finally, PUHCA establishes a general and fundamental requirement for the holding company systems of registered companies to be simple and uncomplicated. Indeed, section 11 of PUHCA actually authorizes the SEC to require the simplification of holding company systems--through, for example, divestment of subsidiaries unrelated to the operations of public utility systems--in order to limit the operations of holding company systems to single and "integrated" public utility systems.(43) The requirement for simplification is the cornerstone of PUHCA.(44) It is also the requirement that precipitated numerous constitutional challenges against PUHCA.(45)

Section 11 requires the SEC to examine holding company systems to assess the extent to which they could be and should be simplified.(46) It authorizes the SEC to require the simplification of holding company systems, through, for example, divestment, reorganization, and recapitalization, to limit their operations to "integrated" public utility systems and to "such other businesses as are reasonably incidental, or economically necessary or appropriate to the operations of such integrated" systems.(47)

The SEC may enforce its reorganization plans in the federal district courts.(48) The holding company system may also submit its own simplification plan for SEC approval and to the district courts for enforcement.(49) PUHCA also provides for judicial review of SEC orders for simplification, as well as of SEC approval of submitted simplification plans, in the federal courts of appeal.(50)

B. Exemptions Under PUHCA

The numerous and arguably onerous requirements that PUHCA imposes on registered companies present a significant incentive for companies with electric and gas utility subsidiaries to avoid its grip, if at all possible. PUHCA does provide companies with such subsidiaries several exemptions. Five exemptions are for holding companies.(51) A sixth exemption is for certain subsidiaries of holding companies.(52) The fifth and sixth exemptions are directly relevant to U.S. investment in foreign electric and gas utility companies.

In September 1991, there were 116 public utility holding companies with exemptions from regulation under PUHCA granted by the SEC (exempt companies).(53) Section 3(c) directs the SEC to issue, within a reasonable time after the submission of an application for an exemption, an order that either grants the application or, after an opportunity for administrative adjudication thereon, denies the application.(54) The exemptions issued to holding companies also exempt their subsidiaries from regulation.(55) submission of an application for an exemption exempts the applicant from regulation until an order is issued on the application.(56) An order that denies an application is not an automatic requirement for the applicant to register.(57) An exemption is subject to revocation.(58) Finally, Section 3(d) authorizes the issuance of blanket exemptions, in the form of SEC regulations, for entire classes of subsidiaries of holding companies.(59)

Section 3(a) establishes five exemptions for holding companies and their subsidiaries that would otherwise be required to register and would be subject to regulation under PUHCA.(60) First, section 3(a)(1) provides an exemption for holding companies and their public utility subsidiaries from which the holding companies derive a material part of their incomes, that are "predominantly intrastate in character and carry on their business substantially in a single State . . ."(61) Second, section 3(a)(2) provides an exemption for holding companies that are "predominantly" engaged in public utility operations, the scope of which is confined to their states of incorporation and contiguous states.(62) Third, section 3(a)(3) provides an exemption for holding companies that are "primarily" interested in nonutility companies and that either derive no material income from public utility subsidiaries or that derive a material part of their incomes from public utility subsidiaries that are in their substantial possession.(63) This exemption is often granted to large industrial facilities with electric generation facilities to provide their own electric power needs.(64) Fourth, section 3(a)(4) provides an exemption for holding companies with public utility subsidiaries that are merely the result of acquisitions of securities for purposes of liquidations or distributions in connection with debts.(65)

The fifth and sixth exemptions are directly relevant to U.S. investment in foreign public utility companies. The fifth exception in section 3(a)(5) exempts from regulation holding companies that are not "principally" engaged in public utility operations in the United States and that derive no material income from public utility subsidiaries that operate in the United States.(66) The exemption would be applicable, for example, to holding companies incorporated in the United States, which are not engaged in public utility operations in the U.S. but derive a material part of their income from public utility subsidiaries operating in foreign nations.(67)

The sixth exemption in section 3(b) exempts "any subsidiary company . . .if such subsidiary company derives no material part of its income, directly or indirectly, from sources within the United States, and neither it nor any of its subsidiary companies is a public utility company operating in the United States."(68) While section 3(a)(5) applies to holding companies and their subsidiaries, section 3(b) applies to subsidiaries of holding companies that are required to register and would otherwise be subject to regulation under PUHCA. The latter exemption would thus be applicable, for example, to subsidiaries, engaged in public utility operations in foreign nations, of holding companies that are engaged in public utility operations in the United States and that are thus not qualified for an exemption under section 3(a)(5).(69)

In the years subsequent to the enactment of PUHCA, there were numerous instances of holding companies, with foreign public utility subsidiaries, that also were the subsidiaries of other holding companies. In those instances, the middle-tier holding companies required a section 3(b) exemption as well as a section 3(a)(5) exemption. In those instances, the SEC granted to middle-tier holding companies both exemptions.(70) The exemptions; the SEC has observed that "[s]ections 3(a)(5) and 3(b) indicate an intention that companies operating in foreign countries shall largely be free from the jurisdiction of this Commission with respect to such of their activities as are essentially foreign in their nature and effect."(71) However, the SEC has denied the application of sections 3(a)(5) and 3(b) for reasons of "public interest" although the interested parties complied with the statute's liberal requirements.(72)

The original legislation regarding holding companies that was introduced in the Senate in February 1935 included neither section 3(a)(5) nor section 3(b).(73) Similarly, the legislation introduced in the House falied to include an exemption for foreign utility subsidiaries.(74)

The Public Utility Act of 1935, introduced in the Senate in May 1935, included a version of the five exemptions presently provided in Section 3(a).(75) It provided, however, no version of the present Section 3(b). In a report on S. 2796, the Senate Committee on Interstate Commerce explained that the exemption for foreign public utility companies, as well as the other exemptions, was applicable to U.S. public utility holding companies because those companies are "not essentially holding companies in the utility field."(76) The full Senate approved S. 2796 on June 11, 1935.(77)

The House Committee on Interstate and Foreign Commerce (House Committee) had conducted numerous hearings on H.R. 5423.(78) Nonetheless, S. 2796 was introduced therein in June 1935. The House Committee soon substituted Title I of the legislation with its own version, Section 3(a)(5) of which, however, was identical to the Senate version. There was no discussion in the House report on the legislation of the statute.(79) The House Committee version of S. 2796 was forwarded to the floor of the House, where a version of the present Section 3(b), introduced on June 29, 1935 by Speaker of the House Rayburn, was immediately adopted without discussion or explanation.(80) The full House approved the legislation on July 2.(81) The Senate agreed to the section 3(b) amendment in conference committee in August 1935.(82) Thus the Public Utility Act of 1935, Title I of which was PUHCA, was enacted into law, with exemptions for foreign public utility companies, on August 26, 1935.

II. SEC APPROVAL OF U.S. INVESTMENT IN FOREIGN UTILITIES

A. Exemptions for Exempt Companies

Neither section 3(a)(5) nor section 3(b) have been particularly active in the administration of PUHCA since 1960. This past summer, however, the statutes assumed a prominent role in SEC administration of PUHCA, as applications of exemption status under those sections stepped up in 1992 due to the numerous opportunities for U.S. investment in foreign electric and gas utility companies. The SEC, for its part, granted several landmark exemptions.

The first exemption was granted by the Commission itself,(83) while all subsequent exemptions were granted by the SEC staff in accordance with authority delegated by the Commission to the Office of Public Utility Regulation (OPUR) in the SEC Division of Investment Management.(84)

In SCEcorp, the applicant was a holding company, incorporated in California, with an interest in Southern California Edison Company, an intrastate electric utility subsidiary, as well as in 297 non-utility subsidiaries.(85) SCE is exempt from regulation under section 3(a)(1) because both SCE and Southern California Edison Company are intrastate in character. In March 1992, SCE and Mission Energy Company (MEC), a nonutility subsidiary, requested a section 3(b) exemption for two Australian public utility subsidiaries of MEC.(86) The two subsidiaries, Loy Yang B Venture (Venture) and Mission Energy Management Australia, Limited (MEMA), were formed in order to acquire a forty percent interest in and operate the Venture electric power plant in Victoria, Australia, currently under construction.(87) SCE and MEC requested a section 3(b) exemption for Venture and MEMA because neither foreign subsidiary, it claimed, would derive a material part of its income from U.S. sources or be involved in public utility operations within the United States.(88) In particular, SCE and MEC stated that there would be no financial transactions between Venture or MEMA and Southern California Edison Company.(89)

The Commission granted an unqualified Section 3(b) exemption in June 1992(90) on the basis of the statement that neither Venture nor MEMA would derive a material part of its income from U.S. sources or would be involved in public utility operations in the United States.(91) In addition, the Commission concluded that, in accordance with section 3(b), "the proposed acquisitions [will not] adversely affect the public interest or the interest of investors or consumers."(92) It observed that "regulation under other federal securities laws offers significant protection for the interest of investors."(93) With respect to the public interest, the Commission focused its analysis on the potential negative impact of the foreign public utility subsidiaries on the operations, rates, and services of Southern California Edison Company.

Two considerations persuaded the Commission that the subsidiaries would not compromise those operations, rates, and services. First, the Commission observed that the 297 non-utility subsidiaries of SCE were separated from the electric public utility company within the SCE holding company system. "The Commission has recognized that the separation of utility and non-utility businesses into corporate subsidiary companies of the holding company tends to insulate utility consumers from the risks of nonutility activities."(94) Second, it observed that the California Public Utility Commission (PUC), which had expressed no objection to the formation of the two foreign public utility subsidiaries,(95) would protect the interest of utility consumers through its regulation of Southern California Edison Company: "the California PUC has noted that its continuing authority over Southern California Edison's capital structure, financing and cost of capital for ratemaking purposes should enable it to protect utility customers from any financial effects resulting from nonutility activities."(96)

The issuance by the Commission itself of an exemption in SCEcorp precipitated the application for issuance of several additional exemptions, by the Staff, to exempt companies.(97) The issuance of exemptions by the Staff is authorized when, inter alia, there is no public request for administrative adjudication on the application for the exemption.(98) In PSI Resources, Inc. the applicant was a holding company with an interest in PSI Energy, Inc. (PSI Energy), an intrastate electric utility subsidiary, and six non-utility subsidiaries.(99) In June 1992, PSI and PSI Energy requested a section 3(b) exemption for PSI Energy Argentina, Inc. (Energy Argentina), a foreign public utility subsidiary of PSI Energy, and two additional subsidiaries.(100) The three companies were formed to acquire an interest in and operate a new Argentine electric utility company with transmission and distribution facilities for electric power in Buenos Aires.(101) The Staff granted an unqualified section 3(b) exemption to Energy Argentina and the other two subsidiaries in July 1992.(102) PSI Energy, a U.S. public utility subsidiary of PSI, became, with the formation of Energy Argentina, a public utility holding company. However, under SEC regulations, the issuance of a section 3(b) exemption to Energy Argentina resulted in an automatic exemption for PSI Energy from the requirements imposed by PUHCA on holding companies.(103)

A second exemption granted by the Staff this past summer presented a unique case.(104) The SEC withdrew the exemption after it discovered a public request for administrative adjudication on the application for the exemption.(105) In Houston Industries, Inc., the applicant was a holding company with an interest in Houston Lighting and Power Company (HL&P), an intrastate public utility subsidiary, and thirty-seven non-utility subsidiaries and partnerships.(106) In June 1992, Houston Industries requested a section 3(b) exemption for two subsidiaries formed to acquire a forty percent interest in and operate a new Argentine electric utility company.(107) Ostensibly in the absence of a public request for administrative adjudication on the application for the exemption,(108) the staff granted an unqualified section 3(b) exemption on July 2, 1992.(109) However, on June 29 the SEC received a public request for administrative adjudication on the application for the exemption, invalidating the previous order.(110) On July 8, the Commission issued another order withdrawing the exemption.(111) Nonetheless, on July 24, the Commission again granted the exemption and denied the request for administrative adjudication(112) because it "failed to establish an issue that would warrant a hearing."(113)

A third exemption granted by the Staff(114) involved a holding company exempt from the requirements of PUHCA under section 3(a)(2).(115) In Duke Power Co. the applicant was an electric public utility as well as a holding company with an interest in Nantahala Power & Light Company, an electric public utility subsidiary, and in ten non-utility subsidiaries.(116) July 1992, Duke and Duke Guemes, Inc. (Duke Guemes), a non-utility subsidiary, requested a section 3(b) exemption for two Argentine public utility subsidiaries of Duke Guemes, Powerco S.A. (Powerco) and Powerco Services, Inc. (Powerco Services).(117) Powerco and Powerco Services were formed to acquire a thirty percent interest in and operate the Guemes electric power plant in Argentina, a sixty percent interest in which the government of Argentina decided to sell in connection with the privatization of its electric and gas utility companies.(118) The Staff issued Duke and Duke Guemes section 3(b) exemption in late July 1992.(119) The order explains that the anticipated annual revenues to Duke from its ownership and operation of the Guemes electric power plant are not expected to exceed two percent of its total anticipated annual revenues.(120) Thus Duke would not derive a material part of its income from the Guemes electric power plant. This conclusion bolstered the determination that the application of PUHCA to Powerco and Powerco Services was not required in the public interest or for the protection of investors.(121)

A fourth exemption was granted to a holding company exempt from the requirements of PUHCA under section 3(a)(1).(122) Dominion Resources, Inc. involved a Virginia holding company with an interest in Virginia Electric and Power Company (VEPCO), an electric public utility subsidiary, and in fifty-four non-utility subsidiaries, several of which are involved in real estate and in financial and investment services.(123) In June 1992, Dominion and Dominion Energy, Inc. (Dominion Energy), a nonutility subsidiary, submitted to the SEC an application for an unqualified section 3(b) exemption for Dominion Management Argentina S.A. (Dominion Argentina), a Dominion Energy subsidiary, and Central Termica Alto Valle S.A. (Alto Valle), an Argentine electric public utility company.(124) Dominion Argentina was established to acquire a fifty-five percent interest in and operate Alto Valle, a government corporation that owns and operates an electric power plant.(125) The Staff approved the section 3(b) exemption in August 1992.(126) The order is largely based on the format of previous section 3(b) exemptions. For example, it observes the anticipated annual revenues to Dominion from its ownership and operation of Alto Valle are not expected to exceed one percent of its total anticipated annual revenues.(127) The Virginia PUC as well as the North Carolina PUC also advised the SEC that the proposed transactions were not subject to their approval and that their continued jurisdiction with respect to VEPCO would ensure the protection of its consumers.(128)

The SEC granted a final section 3(b) exemption in August 1992.(129) The exemption is unique in two particular respects. First, the applicant for the exemption was not a public utility holding company. Seagull is engaged in oil and gas exploration and production but owns no electric or gas public utility subsidiaries. Second, the exemption involved for the first time a gas as opposed to an electric public utility subsidiary. In June 1992, Seagull requested an unqualified section 3(b) exemption for several subsidiaries formed to acquire an interest in and operate several Argentine gas public utility companies (the Argentine subsidiaries), which will be formed in connection with the privatization of Gas del Estado, an Argentine state-owned gas public utility company.(130) The Staff granted the Argentine subsidiaries an unqualified exemption in August 1992.(131) With the acquisition of the Argentine subsidiaries, Seagull would become a public utility holding company and would then be subject to the requirements of PUHCA. However, under Rule 10 of the SEC regulations,(132) the issuance of a section 3(b) exemption to the Argentine subsidiaries results in an automatic exemption for Seagull from the requirements imposed by PUHCA on holding companies.

There are three additional applications for section 3(b) exemptions filed by exempt companies still before the SEC.(133) However, the issuance of Section 3(b) exemptions to Exempt Companies and their subsidiaries appears to have become routine.

In Northern States Power Co., a public utility holding company and two non-utility subsidiaries have requested a Section 3(b) exemption for an electric public utility subsidiary formed to acquire a twenty-five percent interest in the Pego electric power plant in Portugal.(134) The application also requests a section 3(a)(5) exemption for the two non-utility subsidiaries, which, in view of Rule 10,(135) appears to be unnecessary. In Utilicorp, Inc., a holding company has requested a section 3(b) exemption for two subsidiaries to be formed to acquire an eight percent interest in an Argentine electric public utility company with facilities for the distribution of electric power in Buenos Aires, Argentina.(136) Utilicorp is already exempt from regulation under Rule 10, and its sole public utility subsidiary is exempt from regulation under section 3(b).(137) Finally, in Independent Power Corp., a California corporation that is not a public utility holding company together with the non-utility subsidiary of a holding company(138) have requested a section 3(b) exemption for Impedence Power, a limited partnership in possession of a barge mounted with electric generation facilities.(139) The application also requests a section 3(a)(5) exemption for IPC, which, in view of Rule 10, appears to be unnecessary. IPC and ESI intend for the barge to be tugged throughout Latin America, Central America and the Caribbean to offer its electric generation facilities to electric public utility companies with seasonal electric power shortages.(140)

B. Exemptions for Registered Companies

The issuance of section 3(b) exemptions to the subsidiaries of exempt companies appears to have become routine, and it is not unexpected that the acquisition of foreign public utility companies by exempt companies should pose no particular problem under PUHCA. The corporate structures of holding companies that are intrastate, and thus exempt under section 3(a)(1), or that are engaged in public utility operations, and thus exempt under section 3(a)(2), are quite simple and uncomplicated relative to the corporate structures of holding companies that are not qualified for an exemption under section 3(a) and so are subject to the regulatory requirements of PUHCA.

The corporate structures of registered companies are presently within the integration standards and requirements of section 11.(141) However, the requirements of PUHCA with respect to the acquisition of securities, for example, are intended to prohibit the diversification of registered companies into unintegrated public utility systems and thus to ensure that those corporate structures remain within those integration standards and requirements. Thus, the proposed acquisition of foreign public utility companies by Registered Companies is subject to particular scrutiny by the SEC.

In 1992, the SEC received three applications filed by registered companies for exemptions in connection with proposed acquisitions of foreign utilities. The first application was filed in january 1992 by Southern Company.(142) Southern is the largest registered public utility holding company in the United States. In 1990, its consolidated assets were worth almost $20 billion and its consolidated revenues were almost $8 billion.(143) Southern owns an interest in five large electric public utility companies. They, are Alabama Power Co., Georgia Power Co., Gulf Power Co., Mississippi Power Co., and Savannah Electric and Power Co.(144) In addition, Southern owns a sixth electric public utility subsidiary, Southern Nuclear Operating Co., which owns no plants but which operates the three nuclear power plants in the Southern system.(145) Finally, Southern owns three non-utility subsidiaries, Southern Electric International, Inc. (SEI), Southern Company Services, Inc., and The Southern Investment Group, Inc.(146)

Southern and SEI submitted to the SEC an application for exemptions under sections 3(a)(5) and 3(b) in connection with their bid to acquire a forty percent interest in and operate the Venture electric power plant in Victoria, Australia. The plant, of course, was the subject of the Section 3(b) exemption in SCEcorp.(147) However, Southern decided to proceed with its bid and its related application in anticipation of the potential failure of SCE to acquire an interest in Venture. The application indicated that Southern would acquire a forty percent interest in the plant through a new subsidiary, Southern Power Australia, Ltd, (Power Australia), and three additional subsidiaries of Power Australia.(148) To operate Venture, SEI proposed to form a new subsidiary. With the formation of Power Australia and its subsidiaries to acquire a forty percent interest in Venture and the formation of the SEI subsidiary to operate the plant, Power Australia would become a holding company subject to extensive regulation under PUHCA. Southern requested, therefore, a Section 3(a)(5) exemption for Power Australia. It also requested a Section 3(b) exemption for Power Australia, Power Australian's subsidiaries, and the SEI subsidiary.

Because Southern is subject to extensive regulation under PUHCA, its acquisition of an interest in the Venture is subject to prior SEC approval under Sections 9 and 10. Southern and SEI submitted a legal memorandum in support of their application.(149) The substantive criteria for prior SEC approvals of acquisitions are established in sections 10(b) and 10(c) of PUHCA.(150) Section 10(b) establishes three criteria for prior SEC approval. First, it provides for approval unless the acquisition will "tend towards interlocking relations or the concentration of control of public-utility companies . . . ."(151) Second, consideration to be paid for the acquisition must be reasonable and fair.(152) Third, the acquisition may not "unduly complicate the capital structure of the holding-company system . . . ."(153)

Section 10(c) establishes two criteria for prior SEC approval of acquisitions. First, it provides for approval unless the acquisition is "detrimental to the carrying out of the provisions of [section 11]."(154) Second, it provides for approval if the acquisition "will serve the public interest by tending towards the economical and efficient development of an integrated public-utility system."(155) However, a proviso in section 10(c)(2) states that this criterion "shall not apply to the acquisition of securities or utility assets of a public-utility company operating exclusively outside the United States."(156)

With respect to acquisitions of foreign public utility companies, the proviso appears to negate the requirements of section 10(c)(2) as well as the requirements of 10(c)(1), the purpose of which is to limit the properties and businesses of a public utility holding company to those "necessary or appropriate to the operation of an integrated public-utility system,"(157) which is also in accordance with section 11. Thus, the section 10(c)(2) proviso seems to provide that the acquisition of foreign public utility companies is not required to be consistent with an integrated public utility holding company system.

The legal memorandum submitted by Southern and SEI stated that their application was in compliance with the five criteria needed for SEC approval. With respect to section 10(c), however, Southern argued that the proviso negates the requirements of section 11 with respect to acquisitions of foreign public utility companies.(158) Southern and SEI stated, "if the integration requirements of Section 11 seem to conflict with the specific acquisition integration requirements of clause 2 of subsection (c) of Section 10, the latter must prevail under commonly accepted standards of construction of statutes."(159) Because the requirements of sections 10(c)(1) and 10(c)(2) are negated by the section 10(c)(2) proviso, the acquisition of an interest in the Venture, Southern argued, is subject to prior SEC approval under the three criteria of Section 10(b) alone, which it already had argued would not prohibit the acquisition.(160)

The Commission ultimately granted the application and authorized the acquisition and the exemptions in September 1992.(161) The Commission appeared to accept the interpretation of the section 10(c)(2) proviso provided by Southern and SEI in their legal memorandum and signalled a willingness to accommodate the pursuit by registered companies of opportunities for investment in foreign utilities. The Commission first observed that it is authorized to interpret PUHCA and to review the Southern application, "in the light of contemporary circumstances . . . ."(162) It then noted the current circumstances that appeared to provide, in large measure, the basis for its decision to authorize the acquisition and the exemptions:

Since the Act was adopted in 1935, the world economy has

changed vastly. Products and services are increasingly traded on a

global market. Financial and securities markets are becoming

more international. There is every reason to believe that this development

will continue, and even accelerate.

Against this backdrop, we note the increasing opportunities for

international utility investments and demand for American utility

expertise abroad.(163) The Commission concluded that the contemplated acquisition of a forty percent interest in the Venture plant and the section 3(a)(5) and section 3(b) exemptions were consistent with the legal requirements of section 10 and section 11 of PUHCA.(164) "Although approval of the proposed acquisition would represent a departure from the dicta of earlier Commissions concerning the combination of domestic and foreign properties, [PUHCA] does not expressly bar foreign acquisitions by registered holding companies."(165)

The second application the SEC received was filed by Entergy Corporation (Entergy) in June 1992.(166) Entergy is a huge public utility holding company with an interest in several large electric public utility companies, including Arkansas Power & Light Co., Louisiana Power & Light Co., Mississippi Power & Light Co., New Orleans Public Service, Inc., and System Energy Resources, Inc.(167) In 1990, its consolidated assets were worth almost $15 billion and its consolidated revenues were almost $4 billion.(168) In addition to its five electric public utility subsidiaries, Entergy owns a sixth electric public utility subsidiary, Entergy Operations, Inc., which owns no plants but which operates the four nuclear power plants within the Entergy system.(169) A seventh electric public utility subsidiary, Entergy Power, Inc. (EPI), owns no plants but engages in wholesale electric power sales.(170) Finally, Entergy owns a nuclear fuel procurement subsidiary and two other non-utility subsidiaries, Electec, Inc. (Electec) and Entergy Services, Inc.(171)

In April 1992, Entergy, EPI, and Electec filed an application with the SEC for exemptions under sections 3(a)(5) and 3(b) in connection with their acquisition of an option to participate in a consortium with five other companies to purchase a sixty percent interest in and operate the Costanera electric power plant in Argentina.(172) To exercise the option, Entergy would form under Electec a new foreign public utility subsidiary, Entergy S.A.(173) The formation of Entergy S.A. and the acquisition of Costanera would make Electec become a holding company. Entergy S.A. would also become a holding company and both companies would be subject to regulation under PUHCA. Therefore, Entergy requested a section 3(a)(5) exemption for Electec and Entergy S.A., and requested a section 3(b) exemption for Entergy S.A. and Costanera.

The proposed acquisition of an interest in Costanera was subject to prior SEC approval under sections 9 and 10.(174) In accordance with section 10 (d),(175) and Rule 23(e),(176) the SEC provided notice of the application for approval and exemptions in the Federal Register on June 12, 1992.(177) On June 29, the SEC received four public requests for administrative adjudication on the application.(178) The Arkansas PSC, the Louisiana PSC, and the Mississippi PSC all opposed the application and requested an administrative adjudication.(179) In addition, the City of New Orleans in extensive comments on the application requested that the SEC reject the application or provide an administrative adjudication thereon.(180)

New Orleans provided three arguments in opposition to the application and in support of its request. First, the city argued that the formation of Entergy S.A. and its acquisition of Costanera would violate the integration requirements of sections 10 and 11 of PUHCA.(181) It also reviewed the legislative history of PUHCA and concluded that "Congress clearly intended for PUHCA to bar foreign acquisitions by registered holding companies . . . ."(182) Second, New Orleans argued that the acquisition would not "serve the public interest by tending towards the economical and efficient development of an integrated public-utility system," a violation of section 10(c)(2).(183) In a recent interpretation of this requirement, the D.C. Circuit observed that "|something more is required, namely, a showing of efficiencies and economies by virtue of the affiliation' in order to give |meaning to the language of section 10(c)(2).'"(184) New Orleans argued that the "mere intent to increase Entergy profits is insufficient to make this showing."(185) Finally, it argued that the acquisition would be detrimental to the public interest. Discussing the ambitious corporate diversification plans of Entergy, which include the recently announced acquisition of Gulf States Utilities,(186) New Orleans suggests that its "proposed diversification ventures . . . could negatively impact [its] regulated electric utility business."(187)

The city requested an administrative adjudication in part because "[t]he SEC is faced with the question of whether to permit a registered utility holding company, for the first time since the passage of PUHCA, to expand significantly beyond its integrated system and invest in a foreign utility."(188)

On August 24, 1992, the SEC re-noticed in the Federal Register the Entergy application because it had been amended to reflect Entergy's plans to form a new foreign public utility holding company, Argelec, to acquire an interest in the Costanera plant.(189) The public was accordingly afforded a second opportunity to comment and request an administrative adjudication, and on September 8, New Orleans supplemented its prior comments.(190) In addition, the SEC received a new public request for administrative adjudication from two public interest organizations, Environmental Action and Alliance for Affordable Energy (Action and Alliance), opposing the application.(191)

While the Commission itself was required to review the request for administrative adjudication,(192) Entergy concluded a settlement agreement with New Orleans, the Arkansas PSC, and the Mississippi PSC in November 1992. The terms of the agreement were incorporated by Entergy into an amended application that the SEC was, of course, required to renotice in the Federal Register.(193) With three withdrawn requests for administrative adjudication, and in part on the basis of the precedent it established with respect to the Southern acquisition of the Venture plant, the Commission authorized the proposed acquisition of the Costanera plant and the related exemptions on November 10.(194) The order, which incorporated the terms of the settlement agreement, denied without discussion the Action and Alliance request for administrative adjudication.(195)

The SEC received a third application from Entergy(196) in June 1992, which was filed by Entergy, EPI, and Electec for exemptions under sections 3(a)(5) and 3(b) in connection with their acquisition of an option to participate in a consortium (the Consortium) with five other unaffiliated companies. The Consortium planned to purchase a fifty-one percent interest in and operate a new Argentine electric utility company with transmission and distribution facilities for electric power in Buenos Aires, Argentina.(197) To exercise the option, Entergy would form a new foreign public utility subsidiary under Electec, called Entergy Argentina S.A., which would actually acquire a fifteen percent interest in the Consortium. With the formation of Entergy Argentina S.A. and its acquisition through the Consortium of an interest in the new Argentine electric utility company, Electec would become a holding company. Because of its 51% interest in the new utility, the Consortium would become a holding company. Finally, Entergy Argentina S.A. becomes a holding company due to its interest in the Consortium. The application, therefore, requested a section 3(a)(5) exemption for Electec, Entergy Argentina S.A., and the Consortium and requested a section 3(b) exemption for Entergy Argentina S.A., the Consortium, and the new utility.

Even prior to publication of the notice, the Mississippi PSC advised the SEC of its concerns with the proposed acquisition,(198) and within a week requested an administrative adjudication.(199) On August 3, the City of New Orleans similarly requested an administrative adjudication and commented extensively on its opposition to the application.(200) The Arkansas PSC submitted an untimely request for administrative adjudication on August 4.(201) It supplemented its request on September 4 with a statement in which it adopted the August 3 comments of New Orleans.(202) The Louisiana PSC declined to intervene.

The arguments raised by New Orleans to oppose the contemplated acquisition of the new Argentine electric utility company were quite similar to the arguments it raised against the contemplated acquisition of the Costanera plant. For example, it once again argued that "Congress intended for PUHCA to bar foreign acquisitions by registered holding companies. . . ."(203) New Orleans was equivocal, however, in its opposition to the contemplated acquisition of the new Argentine electric utility company. It conceded that "the interests of New Orleans ratepayers could still be protected with the institution of adequate consumer safeguards."(204) It went so far as to suggest numerous safeguards. New Orleans recommended, inter alia, the imposition of fifteen safeguards that the California PUC imposed on SCE when it authorized the formation of that public utility holding company in 1988.(205)

The numerous exemptions the SEC granted in 1992 to public utility holding companies that proposed to invest in foreign utilities--in particular, the landmark decisions in SCECorp, regarding exempt companies, and Southern Co., regarding registered companies--indicate that the SEC both recognized and attempted to accommodate the pursuit of unprecedented opportunities for U.S. investment in foreign utilities. In its decision in Southern Co., the Commission acknowledged "the increasing opportunities for international utility investments and demand for American utility expertise abroad."(206) The SEC began to interpret PUHCA in light of those circumstances to resolve the legal issues that might impede the pursuit of these opportunities for U.S. investment.

Congress shared the SEC's desire to accommodate the pursuit by U.S. electric utility companies of those opportunities. In the final hours of its consideration of the Energy Policy Act, it incorporated the Foreign Investment Amendment into the PUHCA reform package included in the Energy Policy Act. The adoption of the amendment, however, occurred almost thirty months after the U.S. government began to fashion a legislative proposal for PUHCA reform.

III. PUHCA and the Energy Policy Act of 1992

A. National Energy Policy and PUHCA

In July 1989, President Bush directed the Department of Energy (DOE) to develop a national energy policy that would "achieve balance [among) our increasing need for energy at reasonable prices, our commitment to a safer, healthier environment, our determination to maintain an economy that is second to none, and our goal to reduce dependence by ourselves and our friends and allies on potentially unreliable energy suppliers."(207) For the next twenty months, the DOE, under Secretary James D. Watkins, meticulously and painstakingly pursued that executive mandate. For example, it conducted eighteen public hearings across the nation to solicit the views of public officials, energy industries, academics, and the general public on energy policy.(208) It also commissioned reports from its national laboratories on various aspects of energy policy,(209) and in April 1990, it published an interim national energy policy report for public comment.(210)

DOE completed its development of a national energy policy and published the National Energy Strategy Report (the Report) in February. The Report, described by the DOE as "the result of an extensive public dialogue with the American people,"(211) proposes four broad objectives for a national energy policy. First, it proposes that the United States increase the economic efficiency of energy production and use through numerous initiatives discussed therein.(212) Second, the Report proposes numerous initiatives for secure energy supplies.(213) Third, it proposes that the United States enhance the quality of the environment.(214) Finally, the Report proposes various initiatives to strengthen "the foundations" of a national energy policy.(215) The Report in this regard is concerned with, science, research, and education.

The Report proposes numerous initiatives to increase the economic efficiency of electric power production and to promote the diversification of technologies and fuels for such production.(216) These measures are intended "to encourage competition and increase technological choice in the electricity sector."(217) Among these initiatives, the Report recommends that the federal government promote through amendment of PUHCA the construction of new and efficient electric power plants. It proposes that PUHCA be amended "to allow businesses to build, own, and operate powerplants for wholesaling electricity in more than one geographic area."(218) The construction and operation of multiple electric power plants in different states on the part of a single business would ordinarily subject the business to regulation under PUHCA, which would be a disincentive to such construction and operation. The business, however, might invest in new and efficient technologies and fuels for those electric power plants. The Report proposes that PUHCA be amended to remove the disincentive and to allow the business to build those electric power plants--for the production of wholesale but not retail electric power--without the threat of regulation. Its proposal, the Report states, would result in:

lower capital costs for new generating capacity, a wider range of

generating technologies, improved generating efficiencies, lower

electricity prices, reduced risks to consumers of cost overruns for

new generating capacity, increased investment opportunities overseas,

and export of goods and services by the U.S. electric supply

industry.(219)

The DOE addressed the specifics of its proposal to amend PUHCA in a document separate from the Report. The Analysis of Options to Amend the Public Utility Holding Company Act of 1935 (the Options Analysis),(220) also published in February 1991, is essentially a cost-benefit analysis of the Report's proposal to amend PUHCA. The Options Analysis acknowledges that a definitive cost-benefit analysis is impractical because there are numerous specific possibilities and variations for the amendment of PUHCA. The Options Analysis, nonetheless, attempts to estimate the costs and benefits of a generalized amendment that would exempt from PUHCA regulation the ownership of electric power plants constructed and operated for the production of wholesale but not retail electric Power.

The cost-benefit analysis presented in the Options Analysis is prefaced with a description of the generalized amendment on which the analysis is based.(221) The description argues that the benefits of an amendment to PUHCA to the customers of electric utility companies would exceed the impact of an amendment on the investors in electric utility companies.(222) The argument is based on the conclusion that "an extensive infrastructure has developed outside of PUHCA to protect the interests of investors in all major U.S. industries and firms, so that repeal or modification of PUHCA probably would have minimal effects upon investors in electric utility securities."(223)

The description of a generalized amendment to PUHCA that would exempt the ownership of electric power plants for wholesale electric power focuses on the rationale for the amendment, that is, the belief that it would result in new and efficient electric power plants through competition in wholesale electric power production.(224) The belief is based in part on administrative experience under section 210 of the Public Utility Regulatory Policies Act of 1978 (PURPA),(225) which has promoted the construction and operation of new and efficient, albeit small, facilities for wholesale electric power production, although not electric power plants per se. The success of section 210 is attributable in large part to a regulation promulgated thereunder by the Federal Energy Regulatory Commission (FERC), which administers PURPA, that exempts the facilities it has promoted from regulation under PUHCA.(226)

Section 210, however, is not intended to promote the construction and operation of large electric power plants, the ownership of which would still be subject to regulation under PUHCA. The Options Analysis reiterates the disincentive under PUHCA for a business to engage in efficient and competitive wholesale electric power production through the construction of large electric power plants rather than through the construction of small facilities exempt from regulation under section 210 of PURPA.(227) It concludes that in the absence of an amendment to PUHCA, an increase in new and efficient wholesale electric power production in the United States will be limited to electric power generated by the small facilities exempt from regulation under section 210.(228) The Options Analysis nonetheless recognizes that there is no consensus among electric utility companies on the need to amend PUHCA to promote the development of new and efficient electric power production. Neither are trade organizations comprised of electric utility companies in agreement over any amendment.(229)

One year after its publication of the Report and the Options Analysis, DOE reported on the status of efforts to implement its national energy policy.(230) With respect to PUHCA, DOE observed that its amendment was still required and that the Congress should act.(231) The national energy policy developed under President Bush proposed, with respect to PUHCA, an amendment to exempt from regulation under PUHCA the ownership of electric power plants constructed and operated for wholesale electric power production. In this regard, the policy was intended to promote the construction of new and efficient electric power plants in the U.S. The policy was not concerned with plants for retail electric power production. Moreover, it was not concerned with U.S. investment in foreign electric utility companies, which investment, to be sure, would work against the construction of new and efficient electric power plants in the United States.

There is, however, some language in the Report related to U.S. investment. The Report observes that the exemption it proposes for wholesale electric power production would result in "increased investment opportunities overseas."(232) The reference, however, arises in the context of the proposed exemption for wholesale but not retail electric power production. The sole reference, therefore, to U.S. investment in foreign utilities contained in the national energy policy appears to fail to provide a firm foundation for the Foreign Investment Amendment of the Energy Policy Act of 1992, the new section 33 of PUHCA.

B. National Energy Legislation and PUHCA

Numerous initiatives proposed in the Report were embraced, in some form, in comprehensive energy legislation introduced in February to the Congress within weeks of its publication. Senator J. Bennett Johnston (D-La.), Chairman of the Senate Committee on Energy and Natural Resources, introduced Senate Bill 341, the National Energy Security Act of 1991.(233) In March Representative John D. Dingall (D-Mich.), Chairman of the House Committee on Energy and Commerce, introduced House Bill 1301, the National Energy Strategy Act.(234) Both S. 341 and H.R. 1301 were intended to enact a comprehensive national energy policy as well as a substantial amendment to PUHCA consistent with the amendment proposed in the Report.(235)

Title XV of S. 341 was concerned with PUHCA reform.(236) It would have established a PUHCA exemption for the ownership by registered companies of electric power plants engaged in the production of wholesale electric power.(237) It also would have authorized the ownership of such plants by exempt companies.(238) Its treatment of exempt wholesale generation (EWG), however, was not extended either to retail electric power plants or to wholesale electric power plants in existence prior to enactment of the bill. However, it appears that the exemption for registered companies and the authorization for exempt companies were not available with respect to U.S. plants alone. They were available for electric power plants "wheresoever located, used for the generation of electric energy exclusively for sale at wholesale . . . ."(239) In particular, Title XV of S. 341 would have specifically authorized the acquisition of foreign EWG plants by registered companies. "Section 11 of [PUHCA] shall not prohibit the ownership of . . . exempt wholesale generators by a registered holding company (regardless of where facilities owned or operated by such exempt wholesale generators are located), and such ownership . . . shall be deemed consistent with the operation of an integrated public utility system. . . ."(240)

Subtitle A of Title IV of H.R. 1301 was similarly concerned with PUHCA reform(241) and it would also have exempted from PUHCA regulation the ownership of electric power plants engaged in the production of wholesale electric power by registered companies.(242) In addition, it would have declared that the ownership of such electric power plants on the part of exempt companies would have no effect on their exemptions under section 3(a) of PUHCA.(243) Title IV authorized the acquisition of EWG plants "wherever located" by registered companies as well as exempt companies.(244) In particular, it would have specifically authorized the acquisition by registered companies of EWG plants inside or outside the United States.(245) In this regard, the language of Title IV of H.R. 1301 was almost identical to the language of Title XV of S. 341. Title IV was also not applicable to retail electric power plants or to EWG plants in existence prior to enactment of the bill.

Both S. 341 and H.R. 1301, therefore, would have allowed the acquisition by registered companies and exempt companies of EWG plants regardless of their location and, with respect to registered companies, would have specifically declared that the acquisition of EWG plants--"regardless of the location"--was consistent with the requirements of section 11 of PUHCA. Both bills contemplated the ownership and operation of foreign EWG plants by U.S. electric utilities.

The prospect, however, of U.S. investment in foreign utilities was not closely examined in the course of Senate and House consideration of the bills. With respect to PUHCA reform, the bills, after all, were concerned with the construction and operation of new and efficient electric power plants in the U.S., not unlike the national energy policy. The Senate and House hearings and debates on Title XV of S. 341 and Title IV of H.R. 1301, consequently, tended to focus on the impact of their provisions on U.S. electric power production. There was little discussion in those hearings and debates on U.S. investment in foreign electric power plants.

S. 341 was, indeed, subject to thorough consideration in numerous hearings before the Senate Committee on Energy and Natural Resources."(246) On March 14, the Committee examined Title XV. It was assisted in its consideration by several representatives of U.S. electric utility companies and their trade associations, including the PUHCA Reform Coordinating Council, an ad hoc association in favor of PUHCA reform,(247) and an ad hoc association of registered companies,(248) state and local governments,(249) public interest organizations,(250) the DOE,(251) FERC,(252) and, of course, the SEC.(253) The Senate Committee and its panels of experts explored the implications of the title and its proposal to allow the acquisition of EWG plants by registered companies as well as exempt companies for the construction of new and efficient electric power plants in the United States. Neither the Senate Committee nor its experts seemed to address the prospect of U.S. investment in foreign EWG plants.

The sole mention of U.S. investment in foreign utilities was a short paragraph in the written statement of the National Independent Energy Producers (NIEP), a trade association of companies with investments in electric power plants constructed and operated for wholesale electric power generation.(254) NIEP included a brief remark in favor of U.S. investment in foreign electric power plants engaged in wholesale electric power production:

EWG facilities should be permitted to be located outside the

United States without restriction or condition. This would allow

US owners of [such facilities] who wish to own or control generation

facilities as part of a holding company structure outside the

United States to do so without coming under the jurisdiction of

PUHCA.(255)

H.R. 1301 was subject to similar consideration in the First Session of the 102nd Congress, which consideration failed, however, to focus on the implications of U.S. investment in foreign EWG plants. In numerous hearings before it, the Subcommittee on Energy and Power of the House Committee on Energy and Commerce (the House Subcommittee)(256) developed and refined its views on implementation of national energy policy. During May 1-2, 1992, the Subcommittee examined the provisions of the Report and H.R. 1301 relevant to the amendment of PUHCA.(257) The experts that assisted the Subcommittee included several representatives of U.S. electric utility companies(258) and their trade associations,(259) representatives of businesses that have invested or would invest in wholesale electric power plants and facilities,(260) and representatives of several state and local governments,(261) public interest organizations,(262) the DOE,(263) FERC,(264) and the SEC.(265) The House Subcommittee hearing on PUHCA reform was quite similar to the Senate Committee hearing to the extent that it focused on the implications of the proposal for the construction and operation of new and efficient electric power plants in the United States. The sole mention of U.S. investment in foreign EWG plants again was a short paragraph in the written statement of NIEP,(266) which expressed its support for liberalized regulation of U.S. investment in foreign electric power plants engaged in wholesale electric power production. Its statement here was almost identical to its statement before the Senate Committee.(267)

After numerous hearings and upon completion of its consideration of S. 341, in June 1991, the Senate Committee introduced a new bill, S. 1220, entitled the National Energy Security Act of 1991,(268) and issued a report thereon.(269) The report approved S. 1220 by a vote of seventeen to three.(270) Title XV of S. 1220, however, was quite similar in significant respects to Title XV of S. 341. First, it would have exempted from regulation under PUHCA the ownership of wholesale electric power plants by registered companies.(271) Second, it would have allowed the ownership of wholesale electric power plants by exempt companies.(272) Third, the ownership of wholesale electric power plants by both registered companies and exempt companies was authorized for EWG plants "wheresoever located."(273) Finally, S. 1220 would have specifically authorized the acquisition of foreign EWG plants by registered companies. "[S]ection 11 of [PUHCA] shall not prohibit the ownership of . . . exempt wholesale generators by a registered holding company (regardless of wherefacilities owned or operated by such exempt wholesale generators are located), and such ownership shall be deemed consistent with the operation of an integrated public utility system . . . ."(274)

The report on S. 1220 explains that "Title XV is intended to remove the corporate obstacles to independent power production contained in [PUHCA]."(275) It clarifies that its reference to independent power production is in fact synonymous with exempt wholesale generation. There is no discussion in the report, however, of the prospect for acquisitions of foreign EWG plants by exempt or registered companies.

There was a similar dearth of discussion on U.S. investment in foreign utilities in the report issued by the House Committee on Energy and Commerce upon completion of its consideration of H.R. 1301.(276) After numerous hearings between May and October 1991, the House Subcommittee fashioned a new bill,(277) H.R. 776, the Comprehensive National Energy Policy Act of 1991,(278) introduced in October 1991. The Committee on Energy and Commerce approved H.R. 776 in March 1992 by a vote of forty-two to one.(279) Subtitle A of Title VII of H.R. 776 was quite similar in significant respects to Subtitle A of Title IV of H.R. 1301: it was, indeed, also quite similar to Title XV of S. 341 and Title XV of S. 1220. It would have enacted a new section 32 to PUHCA to authorize the acquisition of wholesale electric power plants by exempt companies.280 Section 32 would also have exempted the ownership of EWG plants by registered companies from PUHCA regulation.(281) The definition of EWG plants in section 32 referred to facilities "wherever located."(282) Finally, Section 32 would have provided that the acquisition of foreign EWG plants by Registered Companies shall be "consistent with the operation of an integrated public utility system" as well as "reasonably incidental, or economically necessary or appropriate, to the operation of an integrated public utility system."(283)

The report on H.R. 776 states that "[o]ne overriding constraint on the development of . . . independent power is [PUHCA]."(284) It explains that the new section 32 of PUHCA would promote the development of wholesale electric power plants and their competitive participation in wholesale electric power markets.(285) There is no discussion, however, of foreign EWG plants. The report merely clarifies that an EWG plant "may be located within or outside the U.S., but must be used solely for the generation of electricity at wholesale."(286)

Thus, both S. 1220 and H.R. 776 would have authorized the acquisition, ownership, and operation of U.S. as well as foreign EWG plants by both registered and exempt companies. Indeed, both bills would specifically have declared that their ownership of foreign EWG plants was consistent with the requirements of section 11 with respect to registered companies. However, the actual prospect of U.S. investment in foreign EWG plants was not addressed in either the numerous hearings in the Senate and the House on national energy legislation or the Senate Committee report on S. 1220 and the House Subcommittee report on H.R. 776.

The implications of U.S. investment in foreign utilities were never seriously explored throughout the development of the national energy policy, the numerous legislative hearings on national energy legislation, and the preparation of the congressional reports on that legislation. Furthermore, the prospect of U.S. investment in foreign utilities was not even seriously considered in the preparation of several additional congressional reports, issued in the 102nd Congress, on PUHCA reform. In June 1991, the Congressional Research Service (CRS) completed a report for the House Committee on Energy and Commerce on technological, organizational, and financial developments and their implications for electric power regulation.287 The CRS report discusses three regimes for electric power regulation: the present legal regime, which includes PUHCA;(288) an alternative regime based entirely on economic forces, which would require a substantial revision to PUHCA;(289) and a neo-legal regime that would require several changes to the present legal regime. The discussion of the alternative regime raises the argument that PUHCA should be amended to exempt from regulation the construction and operation of independent power production plants, that is, exempt wholesale generation plants. "Those in favor of reform believe that PUHCA reforms would encourage investment in independent power projects; as a result, it is argued, competition in the electric utility industry would increase."(290) There is no mention, however, of foreign independent power production plants or foreign EWG plants.

In January 1992, the General Accounting Office (GAO) completed a report for the House Subcommittee on the implications of PUHCA reform for reliable and cost-effective electric power generation and for federal and state regulation of electric power generation.(291) The GAO report reviews the proposals for PUHCA reform embraced in both S. 1220 and H.R. 1301.(292) The report concludes that the proposals would not result in unreliable wholesale electric power production.(293) It also concludes that the proposals to exempt the ownership of wholesale electric power plants from regulation under PUHCA would result in increased competition in the market for wholesale electric power, which competition would reduce the price for electric power.(294) There is no mention, however, of U.S. investment in foreign utilities.

C. Foreign Investment Amendment

The Senate never enacted S. 1220. Upon its approval in the Senate Committee in June 1991, it was forwarded to the full Senate for a vote but encountered a filibuster,(295) and by November 1, 1991, the Senate had failed to adopt a motion to defeat the filibuster.(296) It was thus unable to vote on S. 1220 prior to the close of the First Session of the 102nd Congress.

In the Second Session in january 1992, Senator Johnston, introduced a new bill, S. 2166, the National Energy Security Act of 1992.(297) This bill was almost identical to S. 1220 but excluded several controversial provisions of S. 1220, including the sections, which were unrelated to PUHCA, that had precipitated the filibuster in the First Session.(298) Because S. 2166 was otherwise identical to S. 1220, no Senate committee consideration was required, and the bill was immediately forwarded to the full Senate for debate.(299) S. 2166 was approved February 19, 1992 after two weeks and countless amendments, none of which had to do with PUHCA, by a vote of ninety-four to four.(300)

Upon its approval in the House Committee on Energy and Commerce in March 1992, H.R. 776 was referred to(301) and approved by several additional committees.(302) H.R. 776 was thereafter forwarded to the full House for debate, and after the adoption and rejection of numerous amendments unrelated to PUHCA, the House, on May 27, 1992, approved H.R. 776 by a vote of 381 to 37.(303) It requested the Senate to concur in the legislation the following week.(304) The Senate Committee on Finance reviewed, amended, and approved H.R. 776 without a report in June 1992,(305) and forwarded it to the full Senate, where the legislation again encountered a filibuster, which was this time defeated.(306) After the amendment process, which left the revisions to PUHCA intact, the Senate approved H.R. 776 by a vote of 93 to 3 on July 30, 1992.(307) A conference with the House was then requested to resolve the differences between the Senate and House versions.(308)

The conference committee convened in September and worked through October to reach an agreement on the legislation. The committee did not merely address the differences between the Senate and the House versions of H.R. 776. For the first time in the course of congressional consideration of the national energy legislation, it also addressed a proposal to amend PUHCA to authorize the acquisition, ownership, and operation by both registered and exempt companies of foreign electric power plants engaged in both wholesale and retail electric power production. Its consideration of the proposal resulted in committee adoption of the Foreign Investment Amendment, the new section 33 of PUHCA.

The proposal, to be sure, was not first conceived in the conference committee. After H.R. 776 was approved by the House Committee on Energy and Commerce in March 1992, several electric utility companies that favored the proposal attempted to persuade the chairman of that committee to propose a "foreign investment amendment" to H.R. 776 in the full House debate on the legislation.(309) The utilities appeared to recognize that H.R. 776 would authorize the ownership of foreign EWG plants by registered and exempt companies. A "foreign investment amendment" was nonetheless required because "[t]he exemption [in H.R. 776] does not apply to ownership of transmission and distribution facilities or to plants that sell power to retail customers."(310) The utilities complained that "[t]he clear restriction on retail sales by [EWG plants] potentially would be the most important limitation on U.S. developers . . . who want to compete to build and own plants overseas . . ."(311) The amendment sought by the electric utility companies was opposed by several public interest organizations in part because it "was proposed late in the legislative process and . . . has never been explored or debated formally in congressional hearings or among the dozens of interested parties that have been debating PUHCA related issues for years."(312)

Although coalition of electric utility companies failed to persuade the full House during its consideration of and debate on H.R. 776 to adopt such an amendment, undaunted, it decided to focus its efforts on the conference committee.(313) Its efforts received the support of the Bush administration. In a letter dated September 8, 1992 letter to Senator Malcolm R. Wallop (R-WY), Secretary of Energy Watkins urged the adoption of a "foreign investment amendment" in the national energy legislation.(314) His letter observed that PUHCA "should be amended further to allow any U.S. company to make foreign investments--without affecting its status under PUHCA--in the full range of facilities supplying electric and natural gas service to consumers through affiliate companies . . . ."(315) The utilities were also joined in their efforts by several companies that manufacture the equipment required for the construction and operation of electric power plants.(316) The momentum for a foreign investment amendment appeared to increase. In late September, it appeared that the Senate members of the conference committee were committed to the adoption of a "foreign investment amendment" into the legislation.(317)

On September 28, Senator Johnston proposed such an amendment with various safeguards for U.S. electric power customers, which safeguards were presumed to appeal to the House members of the conference committee.(318) With minor revisions, the amendment was approved on September 30.(319) The agreement on a foreign investment amendment and on other PUHCA issues resolved the final substantial difference between the Senate and the House versions of H.R. 776 and precipitated the enactment of the first significant piece of energy legislation since the passage of PURPA in 1978.(320)

The conference committee issued its Report on the approved legislation on October 5.(321) The approved legislation first authorizes the acquisition, ownership, and operation of foreign EWG companies by registered and exempt companies. Section 711 of the Act(322) enacts a new section 32 to PUHCA on EWG companies.(323) Section 32 exempts from PUHCA regulation the ownership of EWG companies by registered companies.(324) It also authorizes the ownership of EWG companies by exempt companies.(325) The EWG companies owned by both registered and exempt companies are required to be engaged in wholesale electric power production but are allowed to be located outside the United States.(326) All EWG companies are required to be certified by the FERC in accordance with regulations the FERC is required to promulgate.(327) The FERC issued its regulations under the requirement in February 1993.(328)

The issuance or guarantee of securities by registered companies to finance the acquisition of EWG companies as well as all contracts between registered companies and EWG companies are subject to regulation by the SEC under PUHCA.(329) However, the ownership per se of EWG companies, "regardless of where facilities owned or operated by [EWG companies] are located," by registered companies is now presumptively consistent with the requirements of section 11 of PUHCA.(330) Section 32 does, however, establish a prohibition on contracts for the purchase of wholesale electric power between electric utility companies and affiliated or associated EWG companies without the permission of state public utility commissions with jurisdiction over the contracts.(331)

Second, the approved legislation includes the Foreign Investment Amendment, codified in section 715 of the Act,(332) which enacts a new section 33 to PUHCA.(333) Section 33 authorizes the acquisition, ownership, and operation by both registered and exempt companies of foreign electric utilities engaged in the generation of wholesale or retail electric power and of electric power transmission and distribution facilities, which are required for retail sales and deliveries of electric power. It also authorizes the acquisition, ownership, and operation of foreign natural gas utilities. All such foreign public utilities are exempt from regulation under PUHCA.(334)

In particular, section 33(b) provides that "a holding company that is exempt under section 3 of [PUHCA] shall be permitted without condition or limitation under [PUHCA] to acquire and maintain an interest in the business of one or more foreign utility companies."(335) section 33(c) provides that "a registered holding company shall be permitted . . . (without the need to apply for, or receive the approval from the [SEC]) to acquire and hold the securities or an interest in the business of one or more foreign utility companies."(336) However, section 33(c) also provides that the issuance or guarantee of securities by registered companies to finance the acquisition of foreign public utilities as well as all contracts between registered companies and foreign public utilities are subject to regulation by the SEC under PUHCA.(337) Still, section 33(c) declares that the ownership by registered companies of foreign public utilities is presumptively consistent with the requirements of section 11 of PUHCA.(338)

The Foreign Investment Amendment includes several safeguards to protect the interests of customers of U.S. public utilities with affiliated or associated foreign public utilities. With respect to registered companies, the SEC is required to "promulgate rules or regulations regarding registered holding companies acquisition of interests in foreign utility companies which shall provide for the protection of the customers of a public utility company which is an associate company of a foreign utility company and the holding company system."(339) The SEC published its proposed regulations under this requirement for public comment in March 1993.(340) In addition, "[a]ny State commission with jurisdiction over the retail rates of a public utility company which is part of a registered holding company system may make such recommendations to the [SEC] regarding the registered holding company's relationship to a foreign utility company . . . ."(341) With respect to exempt companies, their acquisition of foreign public utilities requires a certification, from each state public utility commission with jurisdiction over its U.S. public utility subsidiaries that the state commission "has the authority and resources to protect ratepayers subject to its jurisdiction and that it intends to exercise its authority.(342)

Section 33(e) provides for U.S. public utility companies associated with foreign public utility companies to Report to the SEC in accordance with regulations that the SEC is to promulgate "as necessary or appropriate in the public interest or for the protection of investors or consumers."(343) It also provides for U.S. public utility companies to advise the state public service commissions to whose jurisdiction the companies are subject of acquisitions of foreign public utility companies with which the U.S. companies will be associated.(344) Finally, section 33(f) establishes a general prohibition on the issuance of securities, or the assumption of liabilities, by U.S. public utility companies to finance the acquisition of foreign public utility companies.(345)

There is almost no mention in the conference committee Report of the Foreign Investment Amendment. It merely observes that the new section 32 of PUHCA authorizes the ownership by U.S. public utility holding companies of U.S. as well as foreign EWG companies and that "[t]he provisions of new section 33 supplement these foreign options for utility operations and do not in any way limit any person's ability to pursue SEC approval under current law or the EWG course."(346)

Immediately upon the release of the conference committee Report on the national energy legislation, H.R. 776 was scheduled for a vote in the full House.(347) The brief debate that preceded the vote reiterated the original and principal purpose of the significant amendment to PUHCA included in H.R. 776, to promote the construction and operation of new and efficient electric power plants in the U.S. "H.R. 776 makes significant changes in [PUHCA] to allow much greater entry into the electricity market by independent power producers, to provide a new diversity of supply for wholesale electricity."(348) Representative Dingall, Chairman of the House Committee on Energy and Commerce, remarked that "[u]ltimately, as a result of [PUHCA reform] we should see a more competitive industry, lower costs and reliable service to electricity customers."(349) Representative W.J. Tauzin (D-Okla.) expressed the view that the amendment of PUHCA was the principal achievement of H.R. 776. "We have opened the door in effect to consumers getting cheaper electrical power and having a better supply of electrical energy for America. That is probably the most important thing we do in this bill . . . ."(350) Representative Claude Harris (D-Ala.) remarked that H.R. 776 would "encourage the development of independent power producers. These new electricity producers will compete directly to lower the cost of electricity."(351)

There was almost no discussion on the floor of the House regarding the Foreign Investment Amendment. Indeed, the sole extended mention of the new section 33 to PUHCA was quite critical. Representative Edward J. Markey (D-Mass.) opposed the Foreign Investment Amendment because he feared "that utilities will make unwise investments in foreign utility systems with great potential risk to their asset base, and in turn to their ratepayers--residential, commercial, and industrial."(352) He also expressed the view that the House had failed to adequately examine the Foreign Investment Amendment in the course of its consideration of the national energy legislation:

the foreign utility section was not included in either the House or

the Senate versions of the energy bill. In fact, it was not the subject

of hearings in either body. It appeared during the conference

committee and has barely been analyzed and debated by Congress

or others."(353) In sum, Representative Markey declared the Foreign Investment Amendment "a major change in how utility companies are allowed to invest their money, a change that is premature and . . . ill-advised."(354) The change, observed Congressman Markey, would require an increase in SEC oversight of U.S. investment in foreign utilities: "[N]ext year during debate on reauthorizing the SEC I will make sure that they redeploy their resources to ensuring that utilities do not make unwise and risky foreign investments."(355) Nevertheless, the full House enacted H.R. 776 on October 5.(356)

Three days later, it was scheduled for a vote in the full Senate. In direct contrast to the proceedings in the House, it is not apparent from the debate and remarks that preceded the Senate vote that it was mindful of the original and principal purpose of PUHCA reform. Senator Christopher J. Dodd (D-Conn.) did observe that H.R. 776 "provides for reform of [PUHCA) to increase competition in the utility industry and ultimately to lower rates for consumers of electricity."(357) To a large extent, however, the enthusiasm for Title VII within the Senate was based on section 33 and the prospects it raised for U.S. investment in foreign utilities, which prospects, to be sure, would not result in new and efficient electric power plants in the United States. Senator Donald W. Riegle (D-Mich.) spoke of "immediate, and fleeting, market opportunities" for U.S. public utility companies."(358) "Around the world, countries are privatizing and upgrading their energy networks, often seeking bids from U.S. companies to build and maintain these systems. We do not want to impose Government barriers to these historic opportunities."(359)

However, the enthusiasm for the Foreign Investment Amendment was not shared by several senators who were outspoken in their criticism of the manner in which it was included in the national energy legislation. Its eleventh-hour incorporation into H.R. 776, observed Senator Dale Bumpers D-Ark.):

exemplifies why the American people are so angry with Congress.

No hearings were ever held, neither the House nor the Senate

ever debated, or voted, on the provision, and the proponents of the

provision waited until the final day of the energy bill conference

to reveal their intentions.(360) Senator Howard M. Metzenbaum (D-Ohio) stated that he would scrutinize the SEC in its administration of section 33 "to ensure that consumers are adequately protected" and that he "will . . . tak[e] all necessary actions to change the law if it is insufficient."(361) Some members of the Senate obviously shared concerns that the Foreign Investment Amendment itself and its adoption were flawed.

The Senate nonetheless enacted H.R. 776 on October 8.(362) President Bush signed the national energy legislation into law on October 24.(363) In a statement that accompanied the enactment of the Energy Policy Act of 1992, the President singled out Title VII for praise:

There is much that is good for America in this new law. It contains

a landmark provision furthering competition in the way electricity

is generated and sold, thus lowering prices while ensuring

adequate supplies"(364) In additional remarks, President Bush suggested that all Americans would benefit from the new and efficient electric power plants which Title VII is intended to foster:

And the Act . . . increases competition in a way that electricity is

generated and sold. And that will cut prices, reducing the strain

on family budgets across the country. By the year 2010 . . . our

reforms will save the average household $150 a year in annual

electricity bills.(365)

CONCLUSION

It is difficult to imagine that the U.S. investment in foreign utilities the Foreign Investment Amendment is certain to promote will save the average American household $150 in annual electric power bills by 2010. The development of new and efficient facilities for electric power generation in the U.S. was the original and principal objective of PUHCA reform under the National Energy Strategy and the Energy Policy Act. It is, however, doubtful that the Foreign Investment Amendment will promote the construction of such facilities in the United States.

It is certainly reasonable to suspect that the Foreign Investment Amendment could, in fact, undermine that original and principal objective. It is not difficult to imagine a holding company with limited funds for investment confronted with a choice between investment in a new electric power plant in the United States and investment in an overseas electric power plant that a foreign government has operated for several years but that the foreign government has decided to privatize. The new U.S. plant could require several years of construction and would offer no prospect of an immediate return on the investment. It might also be regulated by a hostile state PSC. In contrast, the overseas plant, having been operational for several years, could provide an immediate return. In order to attract and retain the investment required to privatize its plant, the foreign government would most certainly not subject the plant to intrusive or hostile regulation. Under these circumstances, the investment decision of the holding company seems a foregone conclusion.

One can only speculate about the specific contours of the investment opportunities, both home and abroad, that will present themselves to U.S. utilities. In one or two years, however, it should be possible to determine the extent of U.S. investment in new U.S. electric power facilities under the Energy Policy Act, the extent of U.S. investment in foreign utilities under the Foreign Investment Amendment, and the relationship between those two categories of investment. It is hoped that in the final analysis the pursuit of investment opportunities in foreign utilities will not have compromised the development of new electric power facilities that, it is recognized and accepted, the United States needs. (1.) Energy Policy Act of 1992, Pub. L. No. 102-486, 106 Stat. 2776 (1992); see generally President' Remarks on Signing the Energy Policy Act of 1992 in Maurice, Louisiana, 28 Weekly Comp. Pres. Doc. 2093-94 (Oct. 24, 1992). (2.) The Energy Policy Act implemented in large measure the National Energy Strategy proposed by the U.S. Department of Energy (DOE) in February 1991. U.S. Dep't of Energy, National Energy Strategy: Powerful Ideas for America (1991) [hereinafter Energy Report). Subtitle A of Title VII of the new law amends the Public Utility Holding Company Act of 1935 (PUHCA). Energy Policy Act of 1992, Pub. L. No. 102-486, secs. 711, 715, [subsections] 32, 33, 106 Stat. 2776 2905-10, 2912-15. (3.) [sections] 715, 106 Stat. at 2912-15. (4.) See, e.g., U.S. Electric Companies See Promised Land Elsewhere: with a Mature Domestic Market, Opportunities for Utilities Are Overseas, Wall St. J., March 2, 1993, at B4. (5.) Argentina to Sell and Privatize Three Utilities, Independent Power Rep., Mar. 27, 1992, at 14. (6.) Brazil to Privatize Eletrobras: Consultant to Study Alternatives, Electric Util. Wk., Aug. 10, 1992, at 17. (7.) Colombia Opens Door To Private Power Prompted By Severe Shortfalls, Independent Power Rep., Mar. 3, 1992, at 14; Costa Rica Passes Law Encouraging the Development of Private Power, Independent Power Rep., Jan. 18, 1991, at 11; Honduras Drops Opposition to Private Power, Opens Door to Joint Ventures, Independent Power Rep., July 3, 1992, at 12. (8.) Developers Say East Europeans Want Private Power, But Policies in Flux, Independent Power Rep., Sept. 13, 1991, at 8; Lori M. Rodgers, Lifting the Curtain in Eastern Europe, Pub. Util. Fort., Aug. 15, 1991, at 11; see generally Reinier H.J.H. Lock, On the Privatization of Electric Utilities Abroad, Pub. Util. Fort., Feb. 1, 1991, at 14; Roger W. Gale, The Internationaliz of the American Electric Utility Industry, Pub. Util. Fort., Aug. 2, 1990, at 20. (9.) World Bank Prepares New Polish Plan for Privatization; UEP Project Pared, Independent Power Rep., July 3, 1992, at 10. (10.) China Emerging as Big International Private Power Market. U.S. DOE Memo, Independent Power Rep., June 19, 1992, at 10. (11.) Malaysia to Partially Privatize Its 5,100-MW State-Owned Electric Utility, Independent Power Rep., Feb. 14, 1992, at 14; Pakistan Seeks to Privatize 7, 100 MW State System, Spur Independe Power, Independent Power Rep., Mar. 27, 1992, at 12. (12.) South Korea to Invite Foreign Firms to Bid on Two 500-MW Coal Plants, Electric Util. Wk., Mar. 16, 1992, at 15; Thailand's EGAT Targets Three Large Projects, Z500 MW for Privatization, Independent Power Rep., Apr. 24, 1992, at 7. (13.) Australia--Eyeing Privatization--Starts Program to Set Up National Grid System, Electric Util. Wk., Mar. 16, 1992, at 16; New Zealand Enacts Privalization Law; First Distribution Firm Ready for Sale, Electric Util. Wk., July 27, 1992, at 15. (14.) See 15 U.S.C. [sections] 79b(a)(7) (1988); see also id. [subsections] 79b(a)(3)-(5) (definitio company, gas utility company, and public utility company). (15.) See, e.g., Philip R. O'Connor et al., Palmer Bellevue Corp., Global Challenges in Energy and the Environment: An American Opportunity Through PUHCA Reform 51-64 (1992) [hereinafter Palmer Bellevue Report] (on file with author) (discussion of obstacles under PUHCA to U.S. investment in foreign utilities); see also Palmer Bellevue: PUHCA Overhaul Fails to Remove Barriers to Overseas Market, Independent Power Rep., Sept. 11, 1992, at 16; James E. Rogers, Jr., Unleash American Power in World Markets, Pub. Util. Fort., May 15, 1992, at 88. (16.) The constitutionality of the regime was upheld in Electric Bond and Share Co. v. SEC, 303 U.S. 419 (1938). (17.) 15 U.S.C. [sections] 79a(c). (18.) 15 U.S.C. [sections] 79a(b). (19.) See, e.g., S. Doc. No. 92, 74th Cong., 1st Sess. (1935); H.R. Doc. No. 137, 74th Cong., 1st Sess. (1935); H.R. Rep. No. 827, 74th Cong., 1st Sess. (1935). (20.) See generally 15 U.S.C. [sections] 79c; 17 C.F.R. [subsections] 250.2-.16 (1992). (21.) 15 U.S.C. [sections] 79c; 17 C.F.R. [sections] 250.1.

In December 1990, there were 13 public utility holding companies registered with the SEC (register companies). They were Allegheny Power System, American Electric Power Co., Central and South West Corp., Columbia Gas System, Consolidated Natural Gas Co., Eastern Utilities Associates, Entergy Corp., General Public Utilities Corp., National Fuel Gas Co., New England Electric System, Northeast Utilities, Philadelphia Electric Power Co., and Southern Co. See Sec. & Exchange Comm'n, Holding Companies Registered Under the Public Utility Holding Company Act of 1935 as of December 31, 1990 6 (1991) [hereinafter Registered Companies].

A fourteenth public utility holding company, Unitil Corp., registered with the SEC in 1992. See Unitil Corp., Holding Company Act Release No. 25,524, 51 S.E.C. Docket (CCH) 562 (Apr. 24, 1992) (registration with SEC to occur after acquisition of Fitchburg Gas & Electric Light Co.). (22.) 17 C.F.R. [sections] 250.1(c). (23.) 15 U.S.C. [sections] 79g(a). A declaration is to be filed on SEC Form U-1. 17 C.F.R. [sections (24.) 15 U.S.C. [sections] 79g(b). (25.) 17 C.F.R. [sections] 250.23(c). (26.) 15 U.S.C. [sections] 79g(c)-(g). (27.) 17 C.F.R. [sections] 250.23(c). (28.) 15 U.S.C. [sections] 79j(a). This application is also to be filed on SEC Form U-1. 17 C.F.R. [ 250.20(c). (29.) 15 U.S.C. [sections] 79j(d). (30.) 17 C.F.R. [sections] 250.23(e). (31.) 15 U.S.C. [sections] 79j(b)-(c). (32.) 15 U.S.C. [sections] 791; see 17 C.F.R. [subsections] 250.40-.52 (regulation and exemption of transactions). (33.) 15 U.S.C. [sections] 791(a). (34.) In re Midland United Co., 58 F. Supp. 667, 680-81 (D. Del. 1944). (35.) There are, however, numerous exceptions to this requirement of prior SEC approval of loans. See 17 C.F.R. [sections] 250.45(b). (36.) 15 U.S.C. [sections] 791(c); 17 C.F.R. [subsections] 250.42, 250.46. (37.) 15 U.S.C. [sections] 791(d). (38.) In re North Continent Util. Corp., 61 F. Supp. 419, 421 (D. Del. 1945). (39.) See 17 C.F.R. [sections] 250.80 (definitions of terms used in rules under [sections] 13). (40.) 15 U.S.C. [sections] 79m(a). There are, however, six exceptions to the prohibition. 17 C.F.R. 250.85. (41.) 15 U.S.C. [sections] 79m(b). (42.) 17 C.F.R. [sections] 250.90(a)(2). (43.) See 15 U.S.C. [sections] 79k(b). (44.) Section 11 "is therefore the very heart of [PUHCA], the section most essential to the accompli of [its] purposes . . . ." S. Rep. No. 621, 74th Cong., 1st Sess. 11 (1935); see, e.g., SEC v. New England Elec. System, 394 U.S. 176, 180 (1966) (interpreting [sections] 11). (45.) See, e.g., American Power & Light Co. v. SEC, 329 U.S. 90 (1946) (holding that [sections] 11 i valid exercise of commerce clause power and does not violate due process clause or nondelegation doctrine); North Am. Co. v. SEC, 327 U.S. 686 (1946) (holding that [sections] 11 is a valid exercise commerce clause power and does not violate due process); United Gas Improvement Co. v. SEC, 138 F.2d 1010 (3d Cir. 1943) (holding that [sections] 11 is not an unconstitutional delegation of author SEC); Commonwealth & S. Corp. v. SEC, 134 F.2d 747 (3d Cir. 1943) (holding that [sections] 11 is a v exercise of commerce clause power and is not violative of due process, nondelegation or federalism doctrines). (46.) See, e.g., International Paper & Power Co., 2 S.E.C. 1004 (1937); Central Mass. Light & Power Co., 3 S.E.C. 10 (1938); Mountain States Power Co., 5 S.E.C. 442 (1939). (47.) 15 U.S.C. [sections] 79k(b)(1). Under the statute, for example, the SEC has required a holding company system with an integrated gas utility system to divest itself of oil production and distribu subsidiaries because the subsidiaries, the SEC concluded, were neither "reasonably incidental" nor "economically necessary or appropriate" to the gas utility system. Arkansas Natural Gas Corp. v. SEC, 154 F.2d 597, 599 (5th Cir.), cert. denied, 329 U.S. 738 (1946). (48.) 15 U.S.C. [sections] 79k(d); see, e.g., In re Standard Power & Light Co., 48 F. Supp. 716 (D. 1943). (49.) 15 U.S.C. [sections] 79k(e); see, e.g., In re United Corp., 128 F. Supp. 725 (D. Del. 1955), a 232 F.2d 601 (3d Cir. 1956), cert. denied, 352 U.S. 839 (1956). (50.) 15 U.S.C. [sections] 79x. The right to judicial review of SEC orders is different from the rig judicial enforcement of SEC orders under [sections] 11. In re Sec. & Exchange Comm'n, 142 F.2d 411, (3d Cir. 1944), affd sub nom. Otis & Co. v. SEC, 323 U.S. 624 (1945). (51.) See 15 U.S.C. [sections] 79c(a)(1)-(5); 17 C.F.R. [sections] 250.2-.16. (52.) 15 U.S.C. [sections] 79c(b); see, e.g., 17 C.F.R. [sections] 250.16 (exemption of non-utility affiliates). (53.) See Sec. & Exchange Comm'n, Holding Companies Exempt From the Public Utility Holding Company Act of 1935 Under Section 3(A)(1) and 3(A)(2) Pursuant to Rule 2 Filings or by Order as of September 1, 1991, at 71 (1991) [hereinafter Exempt Companies). (54.) 15 U.S.C. [sections] 79c(c). (55.) 17 C.F.R. [sections] 250.10(b). (56.) 15 U.S.C. [sections] 79c(c). (57.) See, e.g., Houston Natural Gas Corp. v. SEC, 100 F.2d 5, 6-7 (4th Cir. 1938) (holding that an order without a requirement to register is not judicially reviewable). (58.) 15 U.S.C. [sections] 79c(c); 17 C.F.R. [sections] 250.6. (59.) 15 U.S.C. [sections] 79c(d); see, e.g., 17 C.F.R. [sections] 250.12 (exemption of certain publ from the definition of subsidiary companies of holding companies). (60.) 15 U.S.C. [sections] 79c(a). (61.) 15 U.S.C. [sections] 79c(a)(1); 17 C.F.R. [sections] 250.2; see, e.g., Central Ind. Power Co., (1936); Central Cal. Util. Corp., 2 S.E.C. 1 (1937). Several large holding companies in possession of large public utility subsidiaries have qualified fo exemptions under [sections] 3(a)(1). For example, Centerior Energy Corp. of Ohio, a public utility b company with two electric public utility subsidiaries (Cleveland Electric Illuminating Co. and Toled Edison Co.), four non-utility subsidiaries, and total holding company system assets in excess of $11 billion is exempt from regulation under [sections] 3(a)(1). Exempt Companies, supra note 53, at 7. (62.) 15 U.S.C. [sections] 79c(a)(2); 17 C.F.R. [sections] 250.15; see, e.g., Arizona Edison Co., In (1936); Potomac Edison Co., 6 S.E.C. 171 (1939) (denial of [sections] 3(a)(2) exemption). For exampl Commonwealth Edison Co. of Illinois, a public utility holding company with one electric public utili subsidiary (Commonwealth Edison Co. of Indiana), six non-utility subsidiaries, and total holding company system assets in excess of $17.5 billion, is exempt from regulation under [sections] 3(a)(2) Companies, supra note 53, at 59. (63.) 15 U.S.C. [sections] 79c(a)(3). (64.) See, e.g., United States Steel Corp., 1 S.E.C. 497 (1936); Kennecott Copper Corp., 3 S.E.C. 261 (1938). (65.) 15 U.S.C. [sections] 79c(a)(4); 17 C.F.R. [sections] 250.3. This infrequently used exception w for example, to a bank that has foreclosed on a loan secured with public utility securities. Manufacturers Trust Co., 4 S.E.C. 845 (1939). (66.) See, eg., Manufacturers Trust Co., 4 S.E.C. at 845. (67.) The SEC granted numerous exemptions under [sections] 3(a)(5). See, e.g., Hydro Elec. Sec. Co., S.E.C. 328 (1936); Electric Co. of Costa Rica, 1 S.E.C. 382 (1936); Planta Electrica, Inc., 1 S.E.C. 392 (1936); Engineering Investors Corp., 1 S.E.C. 451 (1936); International Pub. Serv. Corp., 1 S.E.C. 453 (1936); J.G. White & Co., 1 S.E.C. 457 (1936); Islands Gas & Elec. Co., 1 S.E.C. 537 (1936); International Gen. Elec. Co., 1 S.E.C. 810 (1936); Insular Light & Power Corp., 2 S.E.C. 79 (1937); South Am. Utit. Corp., 2 S.E.C. 314 (1937); Consolidated Cities Light, Power & Traction Co., 4 S.E.C. 965 (1939); Sudam Corp., 10 S.E.C. 402 (1941).

In one instance, the SEC granted an exemption to three companies that derived a material part of their income from Alaska Public Utilities Company, which in 1936, prior to Alaskan statehood, was engaged in public utility operations outside the United States. American Allied Products Co., 1 S.E. 876 (1936). (68.) 15 U.S.C. [sections] 79c(b). (69.) See, e.g., New Brunswick Power Co., 3 S.E.C. 1051 (1938); Great N. Gas Co., 4 S.E.C. 89 (1938); Southern Util. Co., 4 S.E.C. 93 (1938); Consolidated Elec. & Gas Co., 4 S.E.C. 521 (1939) (exemption inapplicable to certain transactions under [subsections] 6, 9, 11, 12, and 13 of PUHCA); Elec. & Gas Co., 4 S.E.C. 1027 (1939) (exemption inapplicable to certain transactions under [subsect 6, 9, 11, 12, and 13 of PUHCA); Manila Elec. Co., 8 S.E.C. 1014 (1941); International Pub. Serv. Corp., 9 S.E.C. 214 (1941); Consolidated Elec. & Gas Co., 9 S.E.C. 829 (1941); Compania Electrica de Matamoros S.A., 10 S.E.C. 1117 (1942); International Util. Corp., 17 S.E.C. 237 (1944). In one instance, the SEC dismissed an application of several subsidiaries for a [sections] 3(b) exem after it had granted to their public utility holding company a [sections] 3(a)(5) exemption. Interna Corp., 21 S.E.C. 283 (1945); see also Maine Pub. Serv. Co., 26 S.E.C. 326 (1947) ([sections] 3(b) ex application dismissed after [sections] 3(a)(2) exemption application granted). (70.) See, eg., Dominion Elec. Power Ltd., 1 S.E.C. 411 (1936); Middle W. Util. Co. of Canada, 2 S.E.C. 505 (1937); International Util. Corp., 4 S.E.C. 786 (1939) (exemption inapplicable to certa transactions under [subsections] 6, 9, 11 12, and 13 of PUHCA); Middle W. Util. Co. of Canada, 4 S.E 1036 (1939) (exemption inapplicable to certain transactions under [subsections] 6, 9, 11, 12, and 13 PUHCA); Consolidated Cities Light, Power & Traction Co., 12 S.E.C. 883 (1943). In American & Foreign Power Co., Inc., the SEC granted several middle-tier holding companies a [sections] 3(b) exe and a partial [sections] 3(a)(5) exemption. 6 S.E.C. 396 (1939). (71.) 6 S.E.C. 396, 403. (72.) International Util. Corp., 9 S.E.C. 547 (1941). The SEC concluded that a [sections] 3(a)(5) ex "would be detrimental to the public interest and the interest of investors." Id. at 554; see 15 U.S.C. [sections] 79c(a).

The SEC similarly concluded that a [sections] 3(b) exemption "is not necessary in the public inter the protection of investors . . . ." 9 S.E.C. at 555; see 15 U.S.C. [sections] 79c(b). (73.) S. 1725, 74th Cong., 1st Sess. [sections] 4(c) (1935). Title I of S. 1725 would have enacted P Title II of S. 1725 would have enacted Titles II and III of the Federal Power Act. (74.) H.R. 5423, 74th Cong., 1st Sess. [sections] 3(c) (1935). Similarly, Title I of H.R. 5423, the Utility Act, would have enacted PUHCA, and Title II of H.R. 5423 would have enacted Titles II and III of the Federal Power Act. (75.) S. 2796, 74th Cong., 1st Sess., [sections] 3(a) (1935). Title I of S. 2796 proposed to enact P Title II of S. 2796 proposed to enact Titles II and Ill of the Federal Power Act. (76.) S. Rep. No. 621, supra note 44, at 6. (77.) See 79 Cong. Rec. 9040-65 (1935). (78.) See generally Public Utility Holding Companies: Hearings Before the House Comm. on Interstate and Foreign Commerce, 74th Cong., 1st Sess. (1935). (79.) See H.R. Rep. No. 1318, 74th Cong., 1st Sess. (1935). (80.) 79 Cong. Rec. 10,447 (1935). (81.) Id. at 10,640. (82.) H.R. Rep. No. 1903, 74th Cong., 1st Sess. (1935). (83.) See SCEcorp., Holding Company Act Release No. 25,564, 51 S.E.C. Docket (CCH) 1355 (June 29, 1992). (84.) See 17 C.F.R. [sections] 200.30-5(f)(2). (85.) Exempt Companies, supra note 53, at 41. (86.) See SCEcorp., 57 Fed. Reg. 11,638 (1992) (notice of application). (87.) Id. at 11,639. (88.) See 15 U.S.C. [sections] 79c(b). (89.) 57 Fed. Reg. at 11,639; see also Mission Energy: SEC Can Interpret PUHCA to Allow Projects Overseas, Independent Power Rep., May 22, 1992, at 14; Utilities Say SEC Can Interpret PUHCA to Clear Way for Foreign Investment, Electric Util. Wk., May 11, 1992, at 1. (90.) SCEcorp., 51 S.E.C. Docket (CCH) at 1355; see also Mary O'Driscoll, SEC Ruling Eases Utility Investment Restrictions Overseas, Energy Daily, July 8, 1992, at 1; SEC, in Landmark Ruling, Finds PUHCA Does Not Impede Foreign Investments, Electric Util. WK., July 6, 1992, at 1. (91.) SCEcorp., 51 S.E.C. Docket (CCH) at 1357. (92.) Id.; see also 15 U.S.C. [sections] 79c(b). (93.) 51 S.E.C. Docket (CCH) at 1357. (94.) Id. at 1358; cf. Wisconsin's Envt'l Decade, Inc. v. SEC, 882 F.2d 523, 526 (D.C. Cir. 1989) (finding that "Wisconsin law and the order of the Public Service Commission of Wisconsin imposed adequate limitations and safeguards on Holding's diversification."). (95.) Comments of the Public Utilities Commission of the State of California, SCEcorp. (No. 70-7959) (96.) SCEcorp., 51 S.E.C. Docket (CCH) at 1358. (97.) See, e.g., PSI Resources, Inc., Holding Company Act Release No. 25,570, 51 S.E.C. Docket (CCH) 1374 (July 2, 1992). (98.) 17 C.F.R. [sections] 200.30-5(f)(2). (99.) Exempt Companies, supra note 53, at 37. (100.) See, eg. PSI Resources, Inc., 57 Fed. Reg. 27,829 (1992) (notice of application). (101.) Id. (102.) PSI Resources, Inc., 51 S.E.C. Docket (CCH) at 1374; see SEC Okays Two More Overseas Proposals; Houston Industries and FPL Group File, Independent Power Rep., July 17, 1992, at 14. (103.) 17 C.F.R. [sections] 250.10(a)(1). (104.) Houston Indus., Inc., Holding Company Act Release No. 25,571, 51 S.E.C. Docket (CCH) 1465 (July 2, 1992). (105.) Houston Indus., Inc., Holding Company Act Release No. 25,578, 51 S.E.C. Docket (CCH) 1480 (July 8, 1992). (106.) Exempt Companies, supra note 53, at 20. (107.) See Houston Indus., inc., 57 Fed. Reg. 25,097 (1992) (notice of application); More Utilities Seek SEC Approval to Invest in Argentine Projects, Electric Util. WK., June 29, 1992, at 1. (108.) See 17 C.F.R. [sections] 200.30-5(f)(2). (109.) Houston Indus., inc., 51 S.E.C. Docket (CCH) at 1465. (110.) Complaint of Charles E. Pace Against the Houston Lighting & Power Co., Houston Indus., (No. 70-7963) (complaining of "unfair, unreasonable, [and] imprudent" rates). (111.) Houston Indus., Inc., 51 S.E.C. Docket at 1480. (112.) Houston Indus., Inc., Holding Company Act Release No. 25,590, 51 S.E.C. Docket (CCH) 2408 (June 24, 1992). (113.) Id. at 2413 (footnote omitted); cf. Environmental Action, Inc. v. SEC, 895 F.2d 1255, 1266 (9th Cir. 1990) (no adjudication without "adequate proffer of evidence . . . ."); Lafayette v. SEC, 454 F.2d 941, 953 (D.C. Cir. 1971), aff'd sub nom. Gulf States Util. Co. v. FPC, 411 U.S. 747 (1973) (no adjudication "where the ultimate decision will not be enhanced or assisted by the receipt evidence."). (114.) Duke Power Co., Holding Company Act Release No. 25,595, 52 S.E.C. Docket (CCH) 846 (July 31, 1992). (115.) 15 U.S.C. [sections] 79c(a)(2). (116.) Exempt Companies, supra note 53, at 59. (117.) See Duke Power Co., 57 Fed. Reg. 30,525 (1992) (notice of application). (118.) Id. (119.) Duke Power Co., 52 S.E.C. Docket (CCH) at 846. (120.) Id. at 847. (121.) See 15 U.S.C. [sections] 79c(b). (122.) Dominion Resources, Inc., Holding Company Act Release No. 25,598, 52 S.E.C. Docket (CCH) 850 (Aug. 3, 1992). (123.) Exempt Companies, supra note 53, at 12. (124.) See Dominion Resources, Inc., 57 Fed. Reg. 28,895, 28,896 (1992) (notice of application). (125.) Id. (126.) Dominion Resources, Inc., 52 S.E.C. Docket (CCH) at 850. (127.) Id. at 851. (128.) Id. (129.) Seagull Energy Corp., Holding Company Act Release No. 25,603, 52 S.E.C. Docket (CCH) 918 (Aug. 11, 1992). (130.) See Seagull Energy Corp., 57 Fed. Reg. 29,922 (1992) (notice of application). (131.) Seagull Energy Corp., 52 S.E.C. Docket (CCH) at 918. (132.) 17 C.F.R. [sections] 250.10(a)(1). (133.) See Northern States Power Co., 57 Fed. Reg. 10,207 (1992) (notice of application); Utilicorp., 57 Fed. Reg. 20,724 (1992) (notice of application); Independent Power Corp., 57 Fed. Reg. 28,892 (1992) (notice of application). (134.) 57 Fed. Reg. at 10,207-08. (135.) 17 C.F.R. [sections] 250.10. (136.) 57 Fed. Reg. at 20,724. (137.) Utilicorp United, Inc., Holding Company Act Release No. 24,204, 36 S.E.C. Docket (CCH) 857 (Oct. 1, 1986). The sole public utility subsidiary is West Kootenay Power & Light Company, a Canadian electric public utility company. Id. (138.) The subsidiary, ESI Energy, Inc. (ESI), is owned by FPL Group, Inc., a holding company with an interest in Florida Power & Light Co., an electric public utility subsidiary, and 94 non-uti subsidiaries. Exempt Companies, supra note 53, at 18. (139.) 57 Fed. Reg. at 28,892. (140.) Id. (141.) 15 U.S.C. [sections] 79k. (142.) See Southern Co., 57 Fed. Reg. 8505 (1992) (notice of application). (143.) Registered Companies, supra note 21, at 6. (144.) Id. at 83. (145.) Southern Co., Holding Company Act Release No. 25,212, 47 S.E.C. Docket (CCH) 1230 (Dec 14, 1991) (formation of Southern Nuclear Operating Co.). (146.) Registered Companies, supra note 21, at 83. (147.) SCEcorp., Holding Company Act Release No. 25,564, 51 S.E.C. Docket (CCH) 1355 (June 29, 1992). (148.) 57 Fed. Reg. at 8506. (149.) Amended and Restated Memorandum, Southern Co. (No. 70-7931) [hereinafter Legal Memorandum]. (150.) 15 U.S.C. [sections] 79j(b)-(c). (151.) Id. [sections] 79j(b)(1). (152.) Id. [sections] 79j(b)(2). (153.) Id. [sections] 79j(b)(3). (154.) Id. [sections] 79j(c)(1). (155.) Id. [sections] 79j(c)(2). See, e.g., United Gas Improvement Co. v. SEC, 138 F.2d 1010, 1020 ( Cir. 1943) (interpreting [sections] 10). (156.) 15 U.S.C. [sections] 79j(c)(2). (157.) Id. [sections] 79k(a); see, e.g., North Am. Co. v. SEC, 327 U.S. 686, 703-04 (1946) (interpre 11). (158.) Legal Memorandum, supra note 149, at 7-9. (159.) Id. at 8. (160.) Id. at 16. (161.) Southern Co., Holding Company Act Release No. 25,639, 52 S.E.C. Docket (CCH) 1600 (Sept. 23, 1992). (162.) Union Elec. Co., 45 S.E.C. 489, 503 (1974), aff'd sub nom. Cape Girardeau v. SEC, 521 F.2d 324 (D.C. Cir. 1975). (163.) Southern Co., 52 S.E.C. Docket (CCH) at 1607. (164.) Id. at 1608; see Mary O'Driscoll, SEC Approves Southern's Precedent-Setting Foreign Investment Plan, Energy Daily, Oct. 2, 1992, at 1; SEI to Buy Utility in Bahamas; SEC Clears Way for Registered Holding Companies, Independent Power Rep., Oct. 9, 1992, at 9. (165.) Southern Co., 52 S.E.C. Docket (CCH) at 1604. In particular, the Commission concluded that "[c]oncerns with respect to investors have been largely addressed by developments in the federa securities laws and in the securities markets themselves." Id. at 1607. Second, it expressed the vie that "the terms and conditions of the proposed transactions afford protection for the interests of d [electric power] consumers." Id. Finally, it observed that "additional consumer protections are afforded by the holding company structure." Id. at 1608. (166.) See Entergy Corp., 57 Fed. Reg. 25,097 (1992) (notice of application). (167.) Registered Companies, supra note 21, at 54. (168.) Id. at 6. (169.) See Entergy Corp., Holding Company Act Release No. 25,100, 46 S.E.C. Docket (CCH) 596 (June 5, 1990) (formation of Entergy Operations, Inc.). (170.) Entergy Corp., Holding Company Act Release No. 25,136, 46 S.E.C. Docket (CCH) 1560 (June 5, 1990) (formation of Entergy Power, Inc.). (171.) Registered Companies, supra note 21, at 54. (172.) 57 Fed. Reg. at 25,098-99; see also Entergy and PSI Part of Group Picked by Argentina to Buy Into Power Plant, Electric Util. WK., May 25, 1992, at 1. (173.) 57 Fed. Reg. at 25,098-99. (174.) See 15 U.S.C. [subsections] 79i-79j. (175.) Id. [sections] 79j(d). (176.) 17 C.F.R. [sections] 250.23(c). (177.) 57 Fed. Reg. at 25,098. (178.) Rule 23(c) provides that:

Any interested person may, not later than fifteen days after the publication of such notice

or such other date as may be fixed therein, request the Commission in writing that a

hearing be held, stating his reasons therefor and the nature of his interest. 17 C.F.R. [sections] 250.23(e). (179.) See More Overseas Investments Okayed; Regulators Mount First Challenge, ELECTRIC Util. WK., July 13, 1992, at 1, 14. (180.) Notice of Intervention and Request for Rejection, or Hearing and Modification of the City of New Orleans, Entergy Corp. (No. 70-8002) [hereinafter Notice of Intervention]. (181.) M. at 5-8. (182.) Id. at 11. (183.) 15 U.S.C. [sections] 79j(c)(2). (184.) Wisconsin's Envt'l Decade, Inc. v. SEC, 882 F.2d 523, 528 (D.C. Cir. 1989) (citation omitted). (185.) Notice of Intervention, supra note 180, at 13. (186.) See Entergy Corp. (No. 70-8059) (filed Aug. 28, 1992). (187.) Notice of Intervention, supra note 180, at 15. (188.) Id. at 21 (emphasis added). (189.) Entergy Corp., 57 Fed. Reg. 38,333 (1992) (notice of amended application). (190.) Supplementary Comments to Notice of Intervention and Request for Rejection, or Hearing and Modification of the City of New Orleans, Entergy Corp. (No. 70-8002) [hereinafter Supplementary Comments]. (191.) Motion to Intervene, Motion to Reject or, in the Alternative, Request for Hearing of Environm Action and Alliance for Affordable Energy, Entergy Corp. (No. 70-8002); see Consumer Groups Say PUHCA Clearly Bars Entergy Overseas Investment, Electric Util. WK., Sept. 14, 1992, at 16. (192.) See 17 C.F.R. [sections] 200.30-5(f)(2). (193.) Entergy Corp., 57 Fed. Reg. 54,272 (1992) (notice of amended application). The Louisiana PSC also withdrew its request for administrative adjudication. Id. at 54,272. In response to the thi notice of the Entergy application, Action and Alliance supplemented their prior comments and their request for administrative adjudication. Supplemental Comments of Environmental Action and Alliance for Affordable Energy, Entergy Corp. (No. 70-8002). (194.) Entergy Corp., Holding Company Act Release No. 25,673, 52 S.E.C. Docket (CCH) 2429 (Nov. 10, 1992). (195.) Id. at 2430; see also Entergy Corp., Holding Company Act Release No. 25,706, 53 S.E.C. Docket (CCH) 88 (Dec. 14, 1992) (supplemental memorandum opinion). (196.) See Entergy Corp., 57 Fed. Reg. 32,040 (1992) (notice of application). (197.) Id. (198.) Letter from Wm. Bruce McKinley, Commission Attorney, Mississippi PSC, to William M. Weeden, Attorney, SEC 1 (June 24, 1992) (on file with author). (199.) Notice of Intervention of the Mississippi Public Service Commission, Entergy Corp. (No. 70-8010). (200.) Notice of Intervention, supra note 180. (201.) Notice of Intervention and Request for Hearing of the Arkansas Public Service Commission, Entergy Corp. (No. 70-8010). (202.) Comments of the Arkansas Public Service Commission, Entergy Corp. (No. 70-8010). (203.) Notice of Intervention, supra note 180, at 12. (204.) Id. at 22. (205.) See Southern Cal. Edison Co., 90 Pub. Util. Rep. 4th (PUR) 45 (1988). (206.) Southern Co., 52 S.E.C. Docket (CCH) at 1607. (207.) President Bush's Remarks on Signing the Natural Gas Wellhead Decontrol Act of 1989, Pub. Papers 1017, 1018 (July 26, 1989). (208.) See, e.g., 54 Fed. Reg. 30,593 (1989) (notice of public hearing in Washington, D.C. on Aug. 1, 1989); 55 Fed. Reg. 658 (1990) (notice of public hearing in New Orleans, LA on Feb. 2, 1990). (209.) See, e.g., 55 Fed. Reg. 23,801 (1990) (notice of workshops to obtain comments on reports submitted by Oak Ridge National Laboratory, Argonne National Laboratory, Lawrence Berkeley Laboratory, Sandia National Laboratory, Pacific Northwest Laboratory, Idaho National Engineering Laboratory, Los Alamos National Laboratory, and Solar Energy Research Institute). (210.) 55 Fed. Reg. 12,260 (1990) (notice of availability of interim national energy policy report). (211.) 56 Fed. Reg. 7039 (1991) (notice of availability of the National Energy Strategy Report); see also President's Remarks at a Briefing on Energy Policy, 27 Weekly Comp. Pres. Doc. 188 (Feb. 20, 1991). (212.) Energy Report, supra note 2, at 29-72. (213.) Id. at 73-142. (214.) Id. at 143-86. (215.) Id. at 187-214. (216.) See id. at 29-39 (discussion of electric power production and use). (217.) Id. at 33. (218.) Id. at 34. (219.) Id. (emphasis added). (220.) U.S. Dep't of Energy, National Energy Strategy Technical Annex 1: of Options to Amend the Public Utility Holding Company Act of 1935 (1991) [hereinafter Options Analysis]. (221.) See id. at 9-18 (discussing proposals to repeal or amend PUHCA). (222.) Id. at 9. (223.) Id. (224.) See id. at 12-17. (225.) 16 U.S.C. [sections] 824a-3 (1988). (226.) See IS C.F.R. [sections] 292.602 (1992) (exemption to qualifying facilities from PUHCA and ce state laws and regulations). (227.) See Options Analysis, supra note 220, at 15-16. (228.) Id. at 17. (229.) See id. at 48-49. (230.) U.S. Dep't of Energy, National Energy Strategy: Powerful Ideas for America, One Year Later (1992). (231.) "PUHCA reform would ensure continued protection of consumer interests while fostering greater competition in electricity generation, reducing consumer costs, and promoting more rapid dev of new technologies for advanced and environmentally superior electricity generating facilities." Id. at 10. (232.) Energy Report, supra note 2, at 34. (233.) S. 341, 102d Cong., 1st Sess. (1991); see also S. 570, 102d Cong., 1st Sess. (1991) (National Energy Strategy Act). (234.) H.R. 1301, 102d Cong., 1st Sess. (1991); see also H.R. 1543, 102d Cong., 1st Sess. (1991) (Comprehensive Energy Policy Act of 1991). (235.) See Thomas W. Lippman, Opening Up the Halls of Power, WASH. POST, mar. 10, 1991, at H1 ("But the gray, unexciting electricity business is on the brink of radical change. The pace of is uncertain, the scope undecided, the impact on consumers a matter of intense debate, but transform of the industry appears inevitable."). (236.) S. 341, supra note 233, [subsections] 15001-05. (237.) Id. [sections] 15001(d). (238.) Id. [sections] 15001(c). (239.) Id. [sections] 15001(a)(2). (240.) Id. [sections] 15001(c)(1) (emphasis added). (241.) H.R. 1301, supra note 234, [subsections] 401-404. (242.) Id. [sections] 402(d). (243.) Id. [sections] 402(b). (244.) Id. [sections] 401(2). (245.) Id. [sections] 402(e)(i)-(2). (246.) See National Energy Security Act of 1991 (Title XV). Hearing Before the Senate Comm. on Energy and Natural Resources, 102d Cong., 1st Sess. (1991). (247.) Id. at 151 (prepared statement of William W. Berry on behalf of PUHCA Reform Coordinating Council). (248.) Id. at 350 (prepared statement of Charles A. Patrizia on behalf of Registered Electric Utilit Holding Companies). (249.) See, e.g., id. at 338 (prepared statement of Patricia M. Eckert, President, California Public Utilities Commission). (250.) See, e.g., id. at 378 (prepared statement of Dr. Mark N. Cooper, Director of Research, Consumer Federation of America). (251.) Id. at 43 (prepared statement of Linda G. Stuntz, Deputy Under Secretary, Office of Policy, Planning, and Analysis, Dep't of Energy). (252.) Id. at 79 (prepared statement of Cynthia A. Marlette, Associate General Counsel for Hydroelec and Electric Power, Federal Energy Regulatory Comm'n). (253. Id. at 20 (prepared statement of Hon. Edward H. Fleischman, Commissioner, Sec. & Exch. Comm'n). (254.) Id. at 156 (written statement of the National independent Energy Producers). (255.) Id. at 175-76. (256.) National Energy Strategy (Part 1). Hearings Before the Subcomm. on Energy and Power of the House Comm. on Energy and Commerce, 102d Cong., 1st Sess. (1991). (257.) National Energy Strategy (Part 4): Hearings Before the Subcomm. on Energy and Power of the House Comm. on Energy and Commerce, 102d Cong., 1st Sess. (1991). (258.) See, e.g., id. at 157 (prepared statement of Sherwood H. Smith, jr., Chairman, Carolina Power & Light Co.). (259.) See, e.g., id. at 217 (prepared statement of Richard E. Disbrow, Chief Executive Officer, American Electric Power Co., on behalf of Edison Electric institute). (260.) See, eg., id. at 272 (prepared statement of P. Chrisman Iribe, Senior Vice President, PG&E/Bechtel Generating Co., on behalf of the Cogeneration & Independent Power Coalition of America, Inc.). (261.) See, e.g., id. at 516 (prepared statement of Steven M. Fetter, Chairman, Michigan Public Service Comm'n). (262.) See, e.g., id, at 248 (prepared statement of John A. Anderson, Executive Director, Electricit Consumers Resource Council). (263.) Id. at 5 (prepared statement of Linda G. Stuntz, Deputy Under Secretary, Office of Policy, Planning, and Analysis, Dep't of Energy). (264.) Id. at 14 (prepared statement of Cynthia A. Marlette, Associate General Counsel for Hydroelec and Electric Power, Federal Energy Regulatory Comm'n). (265.) Id. at 73 (prepared statement of Philip R. Lochner, Jr., Commissioner, Sec. & Exch. Comm'n). (266.) Id. at 357 (prepared statement of Paul J. Elston, Chief Executive Officer, Long Lake Energy Corp., on behalf of National Independent Power Producers). (267.) Id. at 387. (268.) S. 1220, 102d Cong., 1st Sess. (1991). (269.) S. REP. No. 72, 102d Cong., 1st Sess. (1991). (270.) id. at 213; see also President's Statement on the Senate Energy and Natural Resources Committee's Action Approving the Administration's National Energy Strategy, 27 Weekly Comp. Pres. Doc. 662 (May 23, 1991) ("The 17-3 vote by the committee demonstrates a genuine bipartisan commitment to balanced, realistic, and comprehensive energy legislation."); President's Remarks on the National Energy Strategy, 27 Weekly Comp. Pres. Doc. 1031 (July 24, 1991) (supporting the bill). (271.) S. 1220, supra note 268 [sections] 15101(f). (272.) Id. [sections] 15101(e). (273.) Id. [sections] 15101(a)(2). (274.) Id. [sections] 15101(g)(1). (275.) S. Rep. No. 72, supra note 269, at 354. (276.) H.R. Rep. No. 474, 102d Cong., 1st Sess. (1991). (277.) Id. at 154. (278.) H.R. 776, 102d Cong., 1st Sess. (1991). (279.) H.R. Rep. No. 474, supra note 276, at 155. (280.) H.R. 776, supra note 278, [sections] 711. The authorization for exempt companies was containe in [sections] 32(c). (281.) Id. The exemption for registered companies was contained in [sections] 32(d). (282.) Id. The definition of EWG plants was contained in [sections] 32(a). (283.) Id. (284.) H.R. Rep. No. 474, supra note 276, at 139. (285.) Id. at 140. (286.) Id. at 192. (287.) U.S. Cong. Research Serv., 102D Cong., 1st Sess., Electricity: A New Regilatory Oeder? (Comm. Print 1991). (288.) Id. at 166-70. (289.) Id. at 289-90. (290.) Id. at 289. (291.) U.S. Gen. Acc't Office, GAO/RCED-92-52 Electricity Supply: Potential Effects of Amending the Public Utility Holding Company Act (1992). (292.) Id. at 13 n.5. (293.) Id. at 17. (294.) Id. at 22. (295.) 137 Cong. Rec. S15,542 (daily ed. Oct. 30, 1991). (296.) Id. at S15,754-55 (daily ed. Nov. 1, 1991). (297.) S. 2166, 102d Cong., 2d Sess. (1992); see 138 Cong. Rec. S607 (daily ed. jan. 29, 1992) (introduction of bills and joint resolutions). (298.) See, e.g., 138 Cong. Rec. S949 (daily ed. Feb. 5, 1992) (remarks of Sen. Frank Murkowski (R-Alaska)) ("Last week a decision was made to remove the ANWR and CAFE titles from S. 1220 creating a narrow national energy strategy."). (299.) Id. at S619 (daily ed. jan. 29, 1992). (300.) Id. at S1696 (daily ed. Feb. 19, 1992); see also Statement by Press Secretary Fitzwater on Senate Action on the National Energy Security Act, 28 Weekly Comp. Pres. Doc. 304-05 (Feb. 20, 1992) (stating that the Senate's passage of the bill "marks a substantial milestone in implementing president's national energy strategy"). (301.) 138 Cong. Rec. H2019 (daily ed. March 30, 1991) (referring H.R. 776 to House Committees on Foreign Affairs; Government Operations; Judiciary; Interior and Insular Affairs; Merchant Marine and Fisheries; Public Works and Transportation; Science, Space and Technology; and Ways and Means). (302.) See H.R. Rep. No. 474, supra note 276, pt. 2 (approval by House Committee on Science, Space, and Technology); pt. 3 (approval by House Committee on Public Works and Transportation); pt. 4 (approval by House Committee on Foreign Affairs); pt. 5 (approval by House Committee on Government Operations); pt. 6 (approval by House Committee on Ways and Means); pt. 7 (approval by House Committee on Judiciary); pt. 8 (approval by House Committee on Interior and Insular Affairs); pt. 9 (approval by House Committee on Merchant Marine and Fisheries). (303.) 138 Cong. Rec. H3747-811 (daily ed. May 27, 1992); see also Statement by Press Secretary Fitzwater on the House of Representatives Action on Energy Legislation, 28 Weekly Comp. Press. Doc. 940 (May 27, 1992) ("The President is pleased that the House of Representatives, in passing H.R. 776, today made progress toward adopting a sound national energy strategy."). (304.) 138 Cong. Rec. S7350 (daily ed. June 2, 1992); see also Thomas W. Lippman, Utility Industry Overhaul: Surprisingly Static-Free, Wash. Post, June 11, 1992, at A25 ("Without a syllable of dissent, the House agreed to jettison 57 years of regulatory policy by restructuring the nation's electric utility industry. What could have been a bruising battle ended in harmonic convergence."). (305.) 138 Cong. Rec. at S8500 (daily ed. June 18, 1992). No amendment relating to PUHCA was adopted. (306.) Id. at S10,436 (daily ed. July 28, 1992). (307.) Id. at S10,876 (daily ed. July 30, 1992). (308.) Id. at H8104 (daily ed. Aug. 12, 1992). (309.) See, e.g., Utilities Try to Get Dingell to Back Amendment on Foreign Investments, Electric Util. Wk., Apr. 27, 1992, at 1. (310.) Id. at 17. (311.) Utilities Fear PUHCA Bills Fail to Remove Blocks to Foreign Projects, Independent Power Rep., May 8, 1992, at 10. (312.) Id. (313.) PUHCA, Transmission Changes Sail Through as House Moves Energy Bill, Electric Util. Wk., may 25, 1992, at 1, 14. (314.) Mary O'Driscoll, Administration Warns Energy Conferees of Potential Veto, Energy Daily, Sept. 10, 1992, at 1; Bush Administration Lists Energy Bill Concerns, Wants Hydro Dropped, Electric Util. Wk., Sept. 14, 1992, at 11. (315.) Bush Administration Throws Support Behind Foreign Investment Amendment, Electric Util. Wk., Sept. 14, 1992, at 15; see also Palmer Bellevue Report, supra note 15 (in favor of foreign investment amendment" in national energy legislation). (316.) Wallop, House Members Debate Access as Transmission Dominates Conference, Electric Util. Wk., Sept. 21, 1992, at 1.

Large equipment vendors like Westinghouse, General Electric, and Asea Brown Boveri

joined with the Edison Electric Institute and 11 individual investor-owned utilities in sending

a letter to energy bill conferees last week urging them to remove restrictions on utility

investments overseas. Id. at 10. (317.) Deal on Access, Self-Dealing Emerges as Conferees Struggle on Energy Bill, Electric Util. Wk., Sept. 28, 1992, at 1. (318.) Mary O'Driscoll, Alternative Fuels Stymie Energy Talks, Energy Daily, Sept. 30, 1992, at 1, 2. (319.) Mary O'Driscoll, Conferees Complete Work on PUHCA, Transmission, Energy Daily, Oct. 1, 1992, at 1; Foreign Investment Amendment Okayed; Southern Announces Deal in Bahamas, Electric Util. Wk., Oct. 5, 1992, at 17. (320.) House-Senate Conferees Wrap up Bill, Agree to Amend PUHCA, Mandate Access, Electric Util. Wk., Oct. 5, 1992, at 1; see also President's Statement Urging Passage of National Energy Strategy Legislation, 28 Weekly Comp. Pres. Doc. 1842 (Oct. 2, 1992) ("For the last 18 months, my administration has worked diligently with Congress to produce the most comprehensive energy strategy in 20 years."). (321.) H.R. Rep. No. 1018, 102d Cong., 2d Sess. (1992). (322.) Pub. L. No. 102-486, [sections] 711, 106 Stat. 2905-10 (1992). (323.) Id. [sections] 711, 106 Stat. at 2905. (324.) Id. sec. 711, [sections] 32(g), 106 Stat. at 2907. (325.) Id. [sections] 32(f), 106 Stat. at 2907. (326. Id. [sections] 32(a)(1)-(2), 106 Stat. at 2905-06. (327.) Id. [sections] 32(a)(1), 106 Stat. at 2905. (328.) 58 Fed. Reg. 8897 (1993) (to be codified at 18 C.F.R. pts. 365, 381). (329.) Pub. L. No. 102-486, sec. 711, [sections] 32(h), 106 Stat. at 2907-08. (330.) Id. [sections] 32(h)(1)-(2), 106 Stat. at 2908. (331.) Id. [sections] 32(k)(1)-(2), 106 Stat. at 2909-10. (332.) Pub. L. No. 102-486, [sections] 715, 106 Stat. at 2912. (333.) Id. (334.) Pub. L. No. 102-486, sec. 715, [sections] 33(a)(1), 106 Stat. at 2912. (335.) Id. [sections] 33(b), 106 Stat. at 2913. (336.) Id. [sections] 33(c)(1), 106 Stat. at 2913. (337.) Id. [sections] 33(c)(2), 106 Stat. at 2913. (338.) Id. [sections] 33(c)(3), 106 Stat. at 2913-14. (339.) Id. [sections] 33(c)(1). (340.) 58 Fed. Reg. 13,719 (1993) (to be codified at 17 CFR pts. 250, 259) (proposed March 15, 1993). (341.) Pub. L. No. 102-486, sec. 715 [sections] 33(c)(2), 106 Stat. at 2913. (342.) Id. [sections] 33(a)(2), 106 Stat. at 2912. (343.) Id. [sections] 33(e)(1), 106 Stat. at 2914. (344.) Id. [sections] 33(e)(2), 106 Stat. at 2914. (345.) Id. [sections] 33(f)(1), 106 Stat. at 2914. (346.) H.R. Rep. No. 1018, supra note 321, at 388. (347.) H.R. Res. 601, 102d Cong., 2d Sess. (1992) (to provide for immediate full House consideration of H.R. 776); H.R. Rep. No. 1013, 102d Cong., 2d Sess. (1992) (approval by House Committee on Rules of H.R. Res. 601); 138 Cong. Rec. H11,374 (daily ed. Oct. 5, 1992) (approval by full House of H.R. Res. 601). (348.) 138 Cong. Rec. H11,418 (daily ed. Oct. 5, 1992) (remarks of Rep. Mike Synar (D-Okla.)). (349.) Id. at H11,428. (350.) Id. at H11,436. "We have opened the door today to competition. We have opened the door today to independent power at more efficient production ratios to deliver energy to America across t monopolistic grids we formally set up since the 1930's." Id. (351.) Id. at H11,448. (352.) Id. at H11,446. (353.) Id. (354.) Id. (355.) Id. (356.) Id. at H11,626. (357.) 138 Cong. Rec. S17,820 (daily ed. Oct. 8, 1992). (358.) Id. at S17,629. (359.) Id. (360.) Id. at S17,631. Senator Bumpers noted that he would "introduce legislation next year which will ensure that ratepayers are adequately protected from utility foreign investments." Id. (361.) Id. at S17,642. (362.) Id. at S17,625. (363.) President's Statement on Signing the Energy Policy Act of 1992, 28 Weekly Comp. Pres. Doc. 2094 (Oct. 24, 1992). (364.) Id. at 2095. (365.) President's Remarks on Signing the Energy Policy Act of 1992 in Maurice, Louisiana, supra note 1, at 2095.

James W. Moeller, J.D. 1984, Harvard Law School; M.A.L.D., 1984 Fletcher School of Law and Diploma B.A., 1980 Lake Forest College. The author is an Attorney-Advisor in the Office of Public Utility Regulation of the U.S. Securities and Exchange Commission in Washington, D.C.

The Securities and Exchange Commission, as a matter of policy, disclaims responsibility

for any private publication or statement by any of its employees. The views expressed

herein are those of the author and do not necessarily reflect the views of the Commission or

of the author's colleagues upon the staff of the Commission. 17 C.F.R. [sections] 200.735-4(e)(2)(ii) (1992).

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U.S. Investment in Foreign Utilities under the Public Utility Holding Company Act of 1935 and the Energy Policy Act of 1992
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