Lapp, David, Multinational Monitor
Buried within the massive telecommunications proposals now before Congress is a long-sought victory for the nation's large electric utilities: the removal of a 60-year-old ban on their participation in telecommunications businesses. Elimination of the ban would allow an unprecedented expansion of already immense monopoly power, jeopardizing electric and telecommunications ratepayers and environmental protection, critics say.
If the legislation passes, "the resulting conglomerate[s] would be extremely powerful multistate, multifaceted utility monopol[ies], potentially controlling every aspect of utility services for ratepayers: electric, gas, telephone, cable, mass media and even information services," warns Larry Frimerman, legislative liaison for the Ohio Office of the Consumers' Counsel. "Such powerful entities could control both the content and the methods of delivery for all of these services. An entity controlling so much of our utility network would be difficult to police."
A pending bill moving through Congress would remove restrictions on the ability of electric utilities to diversity into unregulated telecommunications businesses. These restrictions were imposed under New Deal legislation, the Public Utility Holding Company Act (PUHCA), after a period when a few massive holding companies controlled virtually all U.S. utilities and non-utility businesses as well. These companies cost investors and ratepayers untold sums through such monopoly ploys as cross-subsidization, whereby ratepayers subsidize the utility's ventures in unregulated industries.
PUHCA ensures that companies benefiting from government-granted franchises make serving their "captive" customers their primary obligation and that states can effectively protect consumers by regulating utility rates. Its key provisions impose strict limits on diversification into unrelated businesses and promote local ownership and control. PUHCA's most strict regulations govern "registered" holding companies, which are generally larger and operate in multiple states, because they are less susceptible to effective state regulation, (The 10 registered electric holding companies hold about $115 billion in assets and earned more than $3 billion in profits in 1994.)
A broad coalition of consumer and environmental groups - ranging from organizations representing large industrial electric consumers and state consumer advocates to national public interest groups - oppose allowing energy companies to participate in telecommunication markets. In a letter to Senate Republican leadership in March 1995, the coalition wrote: "The anti-competitive aspects of the current [Senate] bill are two-fold: it places millions of electric and gas customers at risk from the tremendous market power these utilities continue to enjoy, and it jeopardizes the development of true competition in telecommunications markets because of the likelihood of cross subsidies .... The only real guarantee that anti-competitive behavior can be prevented is to prohibit the possibility of cross-subsidization in the first place, by preventing monopoly owners from entering telecommunication markets."
Utility executives have been surprisingly forthright about their intention to reach into the pockets of electric ratepayers to subsidize their telecommunications ventures. At a congressional hearing on similar legislation last summer, utility representatives advocated that ratepayers serve as the "anchor tenant" for construction of the information highway. …