Energy Policy Act of 2005
• FERC gets more power -- The Federal
Energy Regulatory Commission (FERC)
will exercise jurisdiction over generation
mergers, the new reliability organization,
public power activities that affect markets,
transmission siting and it will expand its
enforcement powers over markets.
• Repeal of PUHCA-- Effective February 2006, the much maligned
Public Utility Holding Company Act (PUHCA) will expire, and the
Securities Exchange Commission (SEC) will cease to pretend that it
enforces that law.
– Merger approval will no longer require physical contiguity and nonutilities will no longer face the possibility that they will have to sell off
non-utility properties if they acquire utility assets. The industry dearly
wanted repeal of PUHCA. No doubt, investment bankers and private
deal makers and money managers wanted it, too, because it increases
their ability to do deals.
– Regulators, on the other hand, fear that the end of PUHCA will mean
less protection for consumers against deals that damage the regulated
utility. Credit ratings agencies and bond holders fear an increase in
mergers and activities that will endanger credit ratings. Some skeptical
equity holders worry that repeal will open the doors to a host of half
baked mergers and diversification activities, of the sort that the industry
has embraced again and again. Watch this one carefully.
• Mandatory electric reliability-- The bill authorizes the
creation of an electric reliability organization (ERO) that
will have power to mandate reliability rules. Present
reliability rules work on a voluntary basis. FERC will
oversee the new organization, which could evolve from
the existing North American Electric Reliability Council
(NERC), which, incidentally, has new management on
the top. (The new law assumes that mandating rules
assures that the lights stay on. One might think that
Katrina and Rita would have changed that notion, even if
the August 2003 black out did not.)
• Plenty of money for assorted causes-- The law reduces
the tax depreciation lives of equipment for electric
transmission, natural gas distribution and air pollution
control on coal-fired generators. It provides renewable
tax credits for “incremental hydro and Indian coal” and
other renewables (different renewables get different
credits), plus credits for a small number of coal
technologies, plus tax exempt bonds for renewables,
plus a tax credit for research at a consortium and some
other stuff. (Note that everyone plays the old game.
Congress, after prompting from lobbyists, knows best:
what type of plant and equipment deserves a boost,
what type of technology deserves help, even what type
of R&D organization does it best.)
• The Rudden Energy Strategies Report ,
October 17, 2005