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Energy bill a special-interests triumph

Page 8 of 9 -- The law's roots go all the way back to the Great Depression and the stock market crash of 1929. The then-nascent electricity industry was largely owned by a small group of holding companies, which used their reliable receipts from selling electricity to invest in riskier ventures.

When those ventures faltered, the holding companies imploded, and 53 electricity companies went bankrupt; the collapse helped deepen the Great Depression. Consolidation in the industry also allowed holding companies to manipulate the market and overcharge consumers for power.

After an investigation and hearings, Congress approved the PUHCA regulations in 1935, imposing historic controls on energy holding companies. Now, however, energy industry spokesmen say the law is outdated and so onerous that investors are discouraged from putting money into electricity.

"This is a fairly capital-intensive business. The repeal of PUHCA would serve to potentially encourage capital to flow back into the energy market," said Pete Sheffield, a spokesman for Duke Energy, which once employed Andrew Lundquist, the director of Cheney's energy task force, to lobby for the elimination of the law.

The Clinton and Bush administrations have already weakened the regulations by allowing companies to be exempt from certain PUHCA rules. But eliminating the law entirely could have a catastrophic effect on both the financial markets and consumers, critics say.

"It's the only thing between us and a cartel," said Lynn Hargis, a former staff attorney with the Federal Energy Regulatory Commission who now works for the watchdog group Public Citizen.

Deleting PUHCA from the law books would put an estimated $1 trillion in energy assets in play, she said, presenting enormous implications for both the energy sector in particular and the financial markets as a whole.

Deregulation, she predicted, would allow more episodes like the Enron scandal, because holding companies could move capital around and put the health of electricity providers at risk.

Additional deregulation

Lobbyists for energy interests succeeded in getting far more than financial deregulation, however.

The current bill calls for deregulation of laws protecting air quality. One provision would ease rules on ozone, which produces smog. The language, which was not in either the original House or Senate bill, would not only lower the standards set in the Clean Air Act for ozone production, but would extend the time industry has to comply with the rules. The provision, added by the conference committee, would largely benefit oil refineries.

Language was also inserted in the bill that exempts the oil and gas exploration industry from sections of the Clean Water Act; under the bill, such companies would not be penalized for contaminating public waterways. The provision would give oil and gas construction companies a "free pass" to avoid clean water laws, making them the only construction companies not subject to such regulations, said Representative Bob Filner, a California Democrat.   Continued...

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