Need a Reason to Oppose PGW Privatization? Here's One.Ben earlier told us that John Perzel, et. al. are eyeing PGW, with the intent to take Philly’s troubled utility, and privatize it. In a way, given how mismanaged and corrupt much of PGW is, this sounds reasonably appealing to many in Philadelphia, such as Michael Nutter. And, considering that PGW is in debt to the tune of 500 million dollars, it is easy to understand why. But, if we needed a reason NOT to privatize PGW, we got it today.
In the energy bill passed today by both the House and Senate, there was a quiet repeal of PUHCA, the Public Utility Holding Company Act of 1935. What is PUHCA? Why should you care? And why must we keep PGW from being privatized? Read on....
First, what is PUHCA? Via Kos diarist Tocqueville, we turn to PUHCA for Dummies:
Q. What exactly does PUHCA do?
A. PUHCA: (1) limits the geographic spread (therefore, size) of utility holding companies, the kinds of business they may enter, the number of holding companies over a utility in a corporate hierarchy, and their capital structure; (2) controls the amount of debt (thus, cost of capital), dividends, loans and guarantees based on utility subsidiaries (so the parents can't loot or bankrupt the utility subsidiary), and the securities that parent companies may issue; (3) regulates self-dealing among affiliate companies and cross-subsidies of unregulated businesses by regulated businesses; (4) controls acquisitions of other utilities and other businesses; and, (5) limits common ownership of both electric and natural gas utilities.
Q. (Sarcastically) Is that all?
A. Actually, no. PUHCA also limits the activities (and campaign contributions) of officers and directors of holding companies, has control over their accounts, books and records, and regulates them in a number of other ways.
Should Billionaires and Huge Oil Companies Own Our Public Utilities?
Q. Why do Warren Buffet and ChevronTexaco want to get rid of PUHCA?
A. PUHCA does not allow them to own and control utilities unless they give up their other businesses. (They can passively invest in them now.)
Q. Are you kidding? ChevronTexaco would have to give up its oil business? Buffet would have to give up Berkshire/Hathaway?
A. Correct. PUHCA was enacted because huge holding companies were using secure utility revenues to finance and guarantee other, riskier business ventures around the world, and 53 utility holding companies went bankrupt from 1929 to 1936 after the banks called in their loans.
Q. So PUHCA protects the financial health of public utilities that supply our electricity and retail natural gas?
A. Yes, by controlling their parent companies. Of course, PUHCA was also designed to reduce over-concentration of economic power in just a few companies. The top five oil companies now control 50 percent of oil production in the U.S. If they also controlled public utilities, they would be too powerful for any government to regulate.
Hmmmmmm. And, if you need some proof as to the power of this law, consider that a small 1992 repeal of one part of PUHCA “created power marketers, and ultimately the electricity deregulation debacle in California, the Enron bankruptcy, and the bankruptcies and huge debt of numerous utilities all over the United States.”
Well, that does not sound too good. Many people forget that we lucked out, when Enron tried, but failed to takeover PECO. Would you like another Enron controlling your energy? Or, as the same Daily Kos authors points out, would you be comfortable with say, China, controlling the energy of Philadelphians? Or, what about Haliburton or Texaco?
And get ready to start paying your power bill to Halliburton because some of the companies best positioned to take advantage of this deregulation are oil companies: "The top five oil companies now control 50 percent of US oil production. If they also controlled public utilities, they would be too powerful for any government to regulate," said Hargis.
We must figure out how to reform PGW, how to get it out of the patronage mill, how to get people to pay their bills. We must not, however, turn our biggest public utility over to private companies, just as it becomes exponentially more dangerous to do so.
Keep Haliburton, China, Chevron or a new Enron from controlling heat in Philadelphia. Say no to PGW privatization.