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2,561 | 2002-02-13T00:00:00 | 107-82 | The SEC has always stressed however that in order to protect the customers of multistate diversified utility holding companies it is necessary to give the Federal Energy Regulatory Commission FERC and state regulators authority over the books and records of holding companies and authority to regulate their ability to engage in affiliate transactions |
2,571 | 2002-02-13T00:00:00 | 107-82 | PUHCA was enacted in 1935 in response to abuses that had occurred in the gas and electric industry during the first quarter of the last centurySUP2SUP The abuses included misuse of the holding company structure inadequate disclosure of the financial position and earning power of holding companies unsound accounting practices excessive debt issuances and abusive affiliate transactions |
2,576 | 2002-02-13T00:00:00 | 107-82 | The Act also placed restrictions on the geographic scope of holding company systems and limited registered holding companies to activities related to their gas or electric businesses |
2,590 | 2002-02-13T00:00:00 | 107-82 | The purpose of the study was to identify unnecessary and duplicative regulation and at the same time to identify those features of the statute that remain appropriate in the regulation of the contemporary electric and gas industriesSUP4SUP 4 The study focused primarily on registered holding company systems |
2,593 | 2002-02-13T00:00:00 | 107-82 | Despite their small number registered holding companies account for a significant portion of the energy utility resources in this country |
2,594 | 2002-02-13T00:00:00 | 107-82 | As of September 30 2001 the 27 registered holding systems which included 35 registered holding companies owned 133 electric and gas utility subsidiaries with operations in 44 states and in excess of 2500 nonutility subsidiaries |
2,595 | 2002-02-13T00:00:00 | 107-82 | In financial terms as of September 31 2001 the 27 registered holding company systems owned more than 417 billion of investorowned electric and gas utility assets and received in excess of 173 billion in operating revenues |
2,596 | 2002-02-13T00:00:00 | 107-82 | The 27 registered systems represent over 40 of the assets and revenues of the US investorowned electric utility industry and almost 50 of all electric utility customers in the United States |
2,604 | 2002-02-13T00:00:00 | 107-82 | 5 Sections 32 and 33 of the Act which were added to it by the Energy Policy Act of 1992 permit subject to certain conditions the ownership of exempt wholesale generators and foreign utility companies |
2,605 | 2002-02-13T00:00:00 | 107-82 | The impact of section 32 on the electricity industry is discussed in more detail below |
2,630 | 2002-02-13T00:00:00 | 107-82 | When Enron acquired Portland General Electric in 1998 it claimed an exemption under PUHCA rule 2 SUP8SUP as an intrastate holding companySUP9SUP Enron was able to claim this exemption because it was incorporated in Oregon Portland General its only utility subsidiary was incorporated in Oregon and Portland Generals utility operations were located in OregonSUP10SUP For more than sixty years the SEC has held that as long as the holding company and its utility subsidiaries are all incorporated in the same state and the utility operations are conducted primarily in that state the holding company is entitled to an exemption |
2,634 | 2002-02-13T00:00:00 | 107-82 | 9 Enron recently agreed to sell Portland General to Northwest Natural Gas a transaction that is subject to Commission approval under PUHCA |
2,654 | 2002-02-13T00:00:00 | 107-82 | In 1994 Enron Power Marketing Inc EPMI a subsidiary of Enron received a noaction letter from staff in the SECs Division of Investment Management in which the staff agreed not to recommend enforcement action against EPMI if it engaged in power marketing activities without it or Enron registering under the Act |
2,655 | 2002-02-13T00:00:00 | 107-82 | In its request for noaction relief EPMI argued that the contracts books and records and other materials underlying its power marketing activities were not facilities used for the generation transmission or distribution of electric energy for sale SUP13SUP that the power market subsidiary was therefore not an electric utility company for purposes of PUHCA and that Enron was thus not a utility holding company for purposes of the Act |
2,656 | 2002-02-13T00:00:00 | 107-82 | EPMIs request stated that at the time other companies were already engaged in similar power marketing activities |
2,661 | 2002-02-13T00:00:00 | 107-82 | 79ba3 definition of electric utility company |
2,662 | 2002-02-13T00:00:00 | 107-82 | 14 The Commission has also given exempt and registered holding companies the authority necessary to engage in power marketing as a nonutility activity |
2,664 | 2002-02-13T00:00:00 | 107-82 | 25058 which was adopted in early 1997 permits registered holding companies to engage in the brokering and marketing of energy commodities including but not limited to electricity natural or manufactured gas and other combustible fuels as a permitted nonutility activity |
2,675 | 2002-02-13T00:00:00 | 107-82 | Specifically although deregulation is changing the way utilities operate in some states electric and gas utilities have historically functioned as monopolies whose rates are regulated by state authorities |
2,679 | 2002-02-13T00:00:00 | 107-82 | Thus so long as electric and gas utilities continue to function as monopolies the need to protect against this type of crosssubsidization will remain |
2,690 | 2002-02-13T00:00:00 | 107-82 | While this is a significant power and one we believe that state and federal rate regulators should possess we also believe that Congress should consider giving the FERC the authority to use its rulemaking authority to prohibit or limit on a prospective basis those types of affiliate transactions that it concludes are so abusive that they should not be allowed |
2,691 | 2002-02-13T00:00:00 | 107-82 | C Market Power Issues Repeal of PUHCA would remove barriers that now exist to consolidation within the utility industry as well as barriers that prevent diversified nonutility companies from acquiring utilities |
2,692 | 2002-02-13T00:00:00 | 107-82 | Removal of these restrictions may raise competitive issues related to the market power of utilities |
2,695 | 2002-02-13T00:00:00 | 107-82 | 16 Municipal Electric Association v SEC 413 F2d 1052 105607 DC Cir |
2,703 | 2002-02-13T00:00:00 | 107-82 | Cajun Electric Power Cooperative Inc v SEC 1994 WL 704047 DC Cir |
2,709 | 2002-02-13T00:00:00 | 107-82 | In recent years the SEC has looked to all these regulators for their expertise in assessing operational and competitive issues particularly in situations in which the combined entity resulting from a merger would have control of key transmission facilities and of surplus power |
2,712 | 2002-02-13T00:00:00 | 107-82 | SUP19SUP 19 Madison Gas and Electric Company v SEC 168 F3d 1337 DC Cir |
2,715 | 2002-02-13T00:00:00 | 107-82 | Therefore repeal of PUHCA is unlikely to affect how market power issues are reviewed at the federal level |
2,717 | 2002-02-13T00:00:00 | 107-82 | While PUHCA provides an additional layer of regulatory approval for certain utility mergers the Commissions reliance where appropriate on other regulators for the key market power determination makes its review of market power issues largely redundant |
2,720 | 2002-02-13T00:00:00 | 107-82 | For example there has been discussion of whether the FERC needs additional ratemaking authority in the wholesale electricity markets |
2,723 | 2002-02-13T00:00:00 | 107-82 | Likewise PUHCA does not give the SEC authority to attempt to prevent manipulation in the energy trading markets |
2,725 | 2002-02-13T00:00:00 | 107-82 | E PUHCA Repeal and National Energy Policy Repealing the Act is not however a magic solution to the current problems facing the US utility industry |
2,726 | 2002-02-13T00:00:00 | 107-82 | PUHCA repeal can be viewed as part of the needed response to the current energy problems facing the countrynotably the Administrations recent report on energy policy includes a recommendation that PUHCA be repealedSUP20SUP But repeal of the Act will not have any direct effect on the supply of electricity in the United States |
2,728 | 2002-02-13T00:00:00 | 107-82 | As part of the Energy Policy Act Congress amended the Act in 1992 to remove most restrictions on the ability of registered and exempt holding companies as well as companies not otherwise subject to PUHCA to build acquire and own generating facilities anywhere in the United States |
2,729 | 2002-02-13T00:00:00 | 107-82 | These types of facilitiesexempt wholesale generators or EWGsare not considered to be electric utility companies under PUHCA and in fact are exempt from all provisions of PUHCA |
2,731 | 2002-02-13T00:00:00 | 107-82 | SUP21SUP In short the Energy Policy Act removed restrictions on the ability of registered and exempt holding companies to build acquire and own generating facilities anywhere in the United States |
2,733 | 2002-02-13T00:00:00 | 107-82 | Numerous other companies not subject to the Act have also entered the generation businessSUP22SUP 20 See National Energy Policy Report of the National Energy Policy Development Group at 512 May 2001 recommending the reform of outdated federal electricity laws such as the Public Utility Holding Company Act |
2,734 | 2002-02-13T00:00:00 | 107-82 | 21 While no Commission approval is required for the acquisition of an EWG as a result of the Energy Policy Act Commission approval is required for example before a registered holding company can issue securities to finance the acquisition of or guarantee securities issued by an EWG |
2,735 | 2002-02-13T00:00:00 | 107-82 | Under the Energy Policy Act Congress directed the SEC to adopt rules with respect to registered holding companies EWG investments |
2,740 | 2002-02-13T00:00:00 | 107-82 | 22 See eg National Energy Policy Report of the National Energy Policy Development Group at 511 May 2001 noting that most new electricity generation is being built not by regulated utilities but by independent power producers |
2,745 | 2002-02-13T00:00:00 | 107-82 | For example during the past year questions have arisen about how the Act will impact the ability of the FERC to implement its plans to restructure the control of transmission facilities in the United StatesSUP23SUP Specifically in order to ensure that electricity consumers pay the lowest price possible for reliable service the FERC recently implemented new regulations designed to create independent regionally operated transmission grids that are meant to enhance the benefits of competitive electricity markets |
2,761 | 2002-02-13T00:00:00 | 107-82 | By supporting conditional repeal of the 1935 Act the SEC hopes to reduce unnecessary regulatory burdens on Americas energy industry while providing adequate protections for energy consumers |
2,764 | 2002-02-13T00:00:00 | 107-82 | We would now like to hear from Mary Hutzler who has testified before and who is the Acting Director of the Energy Information Administration to give us your view on the facts and the figures about what happened when Enrons bankruptcy became more prevalent |
2,767 | 2002-02-13T00:00:00 | 107-82 | Mr Chairman and members of the subcommittee I appreciate the opportunity to appear before you today to discuss current and future energy prices and supplies in the United States in light of the recent Enron situation |
2,768 | 2002-02-13T00:00:00 | 107-82 | The Energy Information Administration is the autonomous statistical and analytical agency within the Department of Energy |
2,770 | 2002-02-13T00:00:00 | 107-82 | Energy markets with particular emphasis on electricity and natural gas have experienced considerable turmoil over the past 2 years |
2,772 | 2002-02-13T00:00:00 | 107-82 | Most of the volatility in electricity markets occurred on the West Coast particularly in California and in the Pacific Northwest |
2,773 | 2002-02-13T00:00:00 | 107-82 | Many of the conditions that contributed to the electricity market squeeze in California are no longer present |
2,774 | 2002-02-13T00:00:00 | 107-82 | Unfortunately one of the contributors to lower electricity market volatility is the significant slowdown in the US economy in 2001 particularly due to the dramatic decline in industrial output which is still pervading the economy |
2,775 | 2002-02-13T00:00:00 | 107-82 | Despite the volatility in some spot electricity markets most retail electricity customers have seen only slight increases in delivered electricity costs because at the retail level electricity prices are still regulated in many States |
2,776 | 2002-02-13T00:00:00 | 107-82 | Some States particularly California have seen large changes in delivered electricity prices but for most areas retail price changes have been relatively small over the last 2 years |
2,777 | 2002-02-13T00:00:00 | 107-82 | Some of the pressure on the electricity prices in 2000 and early 2001 were related to fuel costs and the availability of adequate generating capacity |
2,778 | 2002-02-13T00:00:00 | 107-82 | Throughout 2000 natural gas spot prices were rising steadily because of strong demand and stagnant or declining productive capacity |
2,779 | 2002-02-13T00:00:00 | 107-82 | The economy was expanding rapidly and incremental natural gas demand requirements were outstripping the capacity to produce new supplies |
2,780 | 2002-02-13T00:00:00 | 107-82 | Natural gas inventories fell steadily to very low levels at the beginning of the 2000 and 2001 heating seasons setting the stage for significant increases in natural gas costs to enduse customers |
2,781 | 2002-02-13T00:00:00 | 107-82 | Oil prices were also well above typical levels because of the tight condition of world oil markets |
2,782 | 2002-02-13T00:00:00 | 107-82 | The reduction in hydroelectric resources in 2000 due to weather factors served to tighten electricity markets by removing an important component of electricity supply adding to the increased demand for natural gas generation |
2,783 | 2002-02-13T00:00:00 | 107-82 | In late 2000 very cold temperatures moved heating and energy use to well above normal levels |
2,784 | 2002-02-13T00:00:00 | 107-82 | This squeeze on natural gas markets resulted in a dramatic runup in the natural gas prices which sent fuel costs soaring |
2,785 | 2002-02-13T00:00:00 | 107-82 | Since last winter the onset of the economic slowdown and relatively mild weather has reduced demand and changed the cost price environment for electricity and other energy sources |
2,786 | 2002-02-13T00:00:00 | 107-82 | Average US natural gas spot prices are currently between onefourth and onefifth the level seen at the height of the runup last winter and oil prices are noticeably lower |
2,787 | 2002-02-13T00:00:00 | 107-82 | Electricity spot prices are generally between 18 and 30 per megawatt hour compared to midJanuary 2001 prices of 40 to 50 in the south and east and 400 to 500 on the West Coast |
2,788 | 2002-02-13T00:00:00 | 107-82 | We have examined electricity and natural gas price data since the fourth quarter of last year and compared them to Enrons stock prices |
2,789 | 2002-02-13T00:00:00 | 107-82 | As this chart shows we see no correlation between spot market prices for electricity and the path of Enrons stock price |
2,790 | 2002-02-13T00:00:00 | 107-82 | Between October 2001 and February of 2002 wholesale electricity prices for the Middle Atlantic New York New England and California displayed relative stability at the same time that Enrons stock value was plummeting from nearly 37 a share in October to less than 1 a share 6 weeks later |
2,791 | 2002-02-13T00:00:00 | 107-82 | In terms of electricity Enron was a small contributor in 2000 accounting for less than 1 percent each of total retail electricity sales total generating capacity and total electricity generation |
2,792 | 2002-02-13T00:00:00 | 107-82 | Similarly the Henry Hub spot natural gas price while a little more volatile than electricity prices showed no sign of being affected by the Enron problems during the same period |
2,794 | 2002-02-13T00:00:00 | 107-82 | Both electricity and natural gas markets appear to have shrugged off the Enron situation with little or no discernable market impacts |
2,795 | 2002-02-13T00:00:00 | 107-82 | In the short term little change is expected for electricity prices |
2,796 | 2002-02-13T00:00:00 | 107-82 | For 2002 an average decline in residential electricity prices of 16 percent is expected and a modest increase of about a 5 percent is anticipated for 2003 as fuel costs increase moderately and as aggregate electricity demand increases |
2,797 | 2002-02-13T00:00:00 | 107-82 | In the longer term the electricity prices are expected to decline about 2 percent annually from 2000 to 2020 as more competition and lower coal prices to electric generators offset somewhat higher natural gas prices |
2,799 | 2002-02-13T00:00:00 | 107-82 | Very mild weather during the fourth quarter of last year through January of this year has reduced heating demand considerably |
2,800 | 2002-02-13T00:00:00 | 107-82 | The low heating demand a weak economy and high storage levels for natural gas should result in natural gas wellhead prices of about 185 per thousand cubic feet for 2002 increasing to nearly 240 per thousand cubic feet in 2003 as the economy grows and world oil prices increase |
2,801 | 2002-02-13T00:00:00 | 107-82 | Natural gas prices at the wellhead are expected to rise from their current levels reaching 326 per thousand cubic feet by 2020 in real 2000 dollars |
2,802 | 2002-02-13T00:00:00 | 107-82 | In summary it appears that the factors responsible for the very volatile and high electricity prices on the West Coast and the spike and subsequent collapse in natural gas prices nationwide stemmed from numerous economic and noneconomic developments that are not obviously related to Enrons market activity |
2,803 | 2002-02-13T00:00:00 | 107-82 | Enron while a large and wellknown player among energy trading entities in the United States was one among many existing and potential new players in electricity and natural gas markets |
2,805 | 2002-02-13T00:00:00 | 107-82 | There is nothing in what has occurred in energy markets since the failure of Enron that would suggest otherwise as far as the aggregate energy market data is concerned |
2,808 | 2002-02-13T00:00:00 | 107-82 | The prepared statement of Mary J Hutzler follows Mary J Hutzler Acting Administrator Energy Information Administration Department of Energy Mr Chairman and Members of the Subcommittee I appreciate the opportunity to appear before you today to discuss current and future electricity and natural gas prices and supplies in the United States in light of the recent Enron situation |
2,809 | 2002-02-13T00:00:00 | 107-82 | The Energy Information Administration EIA is an autonomous statistical and analytical agency within the Department of Energy |
2,810 | 2002-02-13T00:00:00 | 107-82 | We are charged with providing objective timely and relevant data analysis and projections for the use of the Department of Energy other Government agencies the US Congress and the public |
2,811 | 2002-02-13T00:00:00 | 107-82 | We do not take positions on policy issues but we do produce data and analysis reports that are meant to help policy makers determine energy policy |
2,813 | 2002-02-13T00:00:00 | 107-82 | We do not speak for the Department nor for any particular point of view with respect to energy policy and our views should not be construed as representing those of the Department or the Administration |
2,814 | 2002-02-13T00:00:00 | 107-82 | However EIAs baseline projections on energy trends are widely used by Government agencies the private sector and academia for their own energy analyses |
2,815 | 2002-02-13T00:00:00 | 107-82 | The Subcommittee has requested information about current and future electricity and natural gas prices and supplies in light of the Enron situation |
2,816 | 2002-02-13T00:00:00 | 107-82 | EIA collects and interprets data on the current energy situation and produces both shortterm and longterm energy projections |
2,817 | 2002-02-13T00:00:00 | 107-82 | The projections in this testimony are from our ShortTerm Energy Outlook February 2002 and the Annual Energy Outlook 2002 released late last year |
2,818 | 2002-02-13T00:00:00 | 107-82 | The ShortTerm Energy Outlook provides quarterly projections of energy markets through 2003 while the Annual Energy Outlook provides projections and analysis of domestic energy consumption supply and prices through 2020 |
2,819 | 2002-02-13T00:00:00 | 107-82 | These projections are not meant to be exact predictions of the future but represent a likely energy future given technological and demographic trends current laws and regulations and consumer behavior as derived from known data |
2,820 | 2002-02-13T00:00:00 | 107-82 | EIA recognizes that projections of energy markets are highly uncertain and subject to many random events that cannot be foreseen such as weather political disruptions strikes and technological breakthroughs |
2,821 | 2002-02-13T00:00:00 | 107-82 | In addition both short and longterm trends in technology development demographics economic growth and energy resources may evolve along a different path than assumed in the ShortTerm Energy Outlook and the Annual Energy Outlook |
2,822 | 2002-02-13T00:00:00 | 107-82 | Many of these uncertainties are explored through alternative cases with a range of assumptions concerning world oil prices and weather in the ShortTerm Energy Outlook and world oil prices economic growth and technology in the Annual Energy Outlook |
2,825 | 2002-02-13T00:00:00 | 107-82 | Our midterm projections which were published the same month incorporated the most recent events in energy markets as possible but most of our analysis was completed by the end of September 2001 |
2,826 | 2002-02-13T00:00:00 | 107-82 | At that time the problems of Enron had not yet been made public and were not foreseen by most energy analysts |
2,827 | 2002-02-13T00:00:00 | 107-82 | It is our view however that the midterm outlook for energy markets is not materially affected by this situation which is essentially confined to the shareholders and employees of Enron |
2,828 | 2002-02-13T00:00:00 | 107-82 | the current situation and the shortterm outlookOverview Energy markets with particular emphasis on electricity and natural gas have experienced a great deal of volatility over the past two years |
2,829 | 2002-02-13T00:00:00 | 107-82 | For electricity the most dramatic ups and downs have occurred on the West Coast particularly in California |
2,830 | 2002-02-13T00:00:00 | 107-82 | Natural gas market changes over that period have been broader in scope and have been felt strongly across the country although the highest price increases were in California |
2,831 | 2002-02-13T00:00:00 | 107-82 | In general it appears that the factors that are responsible for the very volatile and high electricity prices on the West Coast and the spike and subsequent collapse in natural gas prices nationwide stemmed from numerous economic and noneconomic developments some years in the making that are not obviously related to Enrons market activity |
2,833 | 2002-02-13T00:00:00 | 107-82 | Enron while a large and wellknown player among energy trading entities in the United States was one among many existing and potential new players in electricity and natural gas markets |
2,835 | 2002-02-13T00:00:00 | 107-82 | The projections in this testimony are based on that premise and there is nothing in what has occurred in energy markets since the failure of Enron that would suggest otherwise |