The Public Utility Holding Company Act (PUHCA) (1) and the Federal Power Act(FPA) of 1935 (Title I and Title II of the Public Utility Act) (2) established a regime ofregulating electric utilities that gave specific and separate powers to the states and the federalgovernment. The oil embargoes of the 1970s created concerns about the security of the nation's electricitysupply and led to enactment of the Public Utility Regulatory Policies Act of 1978 (PURPA). PURPA was established in part to augment electric utilitygeneration with more efficiently produced electricity and to provide equitable rates to electricconsumers. This first incremental change of traditional electricity regulation started a movement towarda market-oriented approach to electricity supply. Specifically, EPACT provides for thecreation of entities, called "exempt wholesale generators" (EWGs), that can generate and sellelectricity at wholesale without being regulated as utilities under PUHCA. It was argued that retail prices would decline with additional competition. In part, this law repeals the Public Utility Holding Company Act (PUHCA). Transmission

In addition to creating a new type of wholesale electricity generator, exempt wholesalegenerators (EWGs), the Energy Policy Act (EPACT) provides EWGs with a system to assuretransmission of their wholesale power to its purchaser. As a result of EPACT, on April 24, 1996, FERC issued Orders888 and 889. (7) In issuingits final rules, FERC concluded that these orders will "remedy undue discrimination in transmissionservices in interstate commerce and provide an orderly and fair transition to competitive bulk powermarkets." Regional Transmission Organizations

On December 20, 1999, FERC issued Order 2000, which described the minimumcharacteristics and functions of regional transmission organizations (RTOs). The ERO will developand enforce reliability standards for the bulk-power system. One argument for additional PUHCA reform has been made by electric utilities that wantto further diversify their assets. State regulators have expressed concerns that increased diversification could lead to abuses,including cross-subsidization: a regulated company subsidizing an unregulated affiliate. PUHCA repeal, such groups argue, could only exacerbatemarket power abuses in what they see as a monopolistic industry where true competition does notyet exist. Proponents of PURPA repeal -- primarilyinvestor-owned utilities (IOUs) located in the Northeast and in California -- argued that their stateregulators' "misguided" implementation of PURPA in the early 1980s has forced them to paycontractually high prices for power they do not need.
The Public Utility Holding Company Act of 1935 (PUHCA) and the Federal Power Act(FPA) were enacted to eliminate unfair practices and other abuses by electricity and gas holdingcompanies by requiring federal control and regulation of interstate public utility holding companies. Prior to PUHCA, electricity holding companies were characterized as having excessive consumerrates, high debt-to-equity ratios, and unreliable service. PUHCA remained virtually unchanged for50 years until enactment of the Public Utility Regulatory Policies Act of 1978. PURPA was, in part,intended to augment electric utility generation with more efficiently produced electricity and toprovide equitable rates to electric consumers. Qualifying facilities (QFs) are exempt from regulationunder PUHCA and the FPA.
Electricity regulation was changed again in 1992 with passage of the Energy Policy Act(EPACT). The intent of Title 7 of EPACT is to increase competition in the electric generating sectorby creating new entities, called "exempt wholesale generators" (EWGs), that can generate and sellelectricity at wholesale without being regulated as utilities under PUHCA. This title also providesEWGs with a way to assure transmission of their wholesale power to their purchasers. The effect ofthis act on the electric supply system has been more far-reaching than PURPA.
On April 24, 1996, the Federal Energy Regulatory Commission (FERC) issued Orders 888and 889. FERC issued these rules to remedy undue discrimination in transmission services ininterstate commerce and provide an orderly and fair transition to competitive bulk power markets.Order 2000, issued December 20, 1999, established criteria for forming transmission organizations.
Comprehensive electricity legislation may involve several components. The first is PUHCAreform. Some electric utilities want PUHCA changed so they can more easily diversify their assets. State regulators have expressed concerns that increased diversification could lead to abuses,including cross-subsidization. Consumer groups have expressed concern that a repeal of PUHCAcould exacerbate market power abuses in a monopolistic industry where true competition does notyet exist.
The second issue is PURPA's requirement that utilities purchase power from QFs. Manyinvestor-owned utilities support repeal of these mandatory purchase provisions. They argue that theirstate regulators' "misguided" implementation of PURPA has forced them to pay contractually highprices for power that they do not need. Opponents of this legislation argue that it would decreasecompetition and impede development of renewable energy.
The third main issue is reliability. Without mandatory and enforceable reliability standards,proponents argue that reliability of the electric power system will not be at acceptable levels. Opponents say these standards are unnecessary.
This report will be updated as events warrant.