>X-Mailer: Novell GroupWise 5.5.5
>Date: Wed, 18 Sep 2002 15:42:20 -0400
>From: "Noel Petrie" <NPETRIE at citizen.org>
>Subject: (CMEP-list) House-Senate Conferees Poised to Repeal Law
> Protecting Consumers
>
>*** Apologies for Cross-Postings ***
>
>Press Release
>
>House-Senate Conferees Poised to Repeal Law Protecting Consumers,
>Investors from Enron-style Accounting and Market Manipulation
>
>Sept. 18, 2002
>
>Corporations Seeking Repeal Accused of Trading Scams in California
>
>WASHINGTON, D.C. - Some of the major corporations pushing Congress to
>repeal the consumer-protection law known as the Public Utility Holding
>Company Act (PUHCA) are the same ones that are being investigated for
>gouging ratepayers and manipulating the California energy market through
>schemes involving sham energy trading and the withholding of electricity,
>according to a Public Citizen report released today.
>
>House and Senate conferees, who are trying to reconcile differences in
>energy legislation passed by both chambers, are expected to begin taking
>up the electricity provisions of the competing bills as early as
>Thursday. While most public debate has centered on the massive subsidies
>to energy companies in the bill, the Senate bill also repeals PUHCA, an
>obscure, Depression-era law that is supposed to ensure that electric,
>natural gas and water utilities invest profits in providing reliable
>service rather than fueling the Enron-style acquisition of assets
>unrelated to their core energy business.
>
>"Members of Congress declare themselves to be tough on corporate crime
>when the camera is rolling, but behind closed doors they are trying to
>make it even easier for rapacious energy companies to rip off the public
>and investors," said Joan Claybrook, president of Public Citizen. "The
>energy giants that are being investigated for rigging the California
>energy market are the same ones that are lobbying behind the scenes to get
>rid of the Public Utility Holding Company Act. Rather than protecting
>ratepayers and shareholders, Congress is preparing to strip away any
>vestige of accountability and transparency there is left."
>
>The energy industry poured $44 million into lobbying Congress on PUHCA and
>other issues in 2001 alone, and has contributed more than $16 million to
>federal candidates since 1999, according to the report. This total
>includes lobbying by individual companies and their various
>anti-regulation trade associations, such as the Edison Electric Institute
>and the Coalition to Repeal PUHCA Now!.
>
>Enacted in 1935, PUHCA has historically prohibited holding companies from
>investing ratepayers' money in assets that will not directly contribute to
>low bills and reliable service, such as out-of-region power plants or
>non-electricity industries like water or telecommunications. However, the
>1992 Energy Policy Act allowed holding companies to invest ratepayer money
>in foreign power projects. This permitted the development of offshore
>subsidiaries and sham transactions that eventually led to the downfall of
>sprawling corporate structures. The law has been further weakened by
>exemptions and lack of adequate enforcement by the Securities and Exchange
>Commission (SEC).
>
>Abolishing PUHCA would largely remove government oversight from companies
>such as American Electric Power, Duke Energy, CMS Energy, Southern
>Company/ Mirant and Xcel. As some of the leading energy providers in
>today's deregulated markets, these corporations claim they can be trusted
>in the absence of supervision. But it was exactly that - the lack of
>government supervision - that allowed Enron to build its far-flung empire,
>manipulate markets and use accounting gimmickry to conceal debt and
>inflate income. Had there been a regulated system to ensure corporate
>responsibility and transparent accounting practices, it is likely that
>California's recent energy crisis and the accounting fraud that followed
>would have been impossible.
>
> In the report, Public Citizen examines the record of five
> companies seeking PUHCA repeal: American Electric Power, Duke Energy, CMS
> Energy, Southern Company/ Mirant and Xcel - all of which are under
> investigation for fraudulent trading and/or accounting practices and
> accused by state and federal investigators of gouging billions of dollars
> from California consumers during the artificially created energy "crisis"
> of 2000 and 2001.
>
>"The repeal of PUHCA would have devastating consequences for consumers and
>investors by leading to more Enron-style meltdowns, further industry
>consolidation and the creation of complex corporate structures that
>reduced transparency and accountability," said Tyson Slocum, research
>director for Public Citizen's Critical Mass Energy and Environment
>Program. "We need to demand that these energy companies be good corporate
>citizens, but it's clear they will not do it without strict standards of
>accountability. Government oversight is an indispensable measure needed to
>maintain an affordable and reliable energy market. Congress should be
>strengthening PUHCA, not ditching it."
>
> Public Citizen's report shows:
>
>· On Jan. 18, 2002, the U.S. Court of Appeals for the District of Columbia
>ruled that the SEC failed to prove that the June 15, 2000, merger of
>American Electric Power with Central & South West met the requirements of
>PUHCA and sent the case back to the SEC for further review. Specifically,
>the court told the SEC to revisit its conclusion that the merger met PUHCA
>requirements that utilities be "physically interconnected" and confined to
>a "single area or region."
>
>· In June 2002, the SEC ordered Duke Energy to release information on its
>trading practices, and in July the energy trader admitted that it had
>misled investors and federal officials about its trading operations. In
>July, the Commodity Futures Trading Commission (CFTC) issued a subpoena to
>Duke, and the company has been under investigation by the Federal Energy
>Regulatory Commission (FERC) since May. In addition, Duke is under
>investigation by the Justice Department's Houston office as part of a
>grand jury investigation into allegedly fraudulent trading practices. The
>federal grand jury subpoenaed Duke on July 12.
>
>· The SEC, CFTC, FERC and the Justice Department have all been formally
>investigating CMS Energy since May 2002, making CMS Energy the most
>investigated energy trader next to Enron. Shortly after the investigative
>offensive, long-time CMS Energy Chairman and CEO William McCormick
>resigned. That was followed by the firing of the company's auditor,
>Arthur Andersen. At the time of the accounting firm's dismissal, Arthur
>Andersen noted that its approval of the company's books could no longer be
>relied upon, which should not come as a surprise since 71 percent of the
>$5.6 million CMS Energy paid Arthur Anderson was for non-audit consulting
>services.
>
> The full report can be viewed online at
> http://www.citizen.org/documents/cmeep15.pdf. A copy of Claybrook's
> letter to congressional conferees is online at
> http://www.citizen.org/cmep/energy_enviro_nuclear/electricity/deregulation/puhca/articles.cfm?ID=8291
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>-Public Citizen's Critical Mass Energy and Environment Program