Energy Policy Act of 2005

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Energy Policy Act of 2005
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• FERC gets more power -- The Federal Energy
  Regulatory Commission (FERC) will exercise
  jurisdiction over generation mergers, the new
  reliability organization, public power activities
  that affect markets, transmission siting and it
  will expand its enforcement powers over markets.

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• Repeal of PUHCA-- Effective February 2006, the
  much maligned Public Utility Holding Company Act
  (PUHCA) will expire, and the Securities Exchange
  Commission (SEC) will cease to pretend that it
  enforces that law.
• Merger approval will no longer require physical
  contiguity and non-utilities will no longer face
  the possibility that they will have to sell off
  non-utility properties if they acquire utility
  assets. The industry dearly wanted repeal of
  PUHCA. No doubt, investment bankers and private
  deal makers and money managers wanted it, too,
  because it increases their ability to do deals.
• Regulators, on the other hand, fear that the end
  of PUHCA will mean less protection for consumers
  against deals that damage the regulated utility.
  Credit ratings agencies and bond holders fear an
  increase in mergers and activities that will
  endanger credit ratings. Some skeptical equity
  holders worry that repeal will open the doors to
  a host of half baked mergers and diversification
  activities, of the sort that the industry has
  embraced again and again. Watch this one
  carefully.

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• Mandatory electric reliability-- The bill
  authorizes the creation of an electric
  reliability organization (ERO) that will have
  power to mandate reliability rules. Present
  reliability rules work on a voluntary basis. FERC
  will oversee the new organization, which could
  evolve from the existing North American Electric
  Reliability Council (NERC), which, incidentally,
  has new management on the top. (The new law
  assumes that mandating rules assures that the
  lights stay on. One might think that Katrina and
  Rita would have changed that notion, even if the
  August 2003 black out did not.)

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• Plenty of money for assorted causes-- The law
  reduces the tax depreciation lives of equipment
  for electric transmission, natural gas
  distribution and air pollution control on
  coal-fired generators. It provides renewable tax
  credits for incremental hydro and Indian coal
  and other renewables (different renewables get
  different credits), plus credits for a small
  number of coal technologies, plus tax exempt
  bonds for renewables, plus a tax credit for
  research at a consortium and some other stuff.
  (Note that everyone plays the old game. Congress,
  after prompting from lobbyists, knows best what
  type of plant and equipment deserves a boost,
  what type of technology deserves help, even what
  type of RD organization does it best.)

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• The Rudden Energy Strategies Report , October 17,
  2005