|
Server : Apache/2.4.62 System : FreeBSD fbsdweb2.web.rcn.net 14.1-RELEASE FreeBSD 14.1-RELEASE releng/14.1-n267679-10e31f0946d8 GENERIC amd64 User : www ( 80) PHP Version : 8.3.8 Disable Function : NONE Directory : /domains/enrgy/feldman/ |
Upload File : |
<html>
<head>
<title>February 2004: Mad Cow Lock Up</title>
</head>
<body style="font-family: Arial" vlink="#808080">
<div align="center"><center>
<table border="0" cellpadding="8" cellspacing="0" width="98%" bgcolor="#000000">
<tr>
<td width="100%" valign="middle"><a name="top"></a>
<img src="../images/pmamagsm.gif" alt="PMA Online Magazine" border="0" align="right" width="229" height="100"></td>
</tr>
</table>
</center></div><center>
<table border="0" cellpadding="8" width="98%">
<tr>
<td width="25%" valign="top" align="center">
<!--webbot bot="Include" U-Include="wv_sidebar.htm" TAG="BODY" startspan -->
<table border="0" cellpadding="8" width="98%" id="table1">
<tr>
<td width="25%" valign="top" align="center"><map name="FPMap0_I1">
<area href="http://www.powermarketers.com/adrates.html" shape="rect" coords="14, 297, 97, 322">
<area href="http://www.powermarketers.com/pmajobs.htm" shape="rect" coords="11, 230, 95, 257">
<area href="http://www.powermarketers.com/main.htm" target="_parent" shape="rect" coords="12, 163, 96, 189">
<area href="http://www.powermarketers.com/power2.htm" target="_blank" shape="rect" coords="12, 95, 96, 121">
<area href="../pmamag.htm" shape="rect" coords="11, 29, 96, 54"></map>
<img rectangle="(12,163) (96,189) http://www.powermarketers.com/main.htm##_parent" rectangle="(12,95) (96,121) http://www.powermarketers.com/power2.htm##_blank" rectangle="(11,29) (96,54) ../pmamag.htm" src="../images/magmenu.gif" alt="PMA OnLine Magazine Menu" border="0" align="center" usemap="#FPMap0_I1" width="110" height="350"><p>
<a href="../searchpma.htm">
<img src="../images/archives.gif" alt="Archives Search" border="0" align="center" WIDTH="70" HEIGHT="40"></a></p>
<p align="left"><font face="Arial"><strong><small>About The Author:<br>
<br>
</small></strong><span lang="X-NONE" style="color: black"><font size="2">
ROGER FELDMAN, Co-Chair of Andrews Kurth LLP Climate Change and Carbon
Markets Group has practiced law related to the finance of environmental and
energy projects and companies for 40 years. In particular, he has analyzed
and executed a wide variety and substantial value of project financings. He
chairs the American Bar Association’s Committee on Carbon Trading and
Finance, serves on the Board of the American Council for Renewable Energy,
and has been a senior official in the Federal Energy Administration. He is
a graduate of Brown University, Yale Law School and Harvard Business School.</font></span></font></p>
<p class="BodyText05DS" align="left" style="text-align:left"> </p>
<p> </p>
<p> </p>
<p> </p>
<p> </p>
<p> </p>
<p> </p>
<p> </p>
<p> </p>
<p> </p>
<p> </p>
<p> </p>
<p> </p>
<p> </p>
<p><a href="#top">
<img src="../images/b-t-top.gif" alt="Back To Top" border="0" WIDTH="71" HEIGHT="35"></a></td>
</tr>
</table>
<!--webbot bot="Include" i-checksum="19883" endspan --></td>
<td width="75%" valign="top">
<img src="../images/feldman.gif" alt="Washington Viewpoint by Roger Feldman" border="0" width="375" height="75"><p><b><u><br>
</u></b><u><b>February 2004</b></u></p>
<p align="center"><font size="6"><b>Mad Cow Lock Up</b></font></p>
<p><strong>by Roger Feldman -- Bingham, Dana L.L.P.<br>
</strong><font face="Arial" size="2">(<em>originally published by PMA OnLine
Magazine: 2</em>004/02/13)<br>
</font><span style="font-size: 10.0pt; font-family: Palatino; color: black">
</span></p>
<font FACE="Times New Roman" SIZE="1"><i></i></font>
<font SIZE="3">
</font>
<i></i>
<p align="justify">In late 2003, after Congress at least temporarily gave up
on repealing Public Utility Holding Company Act (“PUHCA”) as part of the
Energy Act, the SEC rattled “dem old bones” by denying Enron’s application
for exemption from PUHCA. Perhaps to say: unless you make this law for go
away we really are going to have enforce it. Certainly to remind us yet
again: government has locked another barn door only after Enron got out and
showed is had Mad Cow disease. And definitely to leave the utility industry
facing the fact: in the land of the blind, the “one off” decision is King of
precedents.<br>
<br>
Here is basically what its decision (SEC Rel. No. 27782) was about. Enron,
the owner of pieces of many “unregulated”PURPA “Qualified Facilities” (QFs)
bought Portland General Electric, Inc., an old-fashioned regulated utility
under Oregon State jurisdiction. In doing so, it became a “holding company”
under PUHCA and, as such, its ownership of QFs along with other utilities
would have invalidated their statute . To escape this result, as well as
broader PUHCA regulation, Enron reincorporated in Oregon and claimed the
right to one of the mandatory exemptions from PUHCA: that it was a holding
company which together with every subsidiary of which was predominantly a
public utility company “was predominantly intrastate in character and
carried on its business in a sirale state. “Perhaps this was literally true.
Probably it was not what the PUHCA’s authors had in mind since they sought
to prevent national electricity holding companies, and Enron certainly
wanted to use Portland General as a pillar of its wholesale trading
activities (later made famous in California and throughout the West). Then
Enron surprised its top executives and went broke, and wanted to sell
Portland General. A difficult trick in bankruptcy made much harder by the
fast no one normally wants to buy a registered holding company, with the SEC
jurisdiction that entails. Suddenly the SEC sobered up, got “spitzer-ized”,
looked hard at the make-up of Portland General’s business — which included a
great deal of wholesale trading — and declared no “intrastate” exemption was
available, because Portland General was not just an intra-state utility
(even though the Oregon State Commission argued that it was, and was doing a
fine job of regulation, thank you.)<br>
<br>
By doing so, the SEC’s bull (Papal style) threatened to break a lot of china
(domestic utility type). The 3(a)(1) PUHCA “intrastate” exemption is the fig
leaf for some mighty large conventional utility holding companies. In
explaining why Portland General was not an intrastate public utility, the
Commission shriveled that fig leaf by citing a wide variety of facts with
respect to Portland General which might also be said to obtain for other
exempt utilities as well, but as they say around the courthouse – “hard
cases made bad law”, or around the Capitol “hard cases are a call for new
law” (or at least _______ of an old one). Here are some of the facts about
Portland General to which the SEC pointed out in denying the intrastate
exemption, which may characterize utilities held by other holding companies
claiming 3(a)(1) intrastate exemptions:</p>
<ul>
<li>
<p align="justify">ownership of generation assets out of state;<br>
</p></li>
<li>
<p align="justify">ownership of transmission out of state (including an
__________ used in interstate commerce) (while protecting “our design …
cannot fairly be interpreted as holding that an interest in an interstate
network, without more, makes a utility interstate in character”); and <br>
</p></li>
<li>
<p align="justify">purchases of wholesale power as a “brokerage” activity
in order to generate revenues, rather than as a means of meeting the needs
of retail customers.</p></li>
</ul>
<p align="justify">In measuring the extent of intrastate activity, the
Commission focused not only on quantitative standards measuring relative in
and out of state asset ownership and other activities, but also on the
policy question of whether state regulators were able to protect effectively
the interests of utility customers and investors, given the extent of the
utility’s out-of-state power sales(over the prior 3 years, Portland
General’s gross operating revenues, out-of-state were almost one-third of
its total sales.<br>
<br>
In addition to creating current confusion as to the interpretation of when
the intrastate exemption properly is involved, the decision highlights two
larger policy conclusions:<br>
� On the one hand, the applicability of PUHCA to the. half restructured
power markets and the shape of the power industry is somewhat questionable.
Certainly, the confusion in applying old statutory tests in the fluid
trading market environment is evident in the case.<br>
� On the other, the repeal of PUHCA (as proposed under the Energy Act)
without a clear concept for directly addressing the modern version of
potential market power abuses at which PUHCA blatantly ignores the recent
history.<br>
<br>
The clear conclusion is that instead of striving to lock up mad cows or just
ignoring them, attention would better be focused on the true nature of their
disease, how to label its carriers and how best to deal with them before
they are out the barn door.<br>
</p>
<!--webbot bot="Include" U-Include="wv_bottom.htm" TAG="BODY" startspan -->
<hr color="#FFFF00">
<p class="MsoBodyText" align="left" style="margin-bottom:0in;margin-bottom:.0001pt;
text-align:left"><font face="Arial" size="2">
<span lang="X-NONE" style="color: black">ROGER FELDMAN, Co-Chair of Andrews
Kurth LLP Climate Change and Carbon Markets Group has practiced law related
to the finance of environmental and energy projects and companies for 40
years. In particular, he has analyzed and executed a wide variety and
substantial value of project financings. He chairs the American Bar
Association’s Committee on Carbon Trading and Finance, serves on the Board
of the American Council for Renewable Energy, and has been a senior official
in the Federal Energy Administration. He is a graduate of Brown University,
Yale Law School and Harvard Business School.</span></font></p>
<!--webbot bot="Include" i-checksum="63395" endspan --></td>
</tr>
</table>
</center>
<p align="center"><a href="#top">
<img src="../images/b-t-top.gif" alt="Back To Top" border="0" width="71" height="35"></a></p>
</body>
</html>