Repeal of the Public Utility Holding Company Act of 1935 and Enactment of the Public Utility Holding Company Act of 2005, 55805-55812 [05-19000]

Agencies

• DEPARTMENT OF ENERGY
• Federal Energy Regulatory Commission

[Federal Register Volume 70, Number 184 (Friday, September 23, 2005)]
[Proposed Rules]
[Pages 55805-55812]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-19000]


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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Parts 365 and 366

[Docket No. RM05-32-000]


Repeal of the Public Utility Holding Company Act of 1935 and 
Enactment of the Public Utility Holding Company Act of 2005

September 16, 2005.
AGENCY: Federal Energy Regulatory Commission, DOE.

ACTION: Notice of Proposed Rulemaking.

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SUMMARY: Pursuant to Title XII, Subtitle F of the Energy Policy Act of 
2005 (EPAct 2005), the Federal Energy Regulatory Commission 
(Commission) proposes to issue rules implementing the repeal of the 
Public Utility Holding Company Act of 1935, and the enactment of the 
Public Utility Holding Company Act of 2005, EPAct 2005. The Commission 
also proposes to remove its exempt wholesale generator rules, 18 CFR 
part 365 (2005), as they are no longer necessary. The Commission seeks 
public comment on the rules proposed herein.

DATES: Comments are due October 14, 2005. Reply comments are due 
October 21, 2005.

ADDRESSES: Comments and reply comments may be filed electronically via 
the eFiling link on the Commission's Web site at https://www.ferc.gov. 
Commenters unable to file comments electronically must send an original 
and 14 copies of their comments and reply comments to: Federal Energy 
Regulatory Commission, Office of the Secretary, 888 First Street, NE., 
Washington, DC, 20426. Refer to the Comment Procedures section of the 
preamble for additional information on how to file comments and reply 
comments.

FOR FURTHER INFORMATION CONTACT: Brandon Johnson (Legal Information), 
Federal Energy Regulatory Commission, 888 First Street, NE., 
Washington, DC 20426, (202) 502-6143.
    James Guest (Technical Information), Federal Energy Regulatory 
Commission, 888 First Street, NE., Washington, DC 20426, (202) 502-
6614.
    James Akers (Technical Information), Federal Energy Regulatory 
Commission, 888 First Street, NE., Washington, DC 20426, (202) 502-
8101.

SUPPLEMENTARY INFORMATION: 

[[Page 55806]]

Introduction

    1. On August 8, 2005, the Energy Policy Act of 2005 (EPAct 2005) 
\1\ was signed into law. In relevant part, it repeals the Public 
Utility Holding Company Act of 1935 (PUHCA 1935) \2\ and enacts the 
Public Utility Holding Company Act of 2005 (PUHCA 2005),\3\ which, with 
one exception not relevant here, will become effective six months from 
the date of enactment.\4\ Sections 1266, 1272, and 1275 of EPAct 2005 
direct the Commission to issue certain rules and to provide detailed 
recommendations to Congress on technical and conforming amendments to 
federal law within four months after the date of enactment.\5\ In 
addition, EPAct 2005 directs the Commission to issue a final rule 
exempting certain entities from the federal access to books and records 
provisions of EPAct 2005 within 90 days of the effective date of 
Subtitle F.
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    \1\ Energy Policy Act of 2005, Pub. L. No. 109-58, 119 Stat. 594 
(2005).
    \2\ 15 U.S.C. Sec. Sec.  79a et seq. (2000).
    \3\ EPAct 2005 at Sec. Sec.  1261 et seq.
    \4\ Id. at Sec.  1274(a).
    \5\ Id. at Sec. Sec.  1266, 1272, 1275.
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    2. The Commission proposes to add a new Subchapter U and Part 366 
to Title 18 of the Code of Federal Regulations to implement Title XII, 
Subtitle F of EPAct 2005 and to remove Subchapter T and Part 365 of 
Title 18 of the Code of Federal Regulations, and intends to issue final 
rules (as well as to submit the required report to Congress) within 
four months.\6\ The Commission seeks comments on its proposals for the 
required rules discussed below.
    3. Section 1264 of PUHCA 2005 concerns Commission access to the 
books and records of holding companies and other companies in holding 
company systems, and section 1275 of PUHCA 2005 concerns the 
Commission's authority to review and authorize the allocation of costs 
for non-power goods or administrative or management services. We note 
that the federal books and records access provision, section 1264, and 
the non-power goods and services provision, section 1275, of PUHCA 2005 
supplement the Commission's existing ratemaking authority under the 
Federal Power Act (FPA) to protect customers against improper cross-
subsidization or encumbrances of public utility assets \7\ and 
similarly our ratemaking authority under the Natural Gas Act (NGA).\8\ 
These provisions of PUHCA 2005 also supplement the Commission's broad 
authority under FPA section 301 and NGA section 8 to obtain the books 
and records of regulated companies and any person that controls or is 
controlled by such companies if relevant to jurisdictional 
activities.\9\ Further, with respect to the electric industry, the 
Congress has enhanced our already significant authorities over public 
utility mergers, acquisitions and dispositions of jurisdictional 
facilities.\10\ We believe that our existing FPA and NGA authorities, 
in combination with our enhanced authority over public utility mergers, 
acquisitions, and dispositions of jurisdictional facilities, and our 
new PUHCA 2005 authority, provide a sound framework to protect 
customers. To the extent that additional rulemakings or orders may be 
needed to protect customers adequately, the Commission will take 
appropriate actions in the future.
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    \6\ A related section of EPAct 2005, section 1289, involving, 
among other things, holding company acquisitions of securities, will 
be addressed in another rulemaking proceeding.
    Moreover, we recognize that the repeal of PUHCA 1935 and section 
318 of the FPA will give the Commission jurisdiction under section 
204 of the FPA over certain issuances of securities and assumptions 
of liabilities by companies within holding company systems that are 
currently subject to the jurisdiction of the Securities and Exchange 
Commission (SEC). If the Commission determines that it is necessary 
or appropriate to revise or supplement its current regulations under 
section 204 of the FPA (16 U.S.C. 824c (2000)), 18 CFR Part 34 
(2005), we will do so in a separate rulemaking proceeding.
    \7\ 16 U.S.C. 824d-e (2000).
    \8\ 15 U.S.C. 717c-d (2000).
    \9\ 16 U.S.C. 825 (2000); 15 U.S.C. Sec.  717g (2000).
    \10\ EPAct 2005 at Sec.  1289.
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Definitions

    4. The Commission proposes to largely incorporate in section 366.1 
of its regulations the text of section 1262 of EPAct 2005, which 
contains the definitions of relevant terms used in PUHCA 2005 and in 
our proposed regulations.

Books and Records Requirements

    5. Sections 1264(a) and (b) of EPAct 2005 generally provide that 
each holding company and each associate company of a holding company, 
as well as each affiliate of a holding company or any subsidiary 
company of a holding company, shall maintain, and shall make available 
to the Commission, such books, accounts, memoranda, and other records 
(books and records) as the Commission determines are relevant to the 
costs incurred by a public utility or natural gas company that is an 
associate company of such holding company and necessary or appropriate 
for the protection of public utility or natural gas company customers 
with respect to jurisdictional rates. Moreover, section 1264(c) 
empowers the Commission to examine the books and records of any company 
in a holding company system, or any affiliate thereof, that the 
Commission determines are relevant to the costs incurred by a public 
utility or natural gas company within such holding company system and 
necessary or appropriate for the protection of public utility or 
natural gas company customers with respect to jurisdictional rates. 
Finally, section 1264(d) forbids any member, officer, or employee of 
the Commission from divulging any fact or information that has come to 
his or her knowledge during the course of the examination of such books 
and records, except as may be directed by the Commission or a court of 
competent jurisdiction.\11\
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    \11\ There are comparable confidentiality provisions in the FPA 
and the NGA for public utility books and records and natural gas 
company books and records. 16 U.S.C. 825 (2000); 15 U.S.C. 717g 
(2000).
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    6. The Commission proposes to incorporate largely without 
modification the text of section 1264 by adding section 366.2 to the 
Commission's regulations. Moreover, the Commission proposes to adopt 
certain accounting, cost-allocation, recordkeeping, and related rules 
promulgated by the SEC for holding companies and their service 
companies, as they existed on the date of enactment of EPAct 2005, 
specifically 17 CFR 250.1,\12\ 250.26, 250.27, 250.80, 250.93, 250.94, 
259.5S, and 259.313 and 17 CFR parts 256 and 257.\13\ The Commission 
seeks comments, however, as to whether there are provisions of these 
SEC rules that the Commission should not adopt and also whether the 
Commission should adopt any additional accounting, cost-allocation, 
recordkeeping and related rules to carry out its statutory duties under 
PUHCA 2005. The Commission also seeks comments concerning which SEC 
reporting requirements the Commission should retain, and which ones it 
should not. Finally, in proposing to adopt the above-specified SEC 
regulations, the Commission does not intend to broaden their 
applicability beyond the types of companies to which they now apply. 
Commenters may address whether this scope of applicability is 
appropriate and

[[Page 55807]]

may propose any regulatory text needed to implement it.
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    \12\ The Commission does not intend to reimpose the registration 
requirement contained in 17 CFR 250.1. Instead, the Commission 
proposes to replace the registration requirement with a requirement 
that all entities falling within the definition of ``holding 
company'' in PUHCA 2005 notify the Commission of their status as a 
holding company and whether they qualify for exemption pursuant to 
section 1266 of EPAct 2005.
    \13\ These provisions, generally speaking, specify accounting, 
cost allocation, and recordkeeping requirements applicable to SEC-
regulated holding companies and service companies.
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Exemption Authority

    7. Section 1266(a) of EPAct 2005 directs the Commission to issue a 
final rule within 90 days after the effective date of Subtitle F 
exempting from the requirements of section 1264 of EPAct 2005 any 
person that is a holding company, solely with respect to one or more:

    (1) Qualifying facilities under the Public Utility Regulatory 
Policies Act of 1978 (16 U.S.C. 2601 et seq. (2000));
    (2) Exempt wholesale generators; or
    (3) Foreign utility companies.

    8. Section 1266(b) further directs the Commission to exempt a 
person or transaction from the requirements of section 1264 if, upon 
application or sua sponte:

    (1) The Commission finds that the books and records of a person 
are not relevant to the jurisdictional rates of a public utility or 
natural gas company; or
    (2) The Commission finds that a class of transactions is not 
relevant to the jurisdictional rates of a public utility or natural 
gas company.

    9. PUHCA 2005 requires the Commission to exempt any person that 
falls within the classes designated by section 1266(a) from the 
requirements of section 1264, and therefore, the Commission proposes to 
adopt such an exemption. At this time, the Commission does not propose 
to categorically exempt classes of entities or transactions described 
in section 1266(b) from the requirements of section 1264. Rather, we 
propose to rely on case-by-case applications for additional exemptions 
until we have gained further experience subsequent to the repeal of 
PUHCA 1935. However, we seek comment on whether the Commission should 
exempt classes of transactions involving mutual fund passive investors 
or other groups of passive investors from the new federal books and 
records access requirements.
    10. Finally, we note that although a person that is a holding 
company solely with respect to exempt wholesale generators or 
qualifying facilities will be exempted from the Federal access to books 
and records provisions in section 1264, many exempt wholesale 
generators and qualifying facilities may nevertheless be public 
utilities under section 201 of the FPA \14\ and remain subject to the 
Commission's authority with regard to their books and records under 
section 301 of the FPA, unless otherwise waived.\15\ An exemption from 
the requirements of section 1264 is not an exemption from FPA section 
301, NGA section 8, or any other requirements of the FPA and the NGA.
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    \14\ 16 U.S.C. 824(e) (2000).
    \15\ Id. at Sec.  825.
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Allocation of Costs of Non-Power Goods or Services

    11. Section 1275(b) of EPAct 2005 provides that, in the case of 
non-power goods or administrative or management services provided by an 
associate company organized specifically for the purpose of providing 
such goods or services to any public utility in the same holding 
company system, at the election of certain holding company systems \16\ 
or a state commission having jurisdiction over the public utility, the 
Commission, after the effective date of PUHCA 2005, shall review and 
authorize an allocation of costs for such goods and services to the 
extent relevant to that associate company. Section 1275(b) thus grants 
to certain holding company systems and state commissions a right to 
obtain Commission review and authorization of such cost allocations, 
and we propose to reflect this statutory provision in new section 
366.4(b) of our regulations.
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    \16\ Section 1275(b) provides that the Commission will exempt 
any company in a holding company system whose public utility 
operations are confined substantially to a single state. We 
interpret this to mean that holding company whose public utility 
operations are confined substantially to a single state may not, 
under this provision, elect to require the Commission to review and 
authorize an allocation of costs for non-power goods and services. 
This is discussed, infra, in paragraphs 15-17.
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    12. We note that, irrespective of the new section 1275(b) of PUHCA 
2005, with the repeal of PUHCA 1935 and the elimination of SEC review 
of the allocation of costs for non-power goods and services, we have 
authority under sections 205 and 206 of the FPA and sections 4 and 5 of 
the NGA to review the rate recovery in jurisdictional rates of such 
associate and affiliated company non-power goods and services costs, 
either upon application under section 205 of the FPA or section 4 of 
the NGA or upon complaint or our own motion under section 206 of the 
FPA and section 5 of the NGA, and we also have the authority to review 
and or require the filing of cost allocation agreements with the 
Commission since they are contracts affecting jurisdictional rates.\17\
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    \17\ 16 U.S.C. 824-e (2000); accord 15 U.S.C. 717c-d (2000); see 
generally EPAct 2005 at Sec.  1275(c) (stating that nothing in 
section 1275 affects the authority of the Commission under other 
applicable law). While the scope of our jurisdiction over wholesale 
sales of natural gas is more limited than our jurisdiction over 
wholesale sales of electric energy, and our rate review may differ 
in certain respects, such reviews could be undertaken under sections 
4 or 5 of the NGA.
    Separately, we note that we are in discussions with the SEC 
regarding the transfer of books and records pursuant to section 1273 
of EPAct 2005.
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    13. The Commission seeks comments as to whether, in light of the 
repeal of PUHCA 1935, holding companies that prior to the repeal of 
PUHCA 1935 were registered holding companies should be required to file 
such cost allocation agreements with the Commission under section 205 
of the FPA and section 4 of the NGA.
    14. In addition, we note that section 1275(b) provides for 
Commission review and authorization of cost allocations for non-power 
goods or services provided by service companies to public utilities, 
but it does not do so where such non-power goods and services are 
provided to gas utility companies and natural gas companies. We invite 
comments as to whether the Commission should recommend an amendment 
clarifying that holding company systems and state commissions having 
jurisdiction over gas utility companies and natural gas companies in 
the holding company systems are included within the scope of section 
1275(b).
    15. Finally, we note that the SEC and state commissions previously 
have been primarily responsible for determining allocations of costs 
for non-power goods and services among the various associate companies 
in registered holding company systems, and these allocations have been 
made on an ``at cost'' basis. By contrast, the Commission's long-
standing policy is that registered holding company special purpose 
subsidiaries must provide non-power goods and services to a public 
utility regulated by the Commission at the lower of cost or market, 
and, for at least a decade, we have imposed this lower of cost or 
market standard as a condition for approval of mergers that result in 
the creation of a new registered holding company.\18\ We invite 
comments as to whether the Commission should apply the lower of cost or 
market standard for the allocation of costs for non-power goods and 
services, or if we should instead adopt the SEC at cost standard.
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    \18\ See Inquiry Concerning the Commission's Merger Policy Under 
the Federal Power Act: Policy Statement, Order No. 592, 61 FR 68595 
(Dec. 18, 1996), FERC Stats. & Regs., Regulations Preambles July 
1996-December 2000 ] 31,044 at 30,124-25 (1996) (Merger Policy 
Statement), reconsideration denied, Order No. 592-A, 62 FR 33341 
(June 19, 1997), 79 FERC ] 61,321 (1997).
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Single-State Holding Company Systems and Other Classes of Transactions

    16. Section 1275(d) of EPAct 2005 directs the Commission to issue 
rules no later than four months after the date of enactment of EPAct 
2005 to exempt

[[Page 55808]]

from the requirements of section 1275 any company in a holding company 
system whose public utility operations are confined substantially to a 
single state (single-state holding company systems) and any other class 
of transactions that the Commission finds are not relevant to the 
jurisdictional rates of a public utility. We invite comments on how the 
Commission should define ``confined substantially to a single state.''
    17. While section 1275(d) states that single-state holding company 
systems are exempt from the ``requirements'' of section 1275, we note 
that section 1275 does not impose any requirements on holding company 
systems, but rather grants holding company systems and relevant state 
commissions the right to obtain Commission review and authorization of 
cost allocations. Instead, the only requirements in section 1275 are 
directed toward the Commission, in particular that ``the Commission 
shall review and authorize'' cost allocations if asked to do so by the 
holding company system or the relevant state commission. Based on the 
structure of section 1275, we believe that the most reasonable 
interpretation of the exemption for single-state holding company 
systems in section 1275(d) is that Congress intended to deny single-
state holding company systems and relevant state commissions the right 
to obtain Commission review of cost allocations pursuant to section 
1275. Accordingly, we propose to reflect this limitation by excluding 
single-state holding company systems from the scope of Commission 
review under section 366.4(b) of the Commission's regulations.\19\ The 
Commission invites comments on this interpretation of section 1275(d).
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    \19\ This interpretation pertains only to review and 
authorization of cost allocations for non-power goods and services 
under section 1275 of EPAct 2005. As discussed earlier, we view the 
ability of the Commission to review rate recovery in jurisdictional 
rates under sections 205 and 206 of the FPA and sections 4 and 5 of 
the NGA as a separate matter.
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    18. We believe that a similar interpretation applies with respect 
to the other classes of transactions that may be exempted pursuant to 
section 1275(d), namely, that an exemption under section 1275(d) 
forecloses Commission review under section 1275(b). In section 366.4(c) 
of the Commission's regulations, we propose to establish a procedure by 
which the Commission, either upon petition for declaratory order or 
upon its own motion, may exclude from the scope of Commission review 
and authorization under section 366.4(b) any class of transactions that 
we determine are not relevant to the jurisdictional rates of a public 
utility.
    19. The Commission seeks comments as to other classes of 
transactions that, pursuant to section 1275(d), should be exempted from 
the requirements of section 1275.

Previously Authorized Activities

    20. Section 1271 of EPAct 2005 states essentially that a person may 
continue to engage in activities or transactions authorized by rule or 
order as of the date of enactment of EPAct 2005 if that person 
continues to comply with the terms of the authorization, and the 
Commission proposes to reflect this statutory provision in section 
366.5 of the Commission's regulations. In addition, the Commission 
proposes to require that, if any such activities are challenged in a 
formal Commission proceeding, the person claiming prior authorization 
shall be required to provide the full text of any such authorization 
(whether by rule, order, or letter) and the application(s) or 
pleading(s) underlying such authorization (whether by rule, order, or 
letter).

Exempt Wholesale Generators and Foreign Utility Companies

    21. EPAct 2005 repeals PUHCA 1935 in its entirety, including 
section 32, which requires the Commission to make exempt wholesale 
generator determinations on a case-by-case basis, upon application. 
Although the definitional section of PUHCA 2005 references section 32 
of PUHCA 1935, the Congress nevertheless repealed section 32 in its 
entirety and did not re-enact that provision in the new PUHCA 2005. The 
Commission believes that the most reasonable interpretation of EPAct 
2005, given the omission of section 32 in the new PUHCA 2005, is that 
Congress did not intend the Commission to continue to make case-by-case 
determinations of exempt wholesale generator status in the future 
(i.e., after the effective date of PUHCA 2005). Rather, we believe that 
the most reasonable interpretation of the statute is that only those 
entities that are holding companies with respect to persons granted 
exempt wholesale generator status before the repeal of PUHCA 1935 will 
qualify for an exemption from the new federal books and records access 
requirements under proposed section 366.3(a)(2) of the Commission's 
regulations. Accordingly, we propose to remove Part 365 of the 
Commission's regulations, which set forth the filing requirements and 
ministerial procedures for persons seeking exempt wholesale generator 
status under section 32 of PUHCA 1935, and we invite comments on 
whether we should do so.
    22. We note that the benefit of exempt wholesale generator status 
under PUHCA 1935 was that entities that the Commission determined to 
have met the definition of exempt wholesale generator were exempted 
from the myriad requirements of PUHCA 1935. The principal benefit of 
being an exempt wholesale generator under PUHCA 2005 is exemption from 
the new federal books and records access requirements. To the extent 
that these new federal books and records access requirements add to the 
Commission's existing very broad books and records access authority 
under FPA section 301 and NGA section 8, our interpretation serves to 
err on the side of greater customer protection.
    23. In any event, as previously noted, entities that qualified as 
exempt wholesale generators under PUHCA 1935 were not exempted from the 
Commission's authority under the FPA if they met the FPA definition of 
``public utility,'' including the very broad access to books and 
records provisions of FPA section 301. Nor will they be exempt from 
these FPA provisions as a result of PUHCA 2005.
    24. In addition, we note that Congress repealed section 33 of PUHCA 
1935, which addresses foreign utility companies. As with exempt 
wholesale generators, we believe that Congress intended to limit the 
exemption for persons that are holding companies with respect to 
foreign utility companies to those attaining foreign utility company 
status before repeal of PUHCA 1935. The Commission seeks comments as to 
this interpretation of EPAct 2005.

Cross-Subsidization and Encumbrances of Utility Assets

    25. PUHCA 2005 is primarily a ``books and records access'' statute 
and does not give the Commission any new substantive authorities, other 
than the requirement in section 1275 of EPAct 2005 that the Commission 
review and determine certain non-power goods and services cost 
allocations among holding company members upon request. Nor does it 
give the Commission authority to pre-approve holding company 
activities.\20\ Accordingly, outside the context of reviewing a holding 
company transaction requiring approval under

[[Page 55809]]

section 203 of the FPA or a proposed issuance of securities under 
section 204 of the FPA, the Commission will continue to rely primarily 
on its ratemaking authorities under sections 205 and 206 of the FPA and 
sections 4 and 5 of the NGA to protect jurisdictional customers against 
inappropriate cross-subsidization or encumbrances of utility assets on 
an ongoing basis.
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    \20\ We note, however, that section 1289 of EPAct 2005 amends 
section 203 of the FPA to grant the Commission expanded approval 
authority with respect to mergers and the acquisitions of securities 
by holding companies within certain holding company systems.
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    26. The Commission already has in place, pursuant to the FPA and 
NGA, certain reporting requirements regarding money pools and cash 
management activities that affect jurisdictional companies.\21\ 
Further, in the electric area, we have policies that protect against 
cross-subsidization occurring as a result of wholesale power sales 
between affiliates in a holding company system as well as sales of non-
power goods and services between such affiliates.\22\ We seek comment 
on whether, in light of the repeal of PUHCA 1935, the Commission needs 
to promulgate additional rules or to adopt additional policies to 
protect against inappropriate cross-subsidization or encumbrances of 
utility assets, pursuant to our authorities under the FPA and NGA. 
Comments should specify what additional rules may be needed and the 
statutory basis for such rules. For example, if it has the authority to 
do so, should the Commission issue rules regarding public utility 
holding company diversification into non-utility businesses? Would the 
Commission have authority to promulgate such rules under its FPA or NGA 
ratemaking authority? Should the Commission modify its existing cash 
management rules to apply not only to public utilities, natural gas 
companies, and oil pipelines, but also to include public utility 
holding companies? We seek comment on these and any other related 
issues in order to determine whether, in addition to the regulations 
being proposed herein under PUHCA 2005, the Commission may need to 
consider promulgating separate, additional rules under the FPA or the 
NGA.
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    \21\ Regulation of Cash Management Practices, Order No. 634, 68 
FR 40500 (Jul. 8, 2003), III FERC Stats. & Regs. ] 31,145 (June 26, 
2003), Order No. 634-A, 68 FR 61993 (Oct. 31, 2003), III FERC Stats. 
& Regs. ] 31,152 (2003).
    \22\ See Merger Policy Statement, FERC Stats. & Regs. ] 31,044 
at 30,124-25. See also Heartland Energy Services, Inc., 68 FERC ] 
61,223 at 62,062-65 (1994); LG&E Power Marketing Inc., 68 FERC ] 
61,247 at 62,121-24 (1994).
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Additional Conforming or Technical Amendments

    27. Section 1272 of EPAct 2005 directs the Commission to submit to 
Congress detailed recommendations on technical and conforming 
amendments to federal law necessary to carry out PUHCA 2005 within four 
months after the date of enactment. The Commission invites comments as 
to what technical and conforming amendments the Commission should 
include in this submission to Congress.

Information Collection Statement

    28. Office of Management and Budget (OMB) regulations require OMB 
to approve certain information collection requirements imposed by 
agency rule.\23\ However, the Commission is carrying out an express 
statutory mandate spelled out in EPAct 2005. Moreover, insofar as the 
Commission is carrying over and applying requirements that the SEC 
previously has applied, we note that the proposed regulations do not 
impose any new or additional reporting burdens. On the contrary, to the 
extent that the Commission's proposed regulations eliminate certain SEC 
regulations concerning accounting, cost-allocation, recordkeeping, and 
related rules, they reduce the information collection burden on 
regulated entities.
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    \23\ 5 CFR 1320.11 (2005).
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    29. In particular, we are adopting the following information 
collections currently implemented by the SEC: Form U13-60 ``Annual 
Report for the period by a reporting company''; Form U5S ``Annual 
Report for Public Utility Holding Company''; Rule 26 ``Financial 
Statement and Recordkeeping Requirements for registered holding 
companies and subsidiaries''; Part 257 ``Preservation and Destruction 
of Records of Registered Public Utility Holding Companies and of Mutual 
and Subsidiary Service Companies''.
    30. The Commission also proposes to eliminate the requirements 
contained under its own regulations in 18 CFR part 365. The 
corresponding information collection is FERC-598 ``Determinations for 
Entities Seeking Wholesale Generator Status''.
    Action: Revision of currently approved collections of information.
    OMB Control Nos.: Currently the above information collections have 
the following control numbers--3235-0153, 32353235-0164, 3235-0182, 
3235-0183, 3235-0306 and 1902-0166.
    Frequency of Responses: Several of the information collections have 
annual submissions while other information collections require that 
records be maintained.
    Necessity of the Information: The proposed rule implements new 
accounting, cost allocation, recordkeeping, and related rules under 
part 366 of the Commission's regulations and deletes requirements 
contained in part 365 of its regulations. These revisions are to 
implement the repeal of PUHCA 1935 and the implementation of certain 
provisions of the EPAct 2005.
    31. For information on the requirements, submitting comments on 
these collections of information including ways to reduce the burden 
imposed by these requirements, please send your comments to the Federal 
Energy Regulatory Commission, 888 First Street, NE., Washington, DC 
20426 (Attention: Michael Miller, Office of the Executive Director, 
(202-502-8415)) or send comments to the Office of Management and Budget 
(Attention: Desk Officer for the Federal Energy Regulatory Commission, 
fax: 202-395-7285, e-mail: oira_submission@omb.eop.gov.)

Environmental Analysis

    32. The Commission is required to prepare an Environmental 
Assessment or an Environmental Impact Statement for any action that may 
have a significant adverse effect on the human environment.\24\ The 
Commission has categorically excluded certain actions from this 
requirement as not having a significant effect on the human 
environment. Included in the exclusion are rules that carry out 
legislation, involve information gathering, analyses and dissemination, 
and involve accounting.\25\ These proposed rules, if finalized, carry 
out EPAct 2005 and involve information gathering and analysis, and 
involve accounting and therefore fall under this exception; 
consequently, no environmental consideration is necessary.
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    \24\ Regulations Implementing the National Environmental Policy 
Act, Order No. 486, 52 FR 47897 (Dec. 17, 1987), FERC Stats. & Regs. 
Preambles 1986-1990 ] 30,783 (1987).
    \25\ 18 CFR 380.4(a)(3), (5), (16) (2005).
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Regulatory Flexibility Act Certification

    33. The Regulatory Flexibility Act of 1980 (RFA) requires 
rulemakings to contain either a description and analysis of the effect 
that the rule will have on small entities or to contain a certification 
that the rule will not have a significant economic impact on a 
substantial number of small entities. \26\ Most public utilities to 
which the rules proposed herein, if finalized, would apply do not fall 
within the RFA's definition of small entity.\27\

[[Page 55810]]

Consequently, the rules proposed herein, if finalized, will not have 
``a significant economic impact on a substantial number of small 
entities.''
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    \26\ 5 U.S.C. Sec.  603 (2000).
    \27\ 5 U.S.C. Sec.  601(3) (2000), citing to section 3 of the 
Small Business Act, 15 U.S.C. Sec.  632 (2000). Section 3 of the 
Small Business Act defines a ``small business concern'' as a 
business that is independently owned and operated and that is not 
dominant in its field of operation. 15 U.S.C. Sec.  632 (2000). The 
Small Business Size Standards component of the North American 
Industry Classification System, for example, defines a small 
electric utility as one that, including its affiliates, is primarily 
engaged in the generation, transmission, and/or distribution of 
electric energy for sale and whose total electric output for the 
preceding fiscal year did not exceed four million MWh. 13 CFR 
121.201 (2005).
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Comment Procedures

    34. The Commission invites interested persons to submit comments 
and reply comments on the matters and issues proposed in this notice to 
be adopted, including any related matters or alternative proposals that 
commenters may wish to discuss. Comments are due October 14 2005. Reply 
comments are due October 21, 2005. Comments and reply comments must 
refer to Docket No. RM05-32-000, and must include the commenter's name, 
the organization he or she represents, if applicable, and his or her 
address.
    35. Comments and reply comments may be filed electronically via the 
eFiling link on the Commission's Web site at https://www.ferc.gov. The 
Commission accepts most standard word processing formats and commenters 
may attach additional files with supporting information in certain 
other file formats. Commenters filing electronically do not need to 
make a paper filing. Commenters who are not able to file comments and 
reply comments electronically must send an original and 14 copies of 
their comments and reply comments to: Federal Energy Regulatory 
Commission, Office of the Secretary, 888 First Street, NE., Washington, 
DC 20426.
    36. All comments and reply comments will be placed in the 
Commission's public files and may be viewed, printed, or downloaded 
remotely as described in the Document Availability section below. 
Commenters on this proposal are not required to serve copies of their 
comments on other commenters.

Document Availability

    37. In addition to publishing the full text of this document in the 
Federal Register, the Commission provides all interested persons an 
opportunity to view and/or print the contents of this document via the 
Internet through the Commission's Home Page (https://www.ferc.gov) and 
in the Commission's Public Reference Room during normal business hours 
(8:30 a.m. to 5 p.m. Eastern time) at 888 First Street, NE., Room 2A, 
Washington, DC 20426.
    38. From the Commission's Home Page on the Internet, this 
information is available in the Commission's document management 
system, eLibrary. The full text of this document is available on 
eLibrary in PDF and Microsoft Word format for viewing, printing, and/or 
downloading. To access this document in eLibrary, type the docket 
number excluding the last three digits of this document in the docket 
number field.
    39. User assistance is available for eLibrary and the Commission's 
Website during normal business hours. For assistance, please contact 
FERC Online Support at 1-866-208-3676 (toll free) or 202-502-6652 (e-
mail at FERCOnlineSupport@FERC.gov), or the Public Reference Room at 
202-502-8371, TTY 202-502-8659 (e-mail at 
public.referenceroom@ferc.gov).

List of Subjects in 18 CFR Parts 3 and 365

    Electric power, Natural gas, Public utility holding companies and 
service companies, Reporting and recordkeeping requirements, Uniform 
System of Accounts and Cost allocations.

    By direction of the Commission.
Magalie R. Salas,
Secretary.
    In consideration of the foregoing, under the authority of EPAct 
2005, the Commission proposes to amend Chapter I of Title 18 of the 
Code of Federal Regulations, as set forth below:

Subchapter T--[Removed and Reserved]

PART 365--[REMOVED]

    1. Subchapter T, consisting of Part 365, is removed and reserved.
    2. Subchapter U, consisting of Part 366, is added to read as 
follows:

Subchapter U--Regulations Under the Public Utility Holding Company Act 
of 2005

PART 366--PUBLIC UTILITY HOLDING COMPANY ACT OF 2005

Sec.
366.1 Definitions.
366.2 Commission access to books and records.
366.3 Exemption from Commission access to books and records.
366.4 Allocation of costs for non-power goods and services.
366.5 Previously authorized activities.


Sec.  366.1  Definitions.

    For purposes of this part:
    Affiliate. The term ``affiliate'' of a company means any company, 5 
percent or more of the outstanding voting securities of which are 
owned, controlled, or held with power to vote, directly or indirectly, 
by such company.
    Associate company. The term ``associate company'' of a company 
means any company in the same holding company system with such company.
    Commission. The term ``Commission'' means the Federal Energy 
Regulatory Commission.
    Company. The term ``company'' means a corporation, partnership, 
association, joint stock company, business trust, or any organized 
group of persons, whether incorporated or not, or a receiver, trustee, 
or other liquidating agent of any of the foregoing.
    Electric utility company. The term ``electric utility company'' 
means any company that owns or operates facilities used for the 
generation, transmission, or distribution of electric energy for sale.
    Exempt wholesale generator and foreign utility company. The terms 
``exempt wholesale generator'' and ``foreign utility company'' have the 
same meanings as in sections 32 and 33, respectively, of the Public 
Utility Holding Company Act of 1935 (15 U.S.C. 79z-5a, 79z-5b (2000)), 
as those sections existed on August 7, 2005, the day before the 
effective date of the Energy Policy Act of 2005, August 8, 2005.
    Gas utility company. The term ``gas utility company'' means any 
company that owns or operates facilities used for distribution at 
retail (other than the distribution only in enclosed portable 
containers or distribution to tenants or employees of the company 
operating such facilities for their own use and not for resale) of 
natural or manufactured gas for heat, light, or power.
    Holding company.
    (1) In general. The term ``holding company'' means--
    (i) Any company that directly or indirectly owns, controls, or 
holds, with power to vote, 10 percent or more of the outstanding voting 
securities of a public-utility company or of a holding company of any 
public-utility company; and
    (ii) Any person, determined by the Commission, after notice and 
opportunity for hearing, to exercise directly or indirectly (either 
alone or pursuant to an arrangement or understanding with one or more 
persons) such a controlling influence over the management or policies 
of any public-utility company or holding company as to make it 
necessary or appropriate for the rate protection of utility customers 
with respect to rates that such person be subject to the obligations, 
duties, and liabilities

[[Page 55811]]

imposed by this subtitle upon holding companies.
    (2) Exclusions. The term ``holding company'' shall not include--
    (i) A bank, savings association, or trust company, or their 
operating subsidiaries that own, control, or hold, with the power to 
vote, public utility or public utility holding company securities so 
long as the securities are--
    (A) Held as collateral for a loan;
    (B) Held in the ordinary course of business as a fiduciary; or
    (C) Acquired solely for purposes of liquidation and in connection 
with a loan previously contracted for and owned beneficially for a 
period of not more than two years; or
    (ii) A broker or dealer that owns, controls, or holds with the 
power to vote public utility or public utility holding company 
securities so long as the securities are--
    (A) Not beneficially owned by the broker or dealer and are subject 
to any voting instructions which may be given by customers or their 
assigns; or
    (B) Acquired within 12 months in the ordinary course of business as 
a broker, dealer, or underwriter with the bona fide intention of 
effecting distribution of the specific securities so acquired.
    Holding company system. The term ``holding company system'' means a 
holding company, together with its subsidiary companies.
    Jurisdictional rates. The term ``jurisdictional rates'' means rates 
accepted or established by the Commission for the transmission of 
electric energy in interstate commerce, the sale of electric energy at 
wholesale in interstate commerce, the transportation of natural gas in 
interstate commerce, and the sale in interstate commerce of natural gas 
for resale for ultimate public consumption for domestic, commercial, 
industrial, or any other use.
    Natural gas company. The term ``natural gas company'' means a 
person engaged in the transportation of natural gas in interstate 
commerce or the sale of such gas in interstate commerce for resale.
    Person. The term ``person'' means an individual or company.
    Public utility. The term ``public utility'' means any person who 
owns or operates facilities used for transmission of electric energy in 
interstate commerce or sales of electric energy at wholesale in 
interstate commerce.
    Public-utility company. The term ``public-utility company'' means 
an electric utility company or a gas utility company.
    Single-state holding company system. The term ``single-state 
holding company system'' means a holding company system whose public 
utility operations are confined substantially to a single state.
    State commission. The term ``state commission'' means any 
commission, board, agency, or officer, by whatever name designated, of 
a state, municipality, or other political subdivision of a state that, 
under the laws of such state, has jurisdiction to regulate public 
utility companies.
    Subsidiary company. The term ``subsidiary company'' of a holding 
company means--
    (1) Any company, 10 percent or more of the outstanding voting 
securities of which are directly or indirectly owned, controlled, or 
held with power to vote, by such holding company; and
    (2) Any person, the management or policies of which the Commission, 
after notice and opportunity for hearing, determines to be subject to a 
controlling influence, directly or indirectly, by such holding company 
(either alone or pursuant to an arrangement or understanding with one 
or more other persons) so as to make it necessary for the rate 
protection of utility customers with respect to rates that such person 
be subject to the obligations, duties, and liabilities imposed by this 
subtitle upon subsidiary companies of holding companies.
    Voting security. The term ``voting security'' means any security 
presently entitling the owner or holder thereof to vote in the 
direction or management of the affairs of a company.


Sec.  366.2  Commission access to books and records.

    (a) In general. Unless otherwise exempted by Commission rule or 
order, each holding company and each associate company thereof shall 
maintain, and shall make available to the Commission, such books, 
accounts, memoranda, and other records as the Commission determines are 
relevant to costs incurred by a public utility or natural gas company 
that is an associate company of such holding company and necessary or 
appropriate for the protection of utility customers with respect to 
jurisdictional rates.
    (b) Affiliate companies. Unless otherwise exempted by Commission 
rule or order, each affiliate of a holding company or of any subsidiary 
company of a holding company shall maintain, and shall make available 
to the Commission, such books, accounts, memoranda, and other records 
with respect to any transaction with another affiliate, as the 
Commission determines are relevant to costs incurred by a public 
utility or natural gas company that is an associate company of such 
holding company and necessary or appropriate for the protection of 
utility customers with respect to jurisdictional rates.
    (c) Holding company systems. The Commission may examine the books, 
accounts, memoranda, and other records of any company in a holding 
company system, or any affiliate thereof, as the Commission determines 
are relevant to costs incurred by a public utility or natural gas 
company within such holding company system and necessary or appropriate 
for the protection of utility customers with respect to jurisdictional 
rates.
    (d) Confidentiality. No member, officer, or employee of the 
Commission shall divulge any fact or information that may come to his 
or her knowledge during the course of examination of books, accounts, 
memoranda, or other records as provided in this section, except as may 
be directed by the Commission or by a court of competent jurisdiction.
    (e) Accounting, cost allocation, recordkeeping, and related rules. 
Each holding company and each associate company, affiliate, and 
subsidiary thereof is to maintain its books, accounts, memoranda, and 
other records in the manner specified in the accounting, cost-
allocation, and related rules contained in 17 CFR 250.1, 250.26, 
250.27, 250.80, 250.93, 250.94, 259.5S, and 2.59.313 and 17 CFR parts 
256 and 257.


Sec.  366.3  Exemption from Commission access to books and records.

    (a) Exempt classes of entities. Any person that is a holding 
company, solely with respect to one or more of the following, is exempt 
from the requirements of Sec.  366.2 of this chapter:
    (1) Qualifying facilities under the Public Utility Regulatory 
Policies Act of 1978 (16 U.S.C. 2601 et seq. (2000));
    (2) Exempt wholesale generators; or
    (3) Foreign utility companies.
    (b) Commission Authority to Exempt Additional Entities and Classes 
of Transactions. The Commission shall exempt a person or transaction 
from the requirements of Sec.  366.2 of this chapter if, upon 
application or upon the motion of the Commission--
    (1) The Commission finds that the books, accounts, memoranda, and 
other records of any person are not relevant to the jurisdictional 
rates of a public utility or natural gas company; or
    (2) The Commission finds that any class of transactions is not 
relevant to the jurisdictional rates of a public utility or natural gas 
company.

[[Page 55812]]

    (c) Any person seeking an exemption under this provision, shall 
file a petition for declaratory order pursuant to Sec.  385.207(a) of 
this chapter justifying its request for exemption. Any person seeking 
such an exemption shall bear the burden of demonstrating that such an 
exemption is warranted.


Sec.  366.4  Allocation of costs for non-power goods and services.

    (a) For purposes of this section, the term ``public utility'' has 
the meaning given the term in section 201(e) of the Federal Power Act 
(16 U.S.C. 824(e) (2000)).
    (b) Commission review. In the case of non-power goods or 
administrative or management services provided by an associate company 
organized specifically for the purpose of providing such goods or 
services to any public utility in the same holding company system, at 
the election of the system or a state commission having jurisdiction 
over the public utility, the Commission shall review and authorize the 
allocation of the costs for such goods or services to the extent 
relevant to that associate company. Such election to have the 
Commission review and authorize cost allocations shall remain in effect 
until further Commission order.
    (c) Exemptions. Any company in a single-state holding company 
system is exempt from paragraph (b) of this section. A holding company 
system or state commission may, pursuant to this subsection, seek a 
Commission determination regarding single-state holding company system 
status by filing a petition for declaratory order pursuant to Rule 
207(a) of the Commission's Rules of Practice and Procedure (Sec.  
385.207(a) of this chapter). Furthermore, any holding company system or 
state commission seeking such a determination shall bear the burden of 
demonstrating that such determination is warranted.
    (d) Other classes of transactions. Either upon petition for 
declaratory order or upon its own motion, the Commission may exclude 
from the scope of Commission review and authorization under paragraph 
(b) of this section any class of transactions that the Commission finds 
is not relevant to the jurisdictional rates of a public utility. Any 
holding company system or state commission seeking to obtain such a 
determination under this subsection shall file a petition for 
declaratory order pursuant to Rule 207(a) of the Commission's Rules of 
Practice and Procedure justifying its request for exemption (Sec.  
385.207(a) of this chapter). Furthermore, any holding company system or 
state commission seeking such an exemption shall bear the burden of 
demonstrating that such determination is warranted.
    (e) Nothing in paragraphs (b)-(d) of this section shall affect the 
authority of the Commission under the Federal Power Act (16 U.S.C. 791 
et seq. (2000)), the Natural Gas Act (15 U.S.C. 717 et seq. (2000)), or 
other applicable law, including the authority of the Commission with 
respect to rates, charges, classifications, rules, regulations, 
practices, contracts, facilities, and services.


Sec.  366.5  Previously authorized activities.

    Unless otherwise provided by Commission rule or order, a person may 
continue to engage in activities or transactions authorized under the 
Public Utility Holding Company Act of 2005 prior to the date of 
enactment of Energy Policy Act of 2005, August 8, 2005, for the period 
of time provided in such authorization, so long as that person 
continues to comply with the terms of such authorization. If any such 
activities or transactions are challenged in a formal Commission 
proceeding, the person claiming prior authorization shall be required 
to provide the full text of any such authorization (whether by rule, 
order, or letter) and the application(s) or pleading(s) underlying such 
authorization (whether by rule, order, or letter).

[FR Doc. 05-19000 Filed 9-22-05; 8:45 am]
BILLING CODE 6717-01-P