Impacts of PUHCA

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Impactsof PUHCA

Impactsof PUHCA

Untilthe 1970s, deregulation of electrical utilities was not an importantsubject. Local and regional organizations which were owned by thegovernment and enjoyed federal subsidies dominated the industry.Private companies in the energy sector were considered to be naturalmonopolies and therefore regulated by a commission. The regulationsaimed at suppressing competition and securing the return ofinvestment, while protecting the interests of the general public. Inreturn, these companies were expected to deliver services to thepublic. The “Public Utility Holding Company Act of 1935”, whichprovided these policies, had enormous impacts on electricityutilities. The law abolished large holding companies in the UnitedStates that controlled the majority of power utilities. The act wasone of the major reforms in the New Deal policy which aimed atdealing with economic challenges associated with the Great Depression(Mahoney,2013).

Theimpacts of the PUHCA on utilities were as a result of therestrictions associated with the law. The legislation targeted bothgeographical and operation confinements. Consequently, holdingcompanies could not own businesses which were integratedgeographically or operationally. The immediate impact of the lawincluded increased operational efficiency and a more regulatedindustry. The law prevented the establishment of large multinationalutility corporations that could be difficult to regulate.Additionally, the act abolished corporate structures in the utilitycompanies to increase efficiency and ease regulations at the statelevel. In the recent past, industry players have lobbied for arepeal of the legislation. Their main argument has been the impactsof the law on domestic investment and return on investments. Thelegislation has an impact on revenues, which is justified because theutility industry is not comparable to other sectors. If the industryis not adequately regulated, there is a likelihood ofoverexploitation of consumers in the market or insufficient supply ofessential goods and services. Therefore, utility companies cannot beallowed to take advantage of the market (Mahoney,2013).

Reference

Mahoney,P. (2012). “The Public Utility Pyramids”. TheJournal of Legal Studies,41(1), pp. 37-66