Utility Industry

UtilityIndustry

UtilityIndustry

ThePublic Utility Holding Company Act stands amongst the mostsignificant federal consumer protection policies ever passed. PUHCAcame into existence as a result of several abuses experienced in thepower industry. Its role is to regulate the holding companies or whatare commonly referred to as the parent plants of both natural gas andelectric utilities, in a manner that the owners cannot increase ratesthrough charging high levies to services from their affiliates. Italso attempts to control owners from venturing in riskier industrieswith the ratepayer’s revenues (Knittel, 2006).&nbsp However, theutility business and owner related services have petitioned theCongress to repeal PUHCA with claims that it is outdated because ithinders non-utility industries from conducting free business.

Abusesof the Power industry leading up to PUCHA&nbsp

Tobegin with, the energy crisis experienced in the United States duringthe 1970s, which resulted from the oil embargo created by OPEC, issighted as one reason for the need of PUCHA.Shortagesof coal, oil and natural gas combined with the declining publicassurance in the nuclear energy industry, led to increases in therate for customers throughout every power industry, comprisingelectricity. After winning the 1976 elections, President Jimmy madeenergy matters one of his main concerns. In tackling the demandaspect of the issue, he conducted a public campaign dedicated toconservationism to curb the U.S. high rates of power consumption.This was a facilitator for matters that could ultimately lead to thePUCHA (Knittel, 2006).&nbsp

Secondly,during the first instances of OPEC oil embargo, there were manycartels in the energy sector who charged huge amounts of funds onelectric and natural gas. Their strategies abused the consumersmaking the whole country to go bankrupt because of their accountingscams. As a result, the government feared for the reemergence of suchadverse intentioned interest groups in the power segment. This led tothe emergence of practices of handling fraud related problems and theappearance of PUCHA. Third, the first electric energy industry wasserved by direct current transmissions and the systems could onlysupply relatively low electricity voltages and over short mileages.The structure led to much competition in the local energy marketplace(Knittel, 2006). Typically, there was the need to develop a plan thatcould lead to numerous power plants within the country so thatgovernment could decide for consumers their service provider.

Alternativeto Avoid the Establishment of PUCHA

Tocombat the abuses so as to avoid going to a fully regulated industry,the country needed to have sought to nurture the sprawl of new energysources, renewable ways as well as nuclear energy. This approachcould be formed in the National Energy Act. The policy couldencourage effective utilization of fossil energies by permittingnon-utility generators to enter the extensive power market. The rulestrategy could as well serve PUCHA’s purpose of introducingcompetition into the manufacturing division of the electricitymarket, hence challenging the claim that the sector stimulatednatural monopoly (Knittel, 2006).

Conclusively,PUHCA should be transformed in a way that it allows the utilityparent firms to integrate in the same manner that it operates. Thiswill still allow the state to regulate the energy sector while at thesame time allowing free use and exploitation of the oil and naturalgas (Knittel, 2006). PUHCA should be adjusted to permit thenon-utility industry, including investment banks and oil companies,to claim the right of utilities.

Reference

Knittel,C. R. (2006). The adoption of state electricity regulation: The roleof interest groups.&nbspThe Journal of Industrial Economics,&nbsp54(2),201-222.