Monopoly Power

Script by Mark Hertsgaard
Marketplace, Jul 26, 2005

Not many people, when they look back at the Enron scandal, say, "That was fun, let's do it again sometime."

But that's what Congress is saying this week. Inside the energy bill being readied for President Bush is a repeal of the Public Utilities Holding Company Act.

The name isn't sexy, Pook-ka for short, but this law helps keep the lights on in households across America.

It empowers the federal government to regulate the ownership of electric utilities. Pooh-ka was passed in 1935 to enhance competition and prevent a repeat of the merger mania of the 1920s.

That's when three giant holding companies gained control of half of America's electric utilities and raided their revenues to finance risky outside ventures.

The utilities were left holding the bag when those ventures failed. Utilities that survived had to raise prices and cut services to customers. Small investors were ruined.

Today, utilities are even more important. Our entire economy depends on electricity and utility assets now amount to one trillion dollars.

But, amazingly, the media has given the act's proposed repeal virtually no news coverage. Maybe that's because both the House and the Senate favor deregulation and so agree on this move.

Advocates of repeal include investor Warren Buffett. He condemns it as an outdated relic that discourages efficiency and raises prices.

But Buffett also has a personal interest in repealing the act. It would give his Berkshire Hathaway holding company a green light for a 5-billion dollar utility merger.

The merger that would stretch from the Great Lakes to the Pacific but is prohibited under current law.

Sound familiar? In the 1990s, mere partial deregulation allowed the Enron thievery that tripled consumers' bills and shafted investors.

Repealing this law now would lead to more mergers. That would leave the nation's electricity controlled by a few giant companies that could impose monopoly prices and avoid such necessary investments as maintaining the electricity grid.

We've seen this movie before, and it doesn't have a happy ending.