The CHAIRMAN. Let the record reflect you did not request, but I would have let you read it if you had insisted, but we will put it in the record. Thank you very much, Senator Nickles. Senator Craig. Senator CRAIG. Mr. Chairman, assuring you that this is not a precedent, I have nothing to say and would urge that we get on with the witnesses. The CHAIRMAN. Thank you very much. I appreciate the cooperation of my colleagues, so let us begin with Ed Fleischman with the SEC, and if all the witnesses would come to the table, please. STATEMENT OF HON. EDWARD H. FLEISCHMAN, COMMISSIONER, SECURITIES AND EXCHANGE COMMISSION, ACCOMPANIED BY MARIANNE K. SMYTHE, DIRECTOR, DIVISION OF INVESTMENT MANAGEMENT; AND WILLIAM C. WEEDEN, ASSISTANT DIRECTOR, DIVISION OF INVESTMENT MANAGEMENT Mr. FLEISCHMAN. Thank you, Mr. Chairman. I am Edward Fleischman, one of the SEC commissioners. I appreciate the opportunity to testify before the committee on behalf of the SEC with respect to title XV of S. 341, the Proposed National Energy Security Act. As you were kind enough to indicate, Mr. Chairman, I am accompanied this morning by the Director of our Division of Investment Management, Ms. Smythe, and the Assistant Director, Mr. Weeden. Both title XV and subtitle A of title IV of the administration's proposed National Energy Strategy Act, Senate bill number 570 would exempt so-called EWG's, independent generators marketing power at wholesale only, from the requirements of the Public Utility Holding Company Act of 1935, which the SEC administers. Both bills seek, as you said Mr. Chairman, through encouragement of competition and removal of unnecessary regulation, to encourage additional generation of electric power for sale at wholesale in order, ultimately, to reduce the consumer cost of electricity and to reduce the Nation's dependence on foreign sources of energy. It has, for several years, been the SEC's view that the system of pervasive regulation created by the 1935 act must be refashioned to address changing economic and regulatory conditions. The SEC is empowered by Congress to adopt exemptive rules in the public interest or for the protection of investors or consumers and consonant with the purposes of the act. But the SEC's exemptive authority would not extend to effectuating the broad exemption that S. 341 and S. 570 contemplate. And of course, the SEC can only work within the limits of Congressionally bestowed authority. Given the agreement between Congress and the administration on the policy objectives of S. 341 and S. 570, the SEC can advise you, this morning, of its belief that adequate safeguards are provided, in the disclosure requirements under the securities laws administered by the SEC and in the market itself, for the protection of the interest of investors in the securities of every type of generating company and generating system: EWG's, unitary utilities, presently exempt utility holding companies and registered utility hold ing companies. And the SEC can also advise you of its belief that the interest of consumers, generally, can be protected by other regulatory entities: The Federal Energy Regulatory Commission, determining market-based, wholesale rates for EWG's at the Federal level, and-while the pattern of State control remains uneven-the various utility regulatory commissions at the State level. Detailed comments on the proposed legislation, Mr. Chairman, are included in the written testimony that the SEC has submitted to the committee. The SEC is grateful for the opportunity to present its views to this committee, and I shall, of course, be pleased to respond to any questions that you or the other members of the committee have. [The prepared statement of Mr. Fleischman follows:] EDWARD H. FLEISCHMAN, COMMISSIONER CONCERNING S. 341 BEFORE THE COMMITTEE ON ENERGY AND NATURAL RESOURCES UNITED STATES SENATE MARCH 14, 1991 U. S. Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549 STATEMENT OF THE HONORABLE EDWARD H. FLEISCHMAN SECURITIES AND EXCHANGE COMMISSION BEFORE THE SENATE COMMITTEE ON ENERGY AND NATURAL RESOURCES CONCERNING 8. 341 March 14, 1991 R ION RESOURCES Chairman Johnston and Members of the Committee: I am Edward Fleischman, one of the Commissioners of the Securities and Exchange Commission ("Commission"). In addition to its other major responsibilities, the Commission administers the Public Utility Holding Company Act of 1935 ("1935 Act"). appreciate this opportunity to testify before you on behalf of the Commission regarding Title XV of S. 341, the "National Energy Security Act of 1991." Both Title XV of S. 341 and Subtitle IV A of the Administration's National Energy Strategy Act, S. 570, would exempt from the 1935 Act certain wholesale power generators. The bills both seek, through such exemptions, to encourage the development of a national wholesale electric power market. Exempting wholesale power generators from the 1935 Act would remove unnecessary regulation and encourage competition in order to reduce the cost of electric power for consumers and, ultimately, reduce our dependence on foreign sources of energy. As President Bush said last month, in announcing the National Energy Strategy, we must find ways "to increase energy efficiency and conservation," to "find more domestic oil and gas, and to "reduce our vulnerability to foreign oil supply 2 disruptions." 1/ Further, as Energy Secretary Watkins noted in his letter to Speaker Foley regarding the Administration bill, "[r]egulatory structures that were appropriate in the 1930s are no longer appropriate" for this industry. 2/ Indeed, as you know, the Commission has long favored repeal of the 1935 Act. 3/ Exempting wholesale power generators from the 1935 Act seems a sensible and appropriate step in the direction of modernizing public utility regulation. There are some differences in the details of the 1935 Act provisions of S. 341 and S. 570, particularly in terms of their treatment of exempt wholesale generators that are part of registered or presently exempt public-utility holding company systems, but these differences seem less important than their similar goal. The 1935 Act provisions of both bills respond, in a sensible if limited way, to the recent changes in the nature of the electric utility industry. BACKGROUND Historically, vertically-integrated investor-owned' utilities that controlled transmission generation, distribution and Speech by President George Bush to the Economic Club of New 1/ 2/ Letter from James D. Watkins to Thomas S. Foley, March 4, 1991. 3/ of Statement of the U.S. Securities and Exchange Commission |