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Be it enacted by the Senate and House of
Representatives of the United States of
America in Congress assembled, that this Act may be cited as the “Public
Utility Act of
1935.”
TITLE I—CONTROL OF PUBLIC-UTILITY HOLDING COMPANIES
NECESSITY FOR CONTROL OF HOLDING COMPANIES
SEC. 1. (a) Public utility holding
companies and their subsidiary companies are
affected with a national public interest in that, among other things:
(1) their securities are
widely marketed and distributed by means of the mails and
instrumentalities of interstate
commerce and are sold to a large number of investors in different
states; (2) their service,
sales, construction, and other contracts and arrangements are often made
and performed
by means of the mails and instrumentalities of interstate commerce; (3)
their subsidiary
public utility companies often sell and transport gas and electric
energy by the use of
means and instrumentalities of interstate commerce; (4) their practices
in respect of and
control over subsidiary companies often materially affect the interstate
commerce in
which those companies engage; (5) their activities extending over many
states are not
susceptible of effective control by any state and make difficult, if not
impossible, effective
state regulation of public utility companies.
(b) Upon the basis of facts disclosed by
the reports of the Federal Trade Commission
made pursuant to S. Res. 83 (Seventieth Congress, first session), the
reports of the Committee on Interstate and Foreign Commerce, House of
Representatives, made pursuant to H. Res. 59 (Seventy-second Congress,
first session) and H. J. Res. 572 (Seventy-second
Congress, second session) and otherwise disclosed and ascertained, it is
hereby declared
that the national public interest, the interest of investors in the
securities of holding companies
and their subsidiary companies and affiliates, and the interest of
consumers of
electric energy and natural and manufactured gas, are or may be
adversely affected—
(1) When such investors cannot obtain the
information necessary to appraise the
financial position or earning power of the issuers, because of the
absence of uniform
standard accounts; when such securities are issued without the approval
or consent of the
states having jurisdiction over subsidiary public utility companies;
when such securities
are issued upon the basis of fictitious or unsound asset values having
no fair relation to
the sums invested in or the earning capacity of the properties and upon
the basis of paper
profits from intercompany transactions, or in anticipation of excessive
revenues from
subsidiary public utility companies; when such securities are issued by
a subsidiary
public utility company under circumstances which subject such company to
the burden
of supporting an overcapitalized structure and tend to prevent voluntary
rate reductions;
(2) When subsidiary public utility
companies are subjected to excessive charges for
services, construction work, equipment, and materials, or enter into
transactions in which
evils result from an absence of arm's length bargaining or from
restraint of free and independent competition; when service, management,
construction, and other contracts
involve the allocation of charges among subsidiary public utility
companies in different states so as to present problems of regulation
which cannot be dealt with effectively by
the states;
(3) When control of subsidiary public
utility companies affects the accounting practices
and rate, dividend, and other policies of such companies so as to
complicate and
obstruct state regulation of such companies, or when control of such
companies is
exerted through disproportionately small investment;
(4) When the growth and extension of
holding companies bears no relation to
economy of management and operation or the integration and coordination
of related
operating properties; or
(5) When in any other respect there is
lack of economy of management and operation
of public utility companies or lack of efficiency and adequacy of
service rendered by
such companies, or lack of effective public regulation, or lack of
economies in the raising
of capital.
(c) When abuses of the character above
enumerated become persistent and widespread
the holding company becomes an agency which, unless regulated, is
injurious to
investors, consumers, and the general public; and it is hereby declared
to be the policy of
this title, in accordance with which policy all the provisions of this
title shall be interpreted,
to meet the problems and eliminate the evils as enumerated in this
section, connected with public utility holding companies which are
engaged in interstate commerce or in activities which directly affect or
burden interstate commerce; and for the purpose of effectuating such
policy to compel the simplification of public utility holding company
systems and the elimination there from of properties detrimental to the
proper functioning of such systems, and to provide as soon as
practicable for the elimination of public utility holding companies
except as otherwise expressly provided in this title. |
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