PUHCA Law and Its Effect on US Utilities

Energy Risk

Many investors and acquisition-minded companies are anxiously crossing their fingers in hopes for a potential repeal by the US Congress of the Public Utility Holding Company Act of 1935 (PUHCA), while other investors are wondering how a potential repeal would affect utility credit ratings, according to a report published yesterday by Standard & Poor's Ratings Services.

Companies falling under PUHCA regulation account for about 25% of investor-owned utility bonds outstanding. The article examines the issues in the debate over PUHCA repeal and examines the credit statistics of PUHCA utilities and those exempt from PUHCA to assess whether PUHCA has contributed to credit protection as many have suggested.

"We've concluded that PUHCA may provide some level of credit protection for bondholders, particularly in restricting utility investment in non-related entities.

However, the SEC's relaxation of these restrictions over the past few years has not helped utility investors," said Standard & Poor's credit analyst Jeffrey Wolinsky.

The report, titled "Is PUHCA Beneficial or Detrimental to US Utilities' Credit?" is available on RatingsDirect.