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Breaking News : posted Aug 7, 2:04 PM

Billions of Dollars in Energy Investments Await PUHCA Repeal in Energy Bill

Berkshire-Hathaway has $15 billion burning a hole in its pocket to invest in the energy industry and there is $100 billion of other investors' money "waiting on the sidelines" to see if Congress passes a broad energy bill this year, which includes repeal of the Public Utility Holding Company Act (PUHCA), MidAmerican's David Sokol told a natural gas strategy conference in Denver this week.

PUHCA, a fossilized law passed in 1935 which restricts investments of companies owning natural gas or electric utilities, has progressed "from nuisance to menace," said the Chairman of MidAmerican Energy Holdings, a Berkshire-Hathaway company. He called on Congress to move quickly to repeal PUHCA to open the field to non-traditional investors to "re-capitalize the industry." Both the House and Senate versions of the energy bill, which are headed to conference committee, include repeal of PUHCA. But Senate Democrats want stronger consumer protections enacted in place of PUHCA, which Republicans oppose.

Capital from Berkshire-Hathaway, funneled through MidAmerican, already has helped complete the 900 MMcf/d Wyoming-to-California Kern River Pipeline expansion, and another 500 MMcf/d expansion of that pipeline is in the works, Sokol pointed out. MidAmerican bought Kern River from financially-strapped Williams in April 2002 and provided the funding to complete the major expansion this spring. The expansion obviously was needed since it has been running essentially full since it opened and on several peak days has exceeded its design capacity.

"The entire industry should support this legislation," Sokol told attendees at the Colorado Oil and Gas Association's natural gas conference, advising those with reservations "not to let the perfect be the enemy of the good." Repeal of PUHCA would allow a host of non-traditional companies to invest in the ailing energy industry.

Kern River will be proceeding with an open season later this year with a target in-service date of late 2005 to early 2006 if there is enough support. But that support has to come from credit-worthy customers, Sokol said, noting that four Kern River shippers had gone into bankruptcy in the last year. He also pointed out that other pipelines are re-examining planned projects, particularly those that would fuel new power plants in what he called "a deteriorating market."

In a briefing with reporters earlier this week in Washington, DC, Donald F. Santa, new president of the Interstate Natural Gas Association of America (INGAA), agreed that PUHCA repeal would be "beneficial" for pipelines and the energy industry as a whole.

"While last week's events [on the Senate floor] were somewhat surprising and in some cases downright bizarre," he noted that it got the energy bill passed and on its way to conference before the Senate recessed for August, which he said was critical.

The Republican-led Senate realized that its "window of opportunity was closing" to pass an energy bill this session, Santa said. It has nine appropriations bills waiting when it returns in early September, which would have left the Senate with little time to debate energy legislation. The Senate recognized there was a possibility the bill could spill over into 2004, an election year, when energy issues would be "even more politically charged and more partisan," he noted.

The demand for floor time on Senate legislation is going to be "pretty intense" in the fall, given the appropriations bills and other legislation, said Bill Wicker, spokesman for the Democratic members of the Senate Energy and Natural Resources Committee. Debate on an energy bill would have been significantly restricted as a result, he noted.

Wicker said he was "confident" that the conference committee, which is expected to be chaired by Senate Energy Committee Chairman Pete Domenici (R-NM), will vote out a conference report on the energy bill in "relatively short order." He doubts there will be a repeat of last year, when the bill fell apart in conference over disputes about electricity and the Arctic Natural Wildlife Refuge (ANWR).

But Capitol Hill aides aren't so sure an energy bill will clear Congress and be sent to President Bush this year. One aide put the odds of passage at about 50-50. Getting an energy bill passed on Capitol Hill is especially difficult because energy "is not a Democratic [or] Republican thing," but rather "it's mostly a regional issue," said one source. In fact, "on almost every [energy] issue, you can see where it breaks down along geographical lines."

Whether energy legislation clears both houses this session is "entirely driven by what the [conference] report says," Wicker noted. If it's "fair and balanced," then it has got an "excellent chance of passing," he told NGI.

While neither the Senate nor the House can amend the conference report on the floor, either body can vote it down or the Senate can hold up the legislation by filibustering it.

What issues could trigger a filibuster. "Obviously one is ANWR. That's a guaranteed filibuster. That's like a poison pill," Wicker said. He doubts that Domenici's substitute electricity title, which calls for PUHCA repeal, will be a deal-breaker for Senate Democrats, but he noted it may pose problems for House conferees.

Domenici signaled last week that he plans to reshape in conference the Senate energy bill, which was crafted when the Democrats led the Senate, to mirror the Republican bill that was blocked on the floor last week. "You can change a significant amount" of the bill in conference, conceded Wicker, but he said there is a "scope of conference" that imposes certain parameters and limitations on the issues to be discussed.

This means House and Senate conferees will pretty much have to stick to issues that are in one or both energy bills, he noted. "There could be some new things brought up, but they would have to closely resemble things that are in the bill already."

Senate and House leaders are expected to pick conferees for the energy measure shortly after lawmakers return in early September. The Senate is likely to name 13 conferees (seven Republicans and six Democrats). The House will have far more conferees, but the number was not immediately known. Last year, the House had about 60 conferees on the energy bill.

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