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U.S. Code as of:
01/19/04
Section 79a. Necessity for control of holding companies
(a) Interstate nature of holding companies
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) Protection of investors and interests of consumers
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 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) Declaration of policy of chapter
When abuses of the character above enumerated become persistent
and wide-spread the holding company becomes an agency which, unless
regulated, is injurious to investors, consumers, and the general
public; and it is declared to be the policy of this chapter, in
accordance with which policy all the provisions of this chapter
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 therefrom 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 chapter.
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