The Public Utility Holding Company Act of 1935 (PUHCA), also known as the Wheeler-Rayburn Act, was a US federal law giving the Securities and Exchange Commission authority to regulate, license, and break up electric utility holding companies. It limited holding company operations to a single state, thus subjecting them to effective state regulation. It also broke up any holding companies with more than two tiers, forcing divestitures so that each became a single integrated system serving a limited geographic area. Another purpose of the PUHCA was to keep utility holding companies engaged in regulated businesses from also engaging in unregulated businesses. The act was based on the conclusions and recommendations of the 1928-35 Federal Trade Commission investigation of the electric industry. On March 12, 1935, President Franklin D. Roosevelt released a report he commissioned by the National Power Policy Committee. This report became the template for the PUHCA. The political battle over its passage was one of the bitterest of the New Deal, and was followed by eleven years of legal appeals by holding companies led by the Electric Bond and Share Company, which finally completed its breakup in 1961. On August 26, 1935, President Franklin D. Roosevelt signed the bill into law. The Energy Policy Act of 2005 repealed the PUHCA under George W. Bush.
Context The passage of the Public Utilities Holding Company Act was the climax to the thirty-year nationwide fight between public vs. private development of electricity in the United States. Other societal issues like the postal service, public roads, schools, social security, national health insurance, and public ownership of electric generation were part of a global phenomenon with most of Europe and regions of the United States in support of mixed economies. The National Electric Light Association and its member companies organized the largest U.S. Public Relations campaign of the 1920s. The campaign had two goals: to stigmatize public ownership on the one hand while promoting the rapid consolidation of the private sector into a few giant multi-tiered holding companies. The nearly 2,000 cities that had public systems, led by Nebraska Senator George W. Norris, Montana Senator Thomas J. Walsh and Pennsylvania Governor Gifford Pinchot were able to pass the 1928 Senate Resolution 83 which directed the Federal Trade Commission to conduct a detailed investigation of the industry's finances and propaganda war waged against publicly owned utilities. That seven-year investigation took on special meaning following the Wall Street Crash of 1929 as the early phase of the investigation showed large scale corruption hidden within the six to ten layered pyramid holding company structures that concentrated financial power in the hands of a few. In June 1932, the Middle West Utility empire, one of the largest electric holding companies operating in 39 U.S. states went bankrupt, destroying the life savings of hundreds of thousands of small investors across the east and mid-west. New York Governor Franklin Delano Roosevelt, who was a public power supporter campaigned on the issue of reforming the electric industry and won election as the country's 32nd president. His initial years in office included large public works projects such as the Tennessee Valley Authority, Bonneville Power Administration and California's Central Valley Project. These were all massive, federally funded water and power projects that put tens of thousands of people to work. The most important of these projects was the Rural Electrification Administration that finally brought electricity to rural America which was shunned by the country's urban-based electric industry as there was no profit to be made. As the Federal Trade Commission's seven-year investigation was starting to wind up, Roosevelt formed the National Power Policy Committee (NPPC) to make sense of the investigation and its recommendations. The PUHCA was originally requested by Franklin Delano Roosevelt in his Second State of the Union Address and was based on the work done by the NPPC. The committee was made up of federal agencies, led by Robert E. Healy who oversaw the 1928-35 Federal Trade Commission's 63,000-page electric investigation. On February 6, 1935, the Wheeler-Rayburn bill was introduced by Senator Wheeler (S 1725) and Representative Rayburn (HR 5423). It was one of several New Deal trust-busting and securities regulation initiatives that were enacted following the Wall Street Crash of 1929 and the ensuing Great Depression. By 1932, eight of the largest utility holding companies controlled 73 percent of the investor-owned electric industry. Their complex, highly leveraged, corporate structures were very difficult for individual states to regulate.
History The New Deal's agenda would face its biggest legislative fight over the passage of the PUHCA. Since March 1928, the Federal Trade Commission (FTC) was releasing monthly reports to the Senate on its investigation of the electric industry. On November 15, 1934, the FTC released segment 71A of its 94-volume investigation that summarized the decades-old "propaganda" war against the general public and supporters of municipal ownership of electric facilities. There was little coverage of the FTC's ongoing public hearings or monthly reports by the country's conservative news media, but that would soon change. On November 20, 1934, the Associated Press released a detailed story about Roosevelt's National Power Policy Committee (NPPC). Roosevelt set up the NPPC on July 29, 1934, to review and report on the FTC's massive electric industry investigation. Roosevelt picked Securities and Exchange Commissioner and former judge Robert E. Healy, who had also been in charge of the FTC's electric investigation, to lead the NPPC review. The article disclosed all of the administration's legislative plan two months before the NPPC or the FTC had released their reports or recommendations on the electric industry.
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