A more appropriate term for deregulation is "reregulation.

" As discussed subsequently in more detail, utility companies have historically been regulated by local, state, and federal authorities. The initial transition to competition in the electric utility industry began with the Public Utility Regulatory Policies Act of 1978 (PURPA), which allowed the development of cogeneration and small power production facilities that are exempt from federal and state regulation, and required utilities to purchase the power from these "qualifying facilities." The Energy Policy Act of 1992 (the 1992 Act) permitted the generation and sale of wholesale power by "exempt wholesale generators" without being subject to the Public Utility Holding Company Act of 1935 (PUHCA); however, the sale of this power remains subject to regulation under the Federal Energy Regulatory Commission (FERC). The 1992 Act also allows investment in power generation facilities outside of the United States and allows transactions between related utilities with state authority approval. In addition, the 1992 Act allows open access to transmission facilities of noncontiguous utilities or facilities. The trend toward decreasing regulation under PUHCA is continuing. Since 1996, numerous states have either passed legislation or issued comprehensive restructuring orders deregulating the electric utility industry, primarily the generation portion of operations in their respective states. However, these changes are being revisited by many of these regulators as a result of the energy crisis in California that occurred in 2000 and early 2001. The Natural Gas Policy Act of 1978 (NGPA) deregulated the prices that producers could charge for natural gas from certain newly developed sources and began the complete deregulation of prices that producers could charge. Various FERC orders continued the transition to competition. In 1992 FERC Order No. 636 ensured any buyer access to gas suppliers and the effective unbundling of services in the natural gas marketplace.

The original Federal Power Act of 1920 was confined largely to hydroelectric projects on navigable streams. The Federal Power Commission (FPC) became a five-member independent agency in 1930, when its powers were broadened. FPC authority was increased substantially in 1935, when its jurisdiction over the electric industry in interstate commerce was expanded, and again in 1938 with the passage of the Natural Gas Act. Rate regulation by the FPC was limited to wholesale sales of gas and electricity in interstate commerce, but with the support of court decisions, the FPC began asserting

increasing authority over accounting and other matters, such as interconnections, construction of major electric facilities, and gas financing. In 1977 the FPC was consolidated, along with the Federal Energy Administration and the Energy Research and Development Administration, into the cabinet-level Department of Energy (DOE). Most of the powers of the FPC were assumed by the FERC within the DOE.

The Securities and Exchange Commission (SEC), a five-member group, was created to administer, along with other statutes, the Securities Act of 1933, the Securities Exchange Act of 1934, and PUHCA. The first two apply to industry generally, PUHCA applies solely to certain public utility arrangements. Under these statutes the SEC has broad power over utility as well as nonutility securities transactions and special authority with respect to electric and gas holding companies and their subsidiaries. Most states also have some degree of securities regulation. The FERC has jurisdiction over securities transactions of those electric companies whose securities issues are not regulated by a state public service commission. If an electric company is subject to securities regulation by both the SEC under PUHCA and the FERC, SEC regulation prevails unless an exemption from the Act has been granted. PUHCA provided for the simplification of electric and gas public utility holding company systems and for regulation of some of their transactions, particularly with respect to finance and acquisitions of utility assets or securities. Other types of utility systems were not covered for various reasons, including regulation by other agencies. PUHCA contained the famous section 11, which was designed to and did bring about in one way or another the dissolution of the nationwide electric and gas holding companies. An electric holding company system could serve only in one state or adjoining states, and all properties were to be either interconnected or capable of being interconnected. Retention of gas properties by electric holding companies was made practically impossible, although a few exceptions still exist. Units of holding company systems furnishing management or other services (service companies) must be separately incorporated and render their services to system companies at cost. PURPA began the process of deregulating the business of generating electricity by encouraging nonutility enterprises to participate in owning and operating electric generating facilities. PURPA, in addition, required state regulatory authorities and public utilities to consider standards on rate

design; provided for FERC rules favoring cogeneration facilities and requiring public utilities to purchase power from cogenerators at reasonable rates; authorized the FERC to (1) require interconnection of transmission facilities, (2) ordered facilities to provide transmission service between noncontiguous utilities; and required reporting of anticipated power shortages. The 1992 Act eliminated PUHCA as a barrier to the development of a wholesale electric power market by exempting wholesale generators of electricity, including affiliates of regulated public utilities, from its restrictive provisions. The 1992 Act also amended PUHCA to permit utility investments outside the United States. Important provisions of the 1992 Act include:

Natural Gas - Exempts natural gas imported from a nation with a free trade agreement and liquified natural gas from FERC regulation. Electricity - Requires owners of electric power transmission facilities to provide competitive electric power marketers with open access to their lines under specified rules in FERC Orders Nos. 888 and 889. It also establishes a category of power plant ownership, "exempt wholesale generator" (EWG) that allows multiple power plant ownership without being subject to the SEC authority under PURPA. Nuclear Energy - Provides for certifying standardized designs for nuclear plants and combining construction and operating licensing; requires specified utility payments for decommissioning of DOE enrichment facilities; and requires the DOE to set public health and safety standards for the Yucca Mountain repository site. Alternative Fuels - Requires federal and state governments to convert vehicle fleets to alternative fuels. Energy Efficiency - Sets energy efficiency standards for buildings and equipment and encourages energy efficiency by utilities.

In 1936, the Rural Electrification Act established, under the Department of Agriculture (DOA), the Rural Electrification Administration (REA), to offer federal assistance to bring modern utilities to rural America through rural electric and telephone cooperatives. Through the DOA the REA, now the Rural Utilities Service (RUS), helps rural utilities expand, keep their technology up to date and develop rural infrastructure. In May 1983, the Supreme Court affirmed the right of state commissions to regulate the wholesale rates charged by generation and transmission cooperatives.