Good morning Mr. Chairman and members of the Committee. My name is Ronald Tanski. I am Vice President and Controller of National Fuel Gas Distribution Corporation, the public utility subsidiary of National Fuel Gas Company. National Fuel is one of only three registered natural gas holding companies and the only registered company in New York State. I am here to emphasize our continuing support for reform of the Public Utility Holding Company Act, subject to the need for uniform interstate treatment of holding company systems.
At the hearing before this Committee last June on the predecessor to Senate Bill 621, we were all involved in debating our views on the issue of PUHCA reform. Having heard the testimony of other parties, it is clear that National Fuel's initial perspective, that simple PUHCA repeal would minimize our regulatory burdens, was itself overly simple. I say this now because PUHCA repeal alone is clearly unacceptable to many other interested parties, especially consumer groups.
Consumer groups, among others, believe that in the event of outright PUHCA repeal, market power issues will require additional FERC and state review authority over holding company financial transactions and investments. With due regard to those concerns, a company like National Fuel, which has businesses regulated by the FERC and two state public utility commissions, has its own concerns about additional regulatory burdens on three fronts. In particular, we strongly believe that granting powers of review over holding company activities to 50 state agencies and the FERC will, without doubt, result in increased, uncoordinated burdens on all companies in the holding company system. With the repeal of PUHCA and the proposed extension of authority to 51 agencies, no one entity will be charged with the duty of adopting a balanced approach that gives weight to all interests and implements appropriate protections.
For these reasons, while still actively supporting reform in the public utility holding company arena, National Fuel believes that PUHCA reform must include some narrow retention of SEC authority over financial matters and a continued SEC role in the auditing of such matters.
I also want to emphasize my company's continued position that repeal of the restrictions on investment in our now almost completely deregulated gas industry should happen immediately. National Fuel is part of an industry which has been through a difficult, wrenching restructuring and is now operating in a robustly competitive environment. The 1935 Act imposes burdensome regulation that hinders that competition.
Those who advocate waiting for electric industry restructuring ignore the fact that the natural gas industry has already restructured, yet it remains subject to requirements that limit its flexibility to respond to the constantly changing market conditions.
When PUCHA was enacted 62 years ago, our industry was a vertically integrated utility system which would produce natural gas, transport that gas by pipeline, and distribute it to all retail customers in a geographically restricted service territory.
Today's natural gas industry no longer bears any significant relationship to the natural gas industry of 1935. Wellhead prices have been decontrolled and prices are set by the market.
Pipeline rates remain regulated by FERC, but rates and services have been unbundled. Customers can purchase transportation, storage, and other services separately and the pipeline no longer bundles the services for a single inclusive rate.
Brokers, hub operators, and marketers compete against us in providing mixes of services for our customers. These non regulated companies provide at market prices the bundling that regulated pipelines once performed.
Local distribution to retail customers remains subject to state commission requirements, but in many states these same customers have the opportunity to purchase gas at the wellhead and arrange their own pipeline transportation of that gas.
Last year our utility and the other major utilities in New York filed new tariffs designed to unbundle our retail services to all of our customers. Residential customers are now able to choose their natural gas supplier in that state. Residential customer choice will soon be available in our Pennsylvania utility operation through our recently filed "Energy Select" pilot program. Most of the suppliers competing, or soon to be competing, with us are completely unregulated. As I drive in to work in the morning, I can hear advertising on my car radio urging listeners to buy- their energy from an unregulated company located over 1,400 miles away. In the meantime, National Fuel must deal with significant regulations at both the state and federal levels.
We are committed to allowing all of our customers to choose where to buy their gas and we will provide the transportation of those volumes. But to be able to compete against unregulated marketers who can change their prices on a moment's notice, we must reduce the burden of regulation.
We must be careful, however, not to replace the 1935 Act with more burdensome and extensive regulation. As currently drafted, Senate Bill 621 grants oversight authority to at least 51 different agencies. Given that state agencies, in particular, have a narrowly defined geographic interest, they cannot be considered the best entities to oversee the implementation of a consistent interstate consumer and investor protection policy. Hence, to the extent regulatory oversight of the financial transactions of holding company systems should continue, it should rest with the SEC, a well-respected body with significant expertise and experience in the area.
Thank you again, Mr. Chairman, for the opportunity to testify before your committee
today. I would be pleased to answer any questions you may have.
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