Federal Appeals Court Upholds EWG Safe Harbor Regs

Turning back a challenge by the National Association of Regulatory Utility Commissioners (NARUC), the U.S. Court of Appeals for the District of Columbia Circuit has upheld federal regulations relaxing scrutiny of investments in exempt wholesale generators (EWGs) by electric utility holding companies. The so-called "safe harbor" regulations, adopted by the Securities and Exchange Commission (SEC) in 1993 pursuant to the Energy Policy Act of 1992 (EPAct), set the standards applied by the SEC to test whether a holding company investment in an EWG would have a "substantial

adverse impact" on the financial integrity of the holding company system. NARUC had complained that the safe harbor criteria were not rigorous enough to ensure that SEC approval did not adversely affect any utility subsidiaries or the ability of state regulators to protect the utility or its customers (an additional requirement of EPAct). The court found the new rules a "rational attempt to balance competing statutory policies" and a permissible construction of the statute. National Association of Regulatory Utility Commissioners v. SEC, No. 93-1778, Aug. 22, 1995 (D.C.Cir.).