Ever since the Public Utility Holding Company Act of 1935 disappeared, people have worried that the safeguards keeping utility ratepayers from subsidizing unrealated businesses were inadequate. Now the Government Accountability Office has confirmed such fears. Says the GAO:

FERC [Federal Energy Regulatory Commission] has made few substantive changes to either its merger review process or its postmerger oversight since [PUHCA was repealed] and, as a result, does not have a strong basis for ensuring that harmful cross-subsidization does not occur. FERC officials told us that they plan to require merging companies to disclose existing or planned cross-subsidization and to certify in writing that they will not engage in cross-subsidization, but do not plan to independently verify such information."

Cross-subsidization occurs when utilities transfer money to affiliates that have nothing to do with providing services to the regulated rate base. The best known potential example in Maryland was when BGE owner Constellation Energy was going to merge with FPL Group. People worried that BGE customers would end up paying to repair hurricane damage for FPL's Florida operation, Florida Power & Light. (The merger didn't go through)... FERC attempted to blunt the report's impact last week by saying it would crack down on cross-subsidization. But the changes come nowhere near what GAO wants.