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the general policy of the Commission in administering this legislation has consistently been to give full effect to the Congressional intent of preventing the repetition of those abuses which led to the passage of the Act in 1935, and to make the administration of the law as workable as possible without imposing unnecessary restrictions of a kind which bear no relationship to the Congressional aims.

In the first twenty years of its administration of the Act (1935 through 1955), the Commission's major task was the administration and enforcement of Section 11(b), involving the break-up and reorganization of registered holding companies. In 1938, when Section 11(b) became operative, there were 214 registered holding companies, which controlled 922 electric or gas utility companies and 1,054 nonutility companies. Today, there are only 14 registered systems, which control 68 utility subsidiaries and 79 nonutility companies.

Section 11(b) of the Act, the heart of the statute, contemplated an effective system of orderly deregulation. Congress did not intend that utilities would remain permanent federal wards under the Act. As has been noted, the Act introduced federal authority into a field traditionally subjected to state or local jurisdiction, because, as Congress found, the holding company device had been abused and was a means to evade state and local regulation.

Vigorous enforcement of Section 11(b) by the Commission over the years eliminated most of the multistate holding companies and reversed the tidal wave of consolidations that had been occurring in the years prior to 1935.

When the Act was passed, about 80 percent or more of the utilities were controlled by holding companies that were registered under the Act. One of the salutary effects of Section 11(b) has been the emergence of many utilities as independent operating companies.

During the past fifteen years, the Commission's major task has involved it in the financing of registered holding company systems, the standards for which are prescribed in Sections 6 and 7. The purpose of these sections is to assure that registered systems subject to the Act are prudently capitalized at economically acceptable costs, because a utility so capitalized serves the interests of both investors and consumers. In fiscal year 1976, total financings authorized under the Act amounted to $4.9 billion. The other provisions of the Act dealing with mergers and acquisitions, new questions under Section 11, and service company regulations also continue to require substantial attention.

To the extent that the Comptroller General's conclusion-that the Commission's regulatory approach under the Act has changed-can be read to imply that the Commission has failed to fulfill its responsibilities, we disagree. As we have noted, such a conclusion appears to have been distilled from a comparison of the level of the Commission's efforts in the early administration of the Act with the current regulatory efforts under conditions and circumstances where the evils and abuses which gave rise to the passage of the Act have been virtually eradicated.

The dominant theme of the Comptroller General's Report, found throughout the chapters on the Commission's regulatory approach as well as in the chapter discussing exemptions, relates to the issue of size. The Report concludes (p. 13) that the Commission has not developed criteria for size or standards relating to how large a holding company or a utility company should be in order to operate efficiently. Further, the Report asserts (pp. 12-13, 32) that, without explicit guidelines as to size. there was no effective means of ascertaining which of the registered systems may be too large to retain the utility companies which they now control and which of the exempted systems may be too large to warrant a continuation of their exemptions.

Significantly, the Report fails to relate the factor of size to the relevant provisions of the Act, 10/ but instead focuses upon criteria such as assets and revenues. 11/ But, in passing the Public Utility Holding Campany Act, the Congress nowhere indicated a concern over the issue of size viewed in light of such narrow criteria.

With respect to the size of registered holding companies, Section 11(b)(1) generally limits a registered holding company to a single, integrated, public utility system, as the Commission, by order in each case, shall prescribe. Section 2(a)(29)(A) of the Act defines integrated electric systems as a group of electric facilities physically interconnected, or capable of interconnection, which may operate as an economical and coordinated system, and is confined to a single area or region in one or more states. That section further states

10/ See Section 3(a) and Section 11(b)(1).

11/ The table at page 23 of the Report sets forth the size of the registered systems, most of them with over $1 billion in assets, and the size of a select group of exempt holding companies with over $1 billion in assets.

"not so large as to impair (considering the state of the
art and the area or region affected) the advantages of
localized management, efficient operation, and the effec-
tiveness of regulation * * *" 12/

The ultimate relevance of size as thus considered is addressed to its effects

upon localized management, efficient operation and effectiveness of regulation. A definition of size measured by dollar values of assets or of revenues -criteria which are highlighted in the Comptroller General's Report-would be far less meaningful than the Act's definitional provisions.

It is evident that Congress, in adopting Section 11(b)(1), was not concerned with the issue of size in terms of dollars; it addressed itself instead to that issue in terms of meaningful and flexible standards articulated in Sections 2(a)(29)(A) and (B) and 11(b)(1), in order to permit the Commission, in its administration of the Act, to effectuate holding company reorganizations in a fashion beneficial to investors and consumers alike. Thus, Section 11(b)(1) directed the Commission to make its decisions as to size in light of the state of the art and the characteristics of the region. These are fundamental and well-chosen standards which were promulgated in recognition of the fact that size is a function of technology and the geographic region in which the service area is located. The first standard-technology-changes with time, and the second-geographic region-may differ for each utility company. The latter may also change in time, depending upon industrial and demographic developments upon which growing consumer demand depends. A case-by-case approach, as has been adopted by the Commission, which gives content and substance to the standards of the statute, is a rational method for dealing

12/ Section 2(a) (29) (B) defines a gas integrated system in like terms.

with the issue of the size of utility holding companies. 13/ In contrast, a handbook setting forth inflexible guidelines as to size, as the Comptroller General apparently recommends, would only produce the illusion of simplicity; and, in the context of any particular case, will not be illuminating.

Although the absolute size of utility companies has increased ten-fold since the passage of the Act, 14/ primarily as a result of technological advances and demographic changes during that period, such growth, in large measure, has been internal (i.e., growth within a service area or extension into adjoining areas). And, registered holding company systems have followed substantially the same pattern of internal growth. Also, the major utility companies that are not in registered holding company systems continue to serve approximately the same territories they did when they were spun off from such systems. 15/ Overall, there has been no significant

13/ These standards, as applied to the facts of a particular case, are discussed in detail in the numerous Commission opinions which were issued during the active phase of the Section 11(b)(1) program in the earlier years of the Commission's administration of the Act.

14/ At the time the Act was adopted the largest steam-electric unit was about 200mw, which cost $32 million to build. Federal Power Cammission 1964 National Power Survey, Part I, p. 14. The average size of all units was 20mw. Ibid. The largest unit today is 1,300mw, which costs over $500 million to build. Steam-Electric Plant Construction Cost and Annual Production Expenses, 26th Annual Supplement, p. IX (1973). The average unit under construction is 500mw. Ibid. Total assets of privately owned Class A and B electric utilities in the United States were $15.7 billion in 1941, of which $12.6 billion represented utility plants. 1941 Federal Power Commission Annual Report of Statistics of Privately Owned Electric Utilities in the United States. They generated 144.3 billion kwh. In 1975, total assets were $157 billion; net utility plant was $137.4 billion; and total generation amounted to 1,493.1 billion kwh. 1976 Federal Power Commission Annual Report of Statistics of Privated Owned Electric Utilities in the United States.

15/ We should note here that integration and simplification under Section 11(b) led to the consolidation of redundant subsidiaries and a significant number of exchanges of outlying properties owned by one system to round out the service area of another.