2005: How will the Public Utility Holdings Company Act affect MidAmerican Energy?
AUDIENCE MEMBER: Good morning. Andrew Sole from New York City.
I just want to preface my question by saying that I have a deep admiration and affection for both of you men. And in that spirit, I had got a Golden Retriever puppy a few months ago, and he’s been proudly named “Munger.”
WARREN BUFFETT: Is he housebroken? (Laughter)
AUDIENCE MEMBER: And Charlie, you’d be very proud. He’s just like you. I bring him to Central Park and hundreds of women flock over to pet him.
CHARLIE MUNGER: Really?
WARREN BUFFETT: He’s well-named. He’s well named. (Laughter)
AUDIENCE MEMBER: That’s serious, but this is also serious.
My question has to do with the Public Utility Holdings Company Act, which obviously affects MidAmerica’s businesses.
You’ve spoken that, if it were repealed, you’d be able to commit billions of dollars into the energy infrastructure for the country.
And despite the fact that there was a massive blackout in this country over the last summer, the act has not been repealed. And I’m curious as to what effect it might have if PUHCA wasn’t repealed for MidAmerica.
WARREN BUFFETT: Yeah. The Public Utility Holding Company Act was passed in 1935. It was a reaction, and a justified reaction, to some real wild antics that had taken place in the ’20s in the public utility field that were most dramatic in the case of Sam Insull, but occurred with a lot of other companies, Associated Gas and Electric and various other companies.
And there was pyramiding of the utility capital structure. And there were a lot of things that were wrong that were addressed in that act. And in our view, that act is long outmoded. And I think that — I mean, the SEC, which has responsibility for administering it, I think there’s a lot of feeling there that it’s long been unneeded.
And I think that there’ve been various energy bills that have included the repeal of it. But there was no energy bill passed in the last year. So we live with the Public Utility Holding Company Act. And it does restrict what we do.
It’s an interesting question, though, if it were repealed, whether that necessarily would open up lots of opportunities. Because if it were repealed, it’s quite conceivable that a number of other companies would also be competing with us, in terms of possibly buying utilities that might have been difficult for us to acquire, or for them to acquire, back when the law was in existence.
So I don’t want you to think that, if it gets repealed, that Berkshire Hathaway is necessarily worth a lot more money.
But I do think it should be — I mean, I think it’s logical. It’s — there are lots of — there’s plenty of appropriate regulation in the public utility field and there are advantages to having strong companies like Berkshire Hathaway pouring money — energy requires enormous sums of money. And to the extent we can use capital advantageously in that business, we’re ready to do it. And it should not be impeded by the act.
If I had to bet, that act will probably go off the books at some time. But it doesn’t seem to be, you know, in the immediate future. It will not necessarily mean we get a lot richer.
Charlie?
CHARLIE MUNGER: Yeah, but if we had a wonderful opportunity in the field now, we would find a way to do it. Probably through MidAmerican, right?
WARREN BUFFETT: Well, we’d find a way to do it. Yeah.
There’s been nothing that’s been presented to us that we couldn’t get done so far. Now it might involve a more awkward structure, but we have not — you know, there’s been nothing that we wish we could have done and when we got to the finish line, or a yard from the finish line, we said, “Well, we can’t do this because of the Public Utility Holding Company Act.”
Now, there might have been other things presented if that act hadn’t been on the books.
But it will be no bonanza for us at all if it goes away. It may make life simpler on some very large transaction.