In this memo, you'll find information about the Wisconsin Utility Holding Company Act (WUHCA), a hotlink to a white paper titled "The ENRON Antidote: How the Wisconsin Utility Holding Company Act Protects Wisconsin's Electric Customers," and a list of news articles about recent events related to WUHCA. CFC is supporting the State of Wisconsin's efforts to preserve WUHCA in federal court. Below are some basic questions and answers about the background and value of this important Wisconsin law.

For a link to the "ENRON Antidote" whitepaper, please click here.

What is the Wisconsin Utility Holding Company Act?
The law, which was enacted in 1985, allowed state utilities to form holding companies that could invest in unregulated, non-utility ventures. Recognizing the need to insulate utility customers from any ill effects of holding company actions, the legislature also included a number of critical consumer protections in the law.

What's being challenged?
In late 2000, Alliant Energy challenged in federal court the constitutionality of some of the key customer protections included in WUHCA. In its challenge, Alliant has stated that it would like to be free from WUHCA requirements in order to explore the possibility of selling a significant portion of the company, incorporate the company out of state, and further diversify its investments. Following a defeat in U.S. District Court, the company has appealed the decision to the 7th Circuit Court of Appeals; the Appeals Court decision is expected this spring.

The key provisions that are under attack:

• Protect utility customers when risky investments go bad by limiting the amount a holding company may invest in non-utility ventures.

• Ensure that utility holding companies that serve Wisconsin ratepayers have a stake in our state by requiring them to be incorporated here.

• Ensure that state regulators have the opportunity to review any take-over or merger of a holding company that serves Wisconsin customers by requiring that the PSC approve any sale of more than 10% of the holding company.

What's at stake?
A great deal is at stake. If Alliant wins the challenge, the face of the Wisconsin utility industry will be radically altered. For years WUHCA's regulatory framework has helped keep Wisconsin-based utilities strong and has protected Wisconsin utility customers. If the legal challenge is successful and WUHCA is overturned, Wisconsin policy-makers will need to work quickly to ensure these valuable protections are not lost. Even if WUHCA is preserved, Wisconsin policy-makers may need to act to ensure that WUHCA's promise to protect Wisconsin customers from potential ill effects of holding company activities is upheld.

The risk to both utilities and their customers from unchecked diversification and unregulated investments has been clearly demonstrated over the past year, following the repercussions of Enron's meltdown. The struggles of holding companies to manage failing non-utility investments, both here in Wisconsin and nationwide, are detailed in the attached news articles.

Smith, Rebecca. "Beleaguered Energy Firms Try to Share Pain with Utility Units." The Wall Street Journal. December 26, 2002.

Garza, Melita Marie. "Alliant Out to Unplug Wisconsin Utility Law." The Chicago Tribune. July 14, 2002.

Hawkins, Lee. "Losses Rise for Alliant Ventures." The Milwaukee Journal Sentinel. October 26, 2002.

Hawkins, Lee. "As its Non-Utility Businesses Teeter, Xcel Hangs in There." The Milwaukee Journal Sentinel. October 20, 2002.

Hanners, David. "Xcel Gets Hit Again." The St. Paul Pioneer Press. August 17, 2002.

Hawkins, Lee. "PSC Stiffens to Alliant's Spending." The Milwaukee Journal Sentinel. July 13, 2002.

Hawkins, Lee. "Alliant Looks to Incorporate Outside State." The Milwaukee Journal Sentinel. April 22, 2002.

For more information about WUHCA or the Customers First! Coalition, please contact Customers First! at 888.960.4778 or on the web at www.customersfirst.org.