Change in Senate could widen business impact

One of the major accomplishments of the Bush administration and Republican Congress, the Energy Policy Act of 2005, included a variety of incentives to oil, gas and coal companies, including tax breaks that many Democrats opposed. The Republican-controlled Congress has also backed moves to open areas for oil and gas exploration that Democrats have opposed. Chipping away at various provisions of the law wouldn’t require a new comprehensive bill.

Moves to extend the licensing of nuclear power plants and incentives to new ones could also be rolled back or slowed. And the long-standing stalemate over the disposition of spent nuclear fuel could remain deadlocked by Sen. Harry Reid, D-Nev., who opposes the proposed Yucca Mountain repository in Nevada.

“Unless the Energy Department completes and submits a formal application to the Nuclear Regulatory Commission for a license to build the repository, the next president could simply cancel it,” said Prudential Equity Research analyst Jim Lucier in a recent note to clients.

A Democratic Congress may also move to slow the deregulation of the electric power industry and could favor tighter restrictions on carbon emissions and higher fuel efficiency mandates for the auto industry. 

Even before proposing new laws or regulations, Democrats have already called for hearings on oil industry profits; some have favored a “windfall” profits tax.

The pharmaceutical industry will likely be one of the first to feel the impact of the switch in control of Congress. Democrats have long favored using the immense buying power of federal Medicare insurance to negotiate lower drug prices. That could effectively become a cap on prices if lower government-negotiated prices are also adopted by private health insurers.

It could also save the government as much as $60 billion over 10 years, according to Rep. Henry Waxman, D-Calif., who stands to take over leadership of the House Government Reform Committee.

Such a move would hurt profits for large pharmaceutical companies that hold exclusive patents on brand-name drugs. But the move to cut the cost of Medicare drugs could benefit makers of cheaper generic drugs.

Telecommunications policy may also see changes. The pending $67 billion merger of AT&T and BellSouth has yet to be approved by the Federal Communications Commission, where a split along party lines has delayed approval. Though the deal could get clearance during the closing weeks of the lame-duck 109^th  Congress, a delay until next year could bring hearings on the issue of industry consolidation.

Also up for grabs is the future of pricing policy for Internet users. Telecom providers have been pushing for a two-tiered structure that would allow them to charge more for high-speed access to help underwrite the cost of upgrading their lines. But Democrats have opposed the move, promoting “net neutrality” that preserves the single pricing model now in place.

The financial services industry also could see changes proposed by a Democratic-controlled House, where Rep. Barney Frank of Massachusetts is in line to take over the powerful Financial Services Committee. 

One likely outcome would be a reversal of Republican-sponsored controls on Fannie Mae and Freddie Mac, the two congressionally chartered companies that control some 40 percent of the more than $10 trillion market for residential mortgages.

Both parties have favored changes in the Sarbanes-Oxley law, enacted after a wave of corporate accounting scandals, which brought tighter financial controls and greater disclosure. Businesses have said the rules are too onerous and expensive. But Democrats have generally supported the idea of fuller disclosure, especially in areas like CEO pay, which could also become a target.

Democrats have also said they want to roll back interest rates on student loans and ease repayment terms. But it’s not clear where the money would come from to pay for those changes; without higher taxes, the changes could hurt the profits of companies that make student loans.

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