Westar Energy Inc., Kansas’ largest electric company, is seeking a special regulatory exemption from Congress that critics say could let hundreds of investment companies go unregulated.

But Westar executives said Friday their company would be the only one affected by their proposal to eliminate a potential barrier to someday splitting Westar’s utility operations from its unregulated assets.

The item, being discussed as congressional negotiators work on legislation overhauling U.S. energy policy, would create an exemption in the Investment Securities Act for affiliates of investment holding companies. Enacted in 1940, the law is viewed as a core protection for shareholders and investors.

The proposal’s sponsor, Rep. Joe Barton, R-Tex., was quoted in a publication that monitors Congress as saying it would benefit only Westar.

Westar has been working on the proposal for nearly two years

“Our goal is ultimately to have the flexibility to separate the businesses,” David Wittig, Westar’s chairman and CEO, said in an interview Friday. “You would potentially have a roadblock to being able to separate the businesses.”

‘A legislative fix’

The proposal caught the attention of Rep. Edward Markey, D-Mass., who suggested during negotiations on the energy legislation Thursday that Westar was “wasting our time seeking a legislative fix.”

“The fact that they are doing so raises some alarm bells for me as to what their real motivations might be,” said Markey, who tried unsuccessfully to strip the Westar provision from the energy measure.

Markey said that if Westar had a legitimate case, it should be made to the Securities and Exchange Commission. He said federal regulators believed a loophole for Westar could be used by other companies.

“The SEC provided me with five boxes of documents containing information about the potentially hundreds of companies that could exploit this loophole,” Markey said.

Westar executives said they heard the SEC concerns and addressed them with the agency and with members of Congress. The change wouldn’t exempt the company from many federal regulations that apply to other publicly held companies, they said.

Moreover, the Westar officials said, the exemption would only apply if Congress repealed a 1935 law governing the activity of utility holding companies and then only if Westar split up its businesses, as it has been considering.

Larry Irick, Westar’s corporate secretary, described the criticism as “a lot of hubbub just to get press.”

“This objection to our language really didn’t surface, really, until Enron became a household name,” he said Friday.

“People wanted to throw us into the same boat. Until that time, no one really had anything much to say about the proposed exemption,” he said.

Enron comparisons

Opponents have drawn parallels to abuses by Enron Corp. In 1997, at the urging of Congress, the SEC gave it a similar exemption from the act, which regulators now say would have significantly limited the company’s operations.

Westar provides electricity to about 636,000 Kansas consumers, but also holds large blocks of stock in security alarm and natural gas companies. For two years, its officials have considered splitting its electrical operations, subject to both state and federal regulation, from the other unregulated assets.

Wittig said two companies could earn more for investors if they were traded separately.

Westar has faced criticism from consumer advocates in Kansas over financial issues, particularly its $3.25 billion debt. Westar contends the criticism is unfounded.

“The status quo is not the end of the world,” Wittig said. “We’re making money and paying down debt.”

The energy bill cleared the House more than a year ago and won Senate passage in April and has been in negotiations since. Still to be resolved are major issues such as oil and gas exploration in the Arctic National Wildlife Refuge.