The Federal Energy Regulatory Commission is seeking public feedback on its policy for providing blanket authorizations to large asset managers purchasing public power utilities.
FERC, an independent agency that regulates the interstate transmission of electricity, natural gas and oil, on Dec. 19 issued a notice of information to gather comments on questions exploring whether such managers have too much power over the public utilities they control.
"Some have argued that the size of these investment companies creates issues related to competition and gives the investment companies unique leverage over the utilities whose voting securities they control," FERC said in the notice. "Additionally, some have argued that the largest index funds have used their ownership stakes to pressure utilities to meet particular public policy goals, despite committing to not exercise control over the utilities. We seek comment on whether, and if so, how, the commission should consider the size of an investment company in evaluating a request for blanket authorization" under the Federal Power Act.
At the Dec. 19 meeting, FERC Commissioner Marc C. Christie said public utilities have responsibilities to the public, but those obligations can come into conflict with investors who have other goals.
"And this is why we have to … apply strict scrutiny when a huge asset manager like Vanguard or State Street or BlackRock is buying a big chunk of either the company itself or its holding company," Christie said. In a written statement, he included large private equity funds in the group that requires heightened scrutiny. "And it's because of the potential conflict between the public service obligations of say the electric utility or the water company and the investor. And so we have to look at that very closely. This NOI is about looking at whether FERC's practices are appropriate."
Under the Federal Power Act, any public utility holding company seeking to acquire more than $10 million in voting securities in another utility must secure an order from FERC authorizing it to do so.
In May, a group of 17 Republican attorneys general filed a motion to intervene with FERC calling on the agency to audit whether BlackRock should have blanket authority to obtain more than $10 million in voting securities in multiple utility companies. The attorneys general cited concerns over BlackRock's environmental, social and governance policies. A group of 11 Republican senators in June sent a letter to FERC with a similar request.
BlackRock in 2022 obtained a three-year reauthorization to purchase, acquire or take over $10 million in voting securities of any "public utility," "electric utility company," "transmitting utility" or "holding company in a holding company system that includes an electric utility company or transmitting utility."
A BlackRock spokesperson did not immediately respond to a request for comment after the Dec. 19 meeting.
A group of attorneys general filed a similar motion in November 2022 concerning Vanguard Group, but in May, FERC approved Vanguard's request for a three-year extension of a blanket authorization to acquire securities of U.S. utilities.
In a statement after FERC's notice of information was issued, a Vanguard spokesperson said in an email that as a passive investment company, Vanguard "invests on behalf of tens of millions of everyday investors and retirement savers, and takes an independent approach that leaves management decisions to companies and policy decisions to policymakers. By design, passively managed index funds acquire shares of a company in order to track an underlying index, not for the purpose of controlling or influencing company strategy or day-to-day operations."
A State Street Global Advisors spokesperson declined to comment.
The notice's initial public comment period will last 90 days upon publication in the Federal Register.
