Dive Brief:
Commissioners Mark Christie and James Danly of the Federal Energy Regulatory Commission are seeking information from Vanguard Group about whether it has tried to influence utility generation mixes through its stock ownership.
Vanguard’s request for a blanket authorization to own up to 20% of a utility’s voting stock warrants scrutiny because Vanguard and its affiliates could exercise “profound control” over the utilities they own, said Christie and Danly a a joint statement Thursday, noting that since FERC approved Vanguard’s prior authorization in 2019, the firm’s assets under management have grown from $5 trillion to $8.5 trillion.
“If a company like Vanguard wants to influence the management and operation of utilities generation portfolio, for example, this could have a significant impact on the rates consumers pay for electric service,” the commissioners said.
Diving knowledge:
Under the Federal Power Act, FERC issues blanket authorizations that allow financial firms such as Vanguard to own up to 20% of a utility’s voting stock, with no individual fund or affiliated entity owning more than 10%.
As an example of the role major investment firms play in utility stock ownership, Vanguard Group was the largest institutional shareholder in NextEra Energy Resources, with a 9.28% stake in the company as of 30 March; six Vanguard mutual funds owned an additional 7.89% of NextEra shares, according to Yahoo Finance.
Vanguard and its affiliated investment companies and funds in February asked FERC extend its current general authorization for three years. On Monday, one day before Vanguard’s authorization was due to expire, FERC staff extended the authorization nine months.
In their statement for more information from Vanguard, Christie and Danly said that financial firms could try to influence the portfolio of a company’s power plant through their control of voting securities.
“The commission must ensure that, at a minimum, companies seeking this type of authorization are subject to controls designed to ensure that such influence is impossible,” Christie and Danly said.
Commissioners asked Vanguard to answer a series of questions, including disclosing any communications between the company and utility boards about plans to retire the power plants and their long-term resource plans.
“What processes or policies do applicants have in place to ensure that they do not mandate or advocate policies that will have the effect, even indirectly, of changing the way energy is generated or transmitted that will necessarily have an effect about the rates??” the commissioners asked.
In response to BlackRock’s similar request for blanket authorization to own up to 20% of a utility’s voting stock, Public Citizen, a consumer watchdog group, notified in March that FERC may not be adequately reviewing the ownership of utilities by financial companies.
BlackRock, Vanguard and State Street controlled 82 percent of all assets flowing into all mutual funds over the past decade and control up to 80 percent of the global exchange-traded fund market, said Tyson Slocum, director of Public Citizen’s energy program, to the protest.
Slocum urged FERC to assess whether granting BlackRock general authorization to own up to 20% of a utility would harm competition and result in unfair rates.
In competition with the approval decision At BlackRock’s request in April, FERC Commissioner Allison Clements said the agency may not have the right tools to assess the effects of blanket authorizations for major investment firms that buy voting securities of public services. He encouraged “more generic consideration” of the analysis required by the commission when evaluating general authorizations.
In a separate concurrent statement, Christie said big financial firms are unlikely to be simply passive investors.
“The claim that large asset managers like BlackRock, State Street and Vanguard are merely passive investors in public corporations, investing solely for the benefit of their beneficiaries, many of whom are retirees receiving pensions, is no longer credible,” he said. said Christie. “BlackRock, in particular, has been overtly aggressive in using its massive financial power to influence corporate policy in areas that greatly dilute the legitimate money management goals of protecting the income and investment interests of its beneficiaries.”
Thursday’s statement by Christie and Danly could be related to a backlash against environmental, social and government investment, Ari Peskoe, director of Harvard Law School’s Electricity Law Initiative, said in an email electronic Thursday
At the end of last month, West Virginia State Treasurer Riley Moore Disqualified BlackRock, Goldman Sachs Group, JPMorgan Chase & Co., Morgan Stanley and Wells Fargo & Co. of signing banking contracts with the state because they are boycotting fossil fuel companies.
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