FERC on Wednesday agreed to reup BlackRock’s (NYSE:BLK) blanket authorization to buy stock in utility companies for another three years, but not without some of the commissioners saying they were wary of the power of massive investors to shape energy companies’ decisions (EC16-77-002).
The four participating commissioners (Commissioner James Danly having recused himself) saw no reason to upend a precedent set more than a decade ago by FERC, which allows the company to own up to 20% of any individual utility.
The investment giant had first requested a blanket authorization in 2010. FERC approved it at that time and has extended it twice since.
“We find that the reauthorization will not have an adverse effect on competition, rates or regulation,” the commission said. “As applicants explain, there have been no changes in material facts and circumstances since issuance of the blanket authorization order that would alter or affect the commission’s prior analysis.”
The reauthorization was not without opposition: Consumer advocacy group Public Citizen filed a protest arguing that it is “impossible for a fund manager of BlackRock’s size and scope to remain a passive investor.”
“BlackRock’s accumulation of voting securities constitutes control over utilities, and its horizontal power over competing utilities harms competition,” the group wrote, calling for a hearing to assess the company’s influence.
FERC denied that request, writing that BlackRock has given it enough assurance that it will not be able to influence utilities. But commissioners from both parties said that they had taken heed of Public Citizen’s warning and are eager to closely examine the way FERC examines such requests in the future.
“I acknowledge Public Citizen’s concerns about the lack of analysis on the effects on competition, just and reasonable rates, and regulation related to the accumulation of acquired interests in public utilities,” wrote Democratic Commissioner Allison Clements.
She said that FERC should take a look at the analysis it requires when evaluating blanket authorizations to make sure any transactions they lead to “do not have an adverse effect on competition and that entities granted such blanket authorizations lack control over the utilities whose interest they acquire.”
Republican Commissioner Mark Christie also said that the worries raised by Public Citizen were “compelling” and called for future scrutiny into investment companies’
control over utilities.
BlackRock in particular, Christie wrote, has been “openly aggressive” in trying to influence corporate policy using its financial power.
“The important question is whether huge asset managers like BlackRock are able to exert undue pressure on regulated public utilities or their holding companies to engage in practices that may undermine their primary responsibilities of delivering reliable power to consumers at just and reasonable rates,” Christie wrote.