[Federal Register Volume 88, Number 247 (Wednesday, December 27, 2023)]
[Proposed Rules]
[Pages 89346-89351]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-28665]


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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Part 33

[Docket No. AD24-6-000]


Federal Power Act Section 203 Blanket Authorizations for 
Investment Companies

AGENCY: Federal Energy Regulatory Commission.

ACTION: Notice of inquiry.

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SUMMARY: The Federal Energy Regulatory Commission (Commission) seeks 
comment on whether, and if so, how, the Commission should revise its 
policy on providing blanket authorizations for investment companies 
under the Federal Power Act. The Commission also seeks comment on what 
constitutes control of a public utility in evaluating holding 
companies', including investment companies', requests for blanket 
authorization and what factors it should consider when evaluating 
control over public utilities as part of a request for blanket 
authorization.

DATES: Initial comments are due March 26, 2024 and reply comments are 
due April 25, 2024.

ADDRESSES: Comments, identified by docket number, may be filed in the 
following ways. Electronic filing through http://www.ferc.gov, is 
preferred.
     Electronic Filing: Documents must be filed in acceptable 
native

[[Page 89347]]

applications and print-to-PDF, but not in scanned or picture format.
     For those unable to file electronically, comments may be 
filed by USPS mail or by hand (including courier) delivery.
    [cir] Mail via U.S. Postal Service Only: Addressed to: Federal 
Energy Regulatory Commission, Secretary of the Commission, 888 First 
Street NE, Washington, DC 20426.
    [cir] Hand (including courier) delivery: Deliver to: Federal Energy 
Regulatory Commission, 12225 Wilkins Avenue, Rockville, MD 20852.
    The Comment Procedures Section of this document contains more 
detailed filing procedures.

FOR FURTHER INFORMATION CONTACT:

Noah Monick (Legal Information), Office of the General Counsel, Federal 
Energy Regulatory Commission, 888 First Street NE, Washington, DC 
20426, [email protected].
Michelle Wei (Technical Information), Office of Energy Market 
Regulation, Federal Energy Regulatory Commission, 888 First Street NE, 
Washington, DC 20426, [email protected].

SUPPLEMENTARY INFORMATION: 
    1. In this Notice of Inquiry (NOI), the Commission seeks comment on 
whether, and if so, how, the Commission should revise its policy on 
providing blanket authorizations for investment companies \1\ under 
section 203(a)(2) of the Federal Power Act (FPA).\2\ The Commission 
also seeks comment on what constitutes control of a public utility in 
evaluating holding companies', including investment companies', 
requests for blanket authorization and what factors it should consider 
when evaluating control over public utilities or holdings companies 
thereof as part of a request for blanket authorization.
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    \1\ For the purposes of this NOI, the term ``investment 
companies'' refers to those companies meeting the definition of 
``investment companies'' in the Investment Company Act of 1940, 
which includes any issuer that ``holds itself out as being engaged 
primarily, or proposes to engage primarily, in the business of 
investing, reinvesting, or trading in securities.'' 15 U.S.C. 80a-3. 
If commenters believe the Commission should apply a different 
definition or use a different term, they are encouraged to explain 
in their comments.
    \2\ 16 U.S.C. 824b(a)(2).
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I. Background

    2. Section 203(a)(2) of the FPA provides that:

    No holding company in a holding company system that includes a 
transmitting utility or an electric utility shall purchase, acquire, 
or take any security with a value in excess of $10,000,000 of, or, 
by any means whatsoever, directly or indirectly, merge or 
consolidate with, a transmitting utility, an electric utility 
company, or a holding company in a holding company system that 
includes a transmitting utility, or an electric utility company, 
with a value in excess of $10,000,000 without first having secured 
an order of the Commission authorizing it to do so.\3\
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    \3\ Id.

    3. The Commission has both established in its regulations and 
granted by Commission order blanket authorizations under section 
203(a)(2) for transactions that meet certain criteria. In Order No. 
669,\4\ the Commission promulgated regulations to implement the 
amendments to section 203 in the Energy Policy Act of 2005 (EPAct 
2005),\5\ including granting blanket authorizations for certain types 
of transactions, such as foreign utility acquisitions by holding 
companies, intra-holding company system financing and cash management 
arrangements, certain internal corporate reorganizations, and certain 
investments in transmitting utilities and electric utility 
companies.\6\ The Commission stated that its goal in promulgating the 
new regulations was ``to ensure that all jurisdictional transactions 
subject to section 203 are consistent with the public interest and at 
the same time ensure that our rules do not impede day-to-day business 
transactions or stifle timely investment in transmission and generation 
infrastructure.'' \7\ For example, one of the blanket authorizations 
granted by the Commission provides authorization for holding companies 
regulated by the Board of Governors of the Federal Reserve Bank or by 
the Office of the Comptroller of the Currency, under the Bank Holding 
Company Act of 1956 as amended by the Gramm-Leach-Bliley Act of 1999, 
to acquire and hold an unlimited amount of the securities of holding 
companies that include a transmitting utility or an electric utility 
company.\8\ The blanket authorization requires that the securities be 
held either as a fiduciary, as principal for derivatives hedging 
purposes incidental to the business of banking (so long as it commits 
not to vote such securities to the extent they exceed 10 percent of the 
outstanding shares), as collateral for a loan, or solely for purposes 
of liquidation and in connection with a loan previously contracted for 
and owned beneficially for a period of not more than two years (subject 
to conditions and a reporting requirement).\9\
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    \4\ Transactions Subject to FPA Section 203, Order No. 669, 113 
FERC ] 61,315 (2005), order on reh'g, Order No. 669-A, 115 FERC ] 
61,097, order on reh'g, Order No. 669-B, 116 FERC ] 61,076 (2006); 
see Blanket Authorization Under FPA Section 203, Order No. 708, 122 
FERC ] 61,156, order on reh'g, Order No. 708-A, 124 FERC ] 61,048 
(2008), order on reh'g, Order No. 708-B, 127 FERC ] 61,157 (2009) 
(amending the Commission's regulations pursuant to FPA section 203 
to provide for additional blanket authorizations under FPA section 
203(a)(1)).
    \5\ Energy Policy Act of 2005, Public Law 109-58, 119 Stat. 594 
(2005).
    \6\ See 18 CFR 33.1(c).
    \7\ Order No. 669, 113 FERC ] 61,315 at P 4.
    \8\ 18 CFR 33.1(c)(9).
    \9\ See id. Sec.  (c)(9)(i)-(iv).
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    4. Prior to Order No. 669, the Commission's order in UBS AG granted 
a blanket authorization on an individual basis for UBS AG and Bank of 
America to acquire public utility securities during their banking 
businesses.\10\ The Commission stated that it was satisfied that the 
applicants in that proceeding would be precluded from using their 
fiduciary holdings to serve their own interests, rather than the 
interests of their fiduciary clients. The Commission stated that 
``backstop protection is provided by the procedures, controls and 
monitoring programs banking institutions are required to have in place 
in order to conduct fiduciary activities and the comprehensive nature 
of supervision and regulation by Bank Regulators of banks' fiduciary.'' 
\11\
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    \10\ UBS AG, 101 FERC ] 61,312 (2002), order on reh'g, 103 FERC 
] 61,284, order on reh'g, 105 FERC ] 61,078 (2003).
    \11\ UBS AG, 105 FERC ] 61,078 at P 16.
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    5. The Commission has also issued blanket authorizations, on a 
case-specific basis to investment companies, that allowed the 
acquisitions of securities in public utilities over the $10 million 
threshold established by EPAct 2005 and up to 20% of the outstanding 
voting securities of a given public utility. For instance, in 2006, the 
Commission granted a blanket authorization for Capital Research and 
Management Company to acquire utility securities on behalf of its 
funds, subject to certain conditions.\12\ As a result of these 
conditions, including limitations on the amount of both collective 
ownership and ownership of securities for each individual fund, 
governing policies, and status as beneficial owners eligible to file 
Schedule 13G under the Securities' and Exchange Act of 1934,\13\ the 
Commission found that Capital Research and Management Company could not 
exercise control over public utilities, and that there would be no harm 
to the public interest that could otherwise result from their holding 
significant equity positions in public

[[Page 89348]]

utilities.\14\ The Commission noted that the repeal of the Public 
Utility Holding Company Act of 1935 (PUHCA 1935) and modifications to 
section 203 of the FPA had changed the law governing investment in 
utility securities.\15\ The Commission found that a blanket 
authorization was appropriate to ``encourage greater investment in 
utilities by mutual funds,'' provided that the Commission can perform 
continuing oversight in accordance with section 203 of the FPA.\16\
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    \12\ Cap. Research & Mgmt. Co., 116 FERC ] 61,267 (2006).
    \13\ 15 U.S.C. 78a et seq.
    \14\ Cap. Research & Mgmt. Co., 116 FERC ] 61,267 at P 32.
    \15\ Id. PP 26-27 (citing 15 U.S.C. 79a et seq.).
    \16\ Id. P 28.
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    6. The Commission issued other individual blanket authorizations 
after its order in Capital Research & Management Co. applying similar 
conditions.\17\ The blanket authorizations were time-limited, for a 
period of three years, based on the Commission's reasoning that it 
should periodically reevaluate whether the blanket authorizations 
remained consistent with the public interest.\18\ The Commission has in 
several instances granted subsequent requests for extensions of those 
blanket authorizations upon the same terms and conditions of the 
original orders.\19\
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    \17\ See Ecofin Holdings Ltd., 120 FERC ] 61,189 (2007); The 
Goldman Sachs Grp., 121 FERC ] 61,059 (2007); Morgan Stanley, 121 
FERC ] 61,060 (2007); Legg Mason, Inc., 121 FERC ] 61,061 (2007); 
Horizon Asset Mgmt., Inc., 125 FERC ] 61,209 (2008); Franklin Res., 
Inc., 126 FERC ] 61,250 (2009); BlackRock, Inc., 131 FERC ] 61,063 
(2010). Additional blanket authorizations were granted via delegated 
authority where applicants met the criteria established in 
previously-issued Commission orders. See T. Rowe Price Grp., Inc., 
119 FERC ] 62,048 (2007) (delegated order); Lord, Abbett & Co. LLC, 
129 FERC ] 62,239 (2009) (delegated order); Mario J. Gabelli GGCP, 
Inc., 137 FERC ] 62,127 (2011) (delegated order); The Vanguard Grp., 
Inc., 168 FERC ] 62,081 (2019) (delegated order).
    \18\ See Cap. Research & Mgmt. Co., 116 FERC ] 61,267 at P 46 
(``[G]iven the importance of balancing the need for regulatory 
oversight with the provision of some business certainty, the 
Commission grants the requested authorizations, as conditioned, on a 
temporary basis. The authorization expires three years from the date 
of this order, without prejudice to requests to extend the 
authorization.'').
    \19\ See, e.g., The Goldman Sachs Grp., 134 FERC ] 61,227 
(2011); BlackRock, Inc., 179 FERC ] 61,049 (2022).
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    7. In 2010, the Commission undertook a generic proceeding to 
address the acquisition of voting securities of a public utility by 
holding companies in response to a petition by the Electric Power 
Supply Association (EPSA) requesting that the Commission provide 
clarification on the Commission's jurisdiction over investors holding 
between 10% and 20% of a public utility's outstanding voting securities 
who are eligible to file a statement of beneficial ownership with the 
Securities and Exchange Commission.\20\ In that proceeding, the 
Commission issued a Notice of Proposed Rulemaking (NOPR) proposing to 
create a FERC form wherein holding companies would affirm that an 
investor did not control a public utility when the investor refrained 
from engaging in certain actions.\21\ Entities signing the form would 
have been eligible for a blanket authorization for the acquisition of 
up to 20% of the outstanding voting securities of a public utility or 
holding company thereof. Comments on the NOPR generally fell into two 
groups. The first group believed that the Commission's proposal was too 
restrictive and that an investor would be unwilling to commit to the 
restrictions on the proposed FERC form, such that the Commission's 
proposal did not provide the original relief requested by EPSA; the 
second group believed the Commission could be opening up wholesale 
energy markets to anticompetitive behavior through partial acquisitions 
of the securities of multiple public utilities without adequate 
oversight. The Commission ultimately decided that, having considered 
these comments, it was persuaded to not seek to adopt the proposed 
reforms, and withdrew the NOPR and terminated the rulemaking 
proceeding.\22\
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    \20\ Control & Affiliation for Purposes of Mkt.-Based Rate 
Requirements Under Section 205 of the Fed. Power Act & the 
Requirements of Section 203 of the Fed. Power Act, 130 FERC ] 
61,046, at P 4 (2010) (citing Securities Exchange Act of 1934, 15 
U.S.C. 78a et seq. (2000)).
    \21\ Id. PP 36-37 (requiring an affirmation from the investor 
that, among other things, it will: not seek or accept representation 
on the public utility's board of directors or otherwise serve in any 
management capacity; not request or receive non-public information, 
either directly or indirectly, concerning the business or affairs of 
the public utility; and not solicit, or participate in any 
solicitation of, proxies involving the public utility).
    \22\ Control & Affiliation for Purposes of Mkt.-Based Rate 
Requirements Under Section 205 of the Fed. Power Act & the 
Requirements of Section 203 of the Fed. Power Act, 157 FERC ] 61,064 
(2016).
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    8. Since the Commission revised its regulations to expand blanket 
authorizations under section 203(a)(2) and began granting case-specific 
blanket authorizations for holding companies, including investment 
companies, there have been changes in the public utility, finance, and 
banking industries that warrant consideration of whether the 
Commission's blanket authorization policy continues to work as 
intended. These changes include consolidation in the public utility 
industry as well as the growth of large index funds and asset managers. 
Factors such as the repeal of PUHCA 1935 and increased interest in U.S. 
utility assets by foreign companies/investors and private equity 
investors have led to the greater consolidation of utility holding 
companies, as shown by utility merger activity of approximately $200 
billion from 2012 to 2018.\23\ At the beginning of 2010, there was 
approximately $2.3 trillion invested in index funds, which grew to 
$11.4 trillion by the end of 2019.\24\ Index funds are estimated to 
have grown from 20% of the fund market in 2011 to 43% by the end of 
2021.\25\ Both commenters and FERC Commissioners have noted that this 
change in the manner in which assets are owned and controlled warrants 
the Commission's careful consideration to make sure that its blanket 
authorization policy is consistent with the public interest.\26\
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    \23\ See Lillian Federico, State Regulatory Reviews Are Creating 
Headwinds For Utility Merger Activity, S&P GLOBAL (Apr. 5, 2019), 
https://www.spglobal.com/marketintelligence/en/news-insights/research/state-regulatory-reviews-are-creating-headwinds-for-utility-merger-activity.
    \24\ Financial Times, Index Funds Break Through $10m-in-Assets 
Mark, https://www.ft.com/content/a7e20d96-318c-11ea-9703-eea0cae3f0de (Jan. 7, 2020).
    \25\ Investment Company Institute, 2022 Investment Company 
Factbook, at 29 (2022), https://www.icifactbook.org/pdf/2022_factbook.pdf.
    \26\ Commissioners Danly, Clements, and Christie have raised 
concerns related to the influence of large investment companies over 
public utilities and whether there is adequate scrutiny in the grant 
of some blanket authorizations. See BlackRock, Inc., 179 FERC ] 
61,049 (Clements, Comm'r, concurring at P 3); BlackRock, Inc., 179 
FERC ] 61,049 (Christie, Comm'r, concurring at PP 4-6); Joint 
Statement of Commissioner Danly & Commissioner Christie Regarding 
The Vanguard Group, Inc. et al., Docket No. EC19-57-001, at PP 7-9 
(Aug. 11, 2022) (eLibrary Accession No. 20220811-4002); Joint 
Statement of Commissioner Danly & Commissioner Christie Regarding 
The Vanguard Group, Inc., et al., Docket No. EC19-57-002, at P 7 
(May 9, 2023) (eLibrary Accession No. 20230509-4000).
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II. Discussion

    9. We are issuing this NOI to further explore whether, and if so, 
how, the Commission should revise its policy on blanket authorizations 
for holding companies, including investment companies, under section 
203(a)(2) of the FPA. We invite all interested persons to submit 
comments and reply comments on any or all of the questions listed 
below. Commenters need not answer all the questions.

A. Blanket Authorization Policy

    10. As noted above, the Commission has granted company-specific 
blanket authorizations under section 203(a)(2) for holding companies, 
including investment companies' managed funds, to acquire the voting 
securities of public utilities and holding companies thereof, in 
addition to the blanket authorizations granted by the Commission in its 
regulations. We seek comment on

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current Commission policy as well as whether, and if so, how, the 
Commission should revise its policy.
    (Q1) Please describe whether the Commission's current blanket 
authorization policy, as set forth in the Commission's regulations or 
on a case-specific basis, is sufficient to ensure that holding 
companies, including investment companies, lack the ability to control 
the public utilities and holding companies whose securities they 
acquire and that the transactions underlying the blanket authorization 
are consistent with the public interest.
    (Q2) If the Commission's current policy is insufficient, how should 
the Commission revise its case-specific blanket authorizations for 
holding companies, including investment companies, to acquire voting 
securities? How should the Commission revise its regulations providing 
certain blanket authorizations under section 203(a)(2)?
    (Q3) Are the existing conditions and restrictions associated with 
case-specific blanket authorizations, such as the submission of 
Securities and Exchange Commission (SEC) Schedule 13D and 13G filings, 
effective in ensuring that holding companies, including investment 
companies, lack control over public utilities, and holding companies 
thereof, such that the Commission can be assured that the transactions 
underlying the blanket authorization are consistent with the public 
interest?
    (Q4) Does the current scope or availability of blanket 
authorizations for the acquisition of voting securities by holding 
companies, including investment companies, create concerns regarding an 
adverse effect on competition or jurisdictional rates?
    (Q5) If there are concerns with the current policy regarding grants 
of blanket authorizations to holding companies, including investment 
companies, are there specific commitments or other conditions from 
holding companies, including investment companies, that could give the 
Commission assurance that such blanket authorizations are consistent 
with the public interest?
    (Q6) The blanket authorization in 18 CFR 33.1(c)(9)(iv) requires 
that a holding company file--when securities are held ``[s]olely for 
purposes of liquidation and in connection with a loan previously 
contracted for and owned beneficially for a period of not more than two 
years,''--on a public basis and within 45 days of the close of each 
calendar quarter, both its total holdings and its holdings as 
principal, each by class, unless the holdings within a class are less 
than one percent of outstanding shares, irrespective of the capacity in 
which they were held. Specifically, there have been cases where it was 
unclear, based on the record, whether an entity has satisfied the 
requirements for blanket authorization under 18 CFR 33.1(c)(9).\27\ 
Should the Commission require a holding company, or a subsidiary of 
that company, that qualifies for FPA section 203 blanket authorization 
under 18 CFR 33.1(c)(9) to report on what basis it qualifies (i.e., 
``(i) [a]s a fiduciary; (ii) [a]s principal for derivatives hedging 
purposes incidental to the business of banking and it commits not to 
vote such securities to the extent they exceed 10 percent of the 
outstanding shares; (iii) [a]s collateral for a loan; or (iv) [s]olely 
for purposes of liquidation and in connection with a loan previously 
contracted for and owned beneficially for a period of not more than two 
years . . . .'')? Are there any other measures that the Commission 
should take to oversee compliance with the terms of these blanket 
authorizations?
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    \27\ See, e.g., Black Hills Colo. Elec., LLC, 184 FERC ] 61,172, 
at P 19 (2023) (``Black Hills MBR Sellers state that State Street 
represented to them that State Street qualifies under section 
33.1(c)(9) of the Commission's regulations for blanket authorization 
under section 203(a)(2) of the FPA to acquire and hold an unlimited 
amount of securities of holding companies that include a 
transmitting utility or an electric utility company.'') (citation 
omitted); see also id. (Danly, Comm'r, concurring at P 3) (``It is 
not clear to me whether State Street satisfies the requirements 
above and nothing in Black Hills MBR Sellers' filing demonstrates 
which, if any, of the elements of our regulation State Street 
satisfies.'').
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    (Q7) The case-specific blanket authorizations granted by the 
Commission to investment companies generally require informational 
filings of holdings, similar to that required of the blanket 
authorization in 18 CFR 33.1(c)(9)(iv). Are these informational filings 
sufficient for the Commission to maintain an appropriate level of 
oversight for compliance with the terms of blanket authorizations? Are 
there any other measures that the Commission should take to oversee 
compliance with the terms of these blanket authorizations?

B. Large Investment Companies

    11. The three largest index fund investment companies currently 
vote over 20% of the stock in the largest U.S. public companies, a 
number that may soon rise to 40%.\28\ 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.\29\ 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.\30\ 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 section 203(a)(2).
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    \28\ See Nathan Atkinson, If Not the Index Funds, Then Who?, 17 
BERKELEY BUS. L.J. 44, 45 (2020) (``In recent years, large asset 
managers have reached incredible sizes, managing trillions of 
dollars of assets on behalf of tens of millions of clients. The 
largest three, BlackRock, Vanguard, and State Street, taken together 
(the `Big Three'), vote about 20% of shares in most large companies, 
with the majority of these shares held in passive index funds.'') 
(citation omitted); Lucian Bebchuk & Scott Hirst, The Specter of the 
Giant Three, 99 B.U. L. REV. 721, 724 (2019).
    \29\ See Public Citizen, Inc., Protest, Docket No. EC16-77-002, 
at 1 (filed Mar. 11, 2022) (``Not only is it impossible for a fund 
manager of BlackRock's size and scope to remain a passive investor, 
scholarly research demonstrates that BlackRock's accumulation of 
voting securities constitutes control over utilities, and its 
horizontal power over competing utilities harms competition.'').; 
see also Einer Elhauge, Horizontal Shareholding, 129 HARV. L. REV. 
1267, 1267 (2016) (``A small group of institutions has acquired 
large shareholdings in horizontal competitors throughout our 
economy, causing them to compete less vigorously with each 
other.'').
    \30\ See Consumers' Research, Inc., Motion to Intervene and 
Protest, Docket No. EC19-57-002, at 4-5 (filed Nov. 28, 2022) 
(arguing that the three largest index funds have ``have embarked on 
a full-scale engagement and proxy-voting strategy to force utility 
companies to comply with various decarbonization goals''); see also 
Eric C. Chaffee, Index Funds & ESG Hypocrisy, 71 CASE W. RES. L. 
REV. 1295, 1298-1299 (2021) (noting statements by index fund 
managers related to climate and sustainability goals).
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    (Q8) How can the Commission effectively evaluate the influence and 
control exerted by holding companies, including investment companies, 
regardless of their size, over public utilities when considering 
blanket authorizations under section 203(a)(2)? What factors should be 
prioritized to ensure a fair and comprehensive assessment while 
maintaining a straightforward and equitable process for all holding 
companies, including investment companies?
    (Q9) Please describe whether and how the Commission should consider 
holding companies', including investment companies', pre-existing 
ownership and control of public utilities and holding companies thereof 
in determining whether to grant blanket authorizations under section 
203(a)(2).
    (Q10) How should the Commission distinguish between various types 
of investment vehicles for purposes of section 203(a)(2) blanket 
authorizations?
    (Q11) What are the impacts on the public interest, both positive 
and negative, of holding companies, including investment companies, 
holding voting securities in multiple

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public utilities and Commission-regulated entities?
    (Q12) What other ways may up to 20% ownership or control of 
multiple public utilities and holding companies thereof by holding 
companies, including investment companies, affect the public interest 
that the Commission should consider?

C. Evaluation of Control Under Section 203 of the FPA

    12. Often, when seeking a blanket authorization under section 
203(a)(2), an investment company will argue that its investments in 
public utilities do not allow for it to control the public utility, 
including control over the day-to-day management and operations of the 
utility, or holding company thereof.\31\ However, it has been argued 
that by holding voting securities in a large number of public 
utilities, investment companies are able to influence utility behavior 
in ways that are not captured by the Commission's current analysis of 
control.\32\ We seek comment on what factors the Commission should 
consider when evaluating control over public utilities as part of a 
request for blanket authorization.
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    \31\ See, e.g., BlackRock, Inc., 131 FERC ] 61,063 at P 17.
    \32\ See Senator Michael S. Lee et al., Letter to Commission, 
Docket No. EC16-77-002 at 5 (filed June 28, 2023) (``Many of 
[BlackRock's] significant attempts to influence control, however, 
have likely been behind closed doors, in the form of `investor 
engagement' with the backdrop of [Climate Action 100+] and [the Net 
Zero Asset Managers Initiative]'s coordinated activities and massive 
collective voting power.'').
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    (Q13) In what way may a holding company, including an investment 
company, exert control over public utilities that is not currently 
captured by the Commission's current policies and regulations?
    (Q14) What strategies or actions taken by holding companies, 
including investment companies, or the actions of a public utility that 
is the subject of a blanket authorization could demonstrate control or 
a degree of influence that would require prior Commission review under 
section 203(a)(2)? In other words, what are the indicia of control that 
the Commission could look to when assessing whether a holding company 
can exercise control?
    (Q15) Does holding the voting securities, notwithstanding 
commitments not to exercise control, of multiple public utilities 
provide a form of control or influence that is not addressed by the 
Commission's current polices and regulations? If so, how? And how 
should the Commission resolve this form of control or influence?
    (Q16) Should the Commission consider the impact of investment 
companies holding public utility voting securities on long-term 
planning by public utilities or other issues beyond day-to-day control 
over utility operations? If so, how?
    (Q17) What corporate governance factors should the Commission 
consider when evaluating whether investment companies can exercise 
control over public utilities? For instance, should the Commission 
consider the ability of an investment company to influence board 
membership of a public utility and, if so, how?

III. Comment Procedures

    13. The Commission invites interested persons to submit comments on 
the matters and issues identified in this notice. Initial comments are 
due March 26, 2024 and reply comments are due April 25, 2024. Comments 
must refer to Docket No. AD24-6-000, and must include the commenter's 
name, the organization they represent, if applicable, and their address 
in their comments. All comments will be placed in the Commission's 
public files and may be viewed, printed, or downloaded remotely as 
described in the Document Availability section below. Commenters on 
this proposal are not required to serve copies of their comments on 
other commenters.
    14. The Commission encourages comments to be filed electronically 
via the eFiling link on the Commission's website at http://www.ferc.gov. The Commission accepts most standard word processing 
formats. Documents created electronically using word processing 
software must be filed in native applications or print-to-PDF format 
and not in a scanned format. Commenters filing electronically do not 
need to make a paper filing.
    15. Commenters that are not able to file comments electronically 
may file an original of their comment by USPS mail or by courier-or 
other delivery services. For submission sent via USPS only, filings 
should be mailed to: Federal Energy Regulatory Commission, Office of 
the Secretary, 888 First Street NE, Washington, DC 20426. Submission of 
filings other than by USPS should be delivered to: Federal Energy 
Regulatory Commission, 12225 Wilkins Avenue, Rockville, MD 20852.

IV. Document Availability

    16. In addition to publishing the full text of this document in the 
Federal Register, the Commission provides all interested persons an 
opportunity to view and/or print the contents of this document via the 
internet through the Commission's Home Page (http://www.ferc.gov).
    17. From the Commission's Home Page on the internet, this 
information is available on eLibrary. The full text of this document is 
available on eLibrary in PDF and Microsoft Word format for viewing, 
printing, and/or downloading. To access this document in eLibrary, type 
the docket number excluding the last three digits of this document in 
the docket number field.
    18. User assistance is available for eLibrary and the Commission's 
website during normal business hours from the Commission's Online 
Support at 202-502-6652 (toll free at 1-866-208-3676) or email at 
[email protected].
    By direction of the Commission. Commissioner Christie is concurring 
with a separate statement attached.

    Issued: December 19, 2023.
Debbie-Anne A. Reese,
Deputy Secretary.

United States of America

Federal Energy Regulatory Commission

Federal Power Act Section 203 Blanket Authorizations for Investment 
Companies

Docket No. AD24-6-000
(Issued December 19, 2023)
CHRISTIE, Commissioner, concurring:
    1. Public utilities, sometimes called ``public service 
corporations'' or ``public service companies'' under various state 
laws,\1\ are not garden-variety, for-profit, shareholder-owned 
companies. In particular, public utilities that provide electrical 
power to retail customers are usually holders of a state-granted 
monopoly franchise that comes with various public service obligations, 
such as providing reliable power service at rates that are just and 
reasonable. So whether a public utility is owned by investors directly 
or through a holding company structure, it is absolutely essential for 
regulators to make sure that the interests of investors do not conflict 
with the public service obligations that a utility has. And yes, there 
is a potential conflict. That potential conflict requires heightened 
regulatory scrutiny when huge investment companies and asset managers, 
as well as large private equity funds, which individually and 
collectively direct literally trillions of dollars in capital, appear 
to be acting not as passive investors simply seeking the best risk-
based returns for their own clients, but instead appear to be actively 
using their investment power to affect how the

[[Page 89351]]

utility meets its own public service obligations. That is why this 
proceeding is so essential, to explore those issues and determine 
whether the Commission's own regulations and regulatory practices are 
still sufficient to protect the interests of the customers of public 
utility companies which, again, are likely to be monopoly providers of 
a vital public service such as electrical power.
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    \1\ See, e.g., Va. Code Ann. Sec.  56.1 et seq.
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    2. As I mentioned in my concurrence to an earlier order extending 
BlackRock, Inc.'s (BlackRock) blanket authorization under section 203 
of the Federal Power Act (FPA),\2\ it simply is no longer a credible 
assertion that investment managers, like BlackRock, State Street 
Corporation, and The Vanguard Group, Inc., are always or should be 
assumed to be merely passive investors. These investment managers are 
often the three biggest investors in publicly traded companies across 
the U.S. economy, including the utility industry, and wield significant 
financial power by virtue of their investments.\3\ These investment 
managers may occasionally use that financial power to push various 
types of policy agendas, agendas that may ultimately conflict with the 
utility's public service obligations to its customers.\4\ Or, totally 
different from any policy goal, the threat may come from a private 
equity investor's attempt to turn a quick profit on a short-term trade 
by undercutting utility practices that are designed to serve its retail 
customers over the long term, not the short-term interests of the 
private equity investor.
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    \2\ BlackRock, Inc., 179 FERC ] 61,049 (2022) (Christie, Comm'r, 
concurring at P 3) (BlackRock Concurrence), available at https://www.ferc.gov/news-events/news/commissioner-christies-concurrence-blackrocks-authorization-buy-voting-securities.
    \3\ You can see the extent of these investment managers' 
holdings through the quarterly reports the Commission receives as 
part of the requirements associated with section 203(a)(2) blanket 
authorizations. See, e.g., BlackRock, Quarterly Report, Docket No. 
EC16-77-002 (filed Nov. 15, 2023) (detailing holdings in several 
publicly traded holding companies with public utility subsidiaries).
    \4\ See BlackRock Concurrence at PP 4-5.
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    3. One focus recently, and rightfully so, has been on ``ESG'' 
(environmental, social, and governance-related) corporate initiatives, 
with huge asset managers pushing policy decisions that should be left 
to elected legislators. For example, I have pointed out the reliability 
problems that will result from premature dispatchable generation 
retirements that may come from these initiatives.\5\ Decisions on the 
appropriate generation resources mix for a public utility with a state-
granted franchise are policy decisions for state policymakers, not huge 
Wall Street asset managers.
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    \5\ See, e.g., Testimony of Commissioner Mark C. Christie, 
Oversight of FERC: Adhering to a Mission of Affordable and Reliable 
Energy for America, United States House of Representatives (June 12, 
2023), available at https://www.ferc.gov/media/testimony-commissioner-mark-c-christie-oversight-ferc-adhering-mission-affordable-and; Written Testimony of Commissioner Mark Christie 
Before the Committee on Energy and Natural Resources, United States 
Senate (Sept. 27, 2021), available at https://cms.ferc.gov/media/written-testimony-commissioner-mark-christie-committee-energy-and-natural-resources-united.
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    4. But let us be clear--``ESG'' investor activity is simply a 
symptom of a larger, more pernicious threat that has always existed in 
the utility industry: improper investor influence and control over 
public utilities. Large investors can and do force utilities to make 
decisions that are contrary to their public service obligations to 
their retail customers. This, among other related concerns, is exactly 
why Congress enacted a suite of consumer protection statutes, including 
the FPA almost 100 years ago. Congress's subsequent revisions to the 
FPA over the years, such as by the Energy Policy Act of 2005, signal 
the ongoing importance of consumer protection in the Commission's 
regulatory responsibilities, including under section 203. Congress may 
have directed the Commission to streamline its regulations to 
facilitate greater investments in the utility industry, such as through 
section 203 blanket authorizations,\6\ but that streamlining does not, 
and should never, come at expense of protecting consumers. Indeed, it 
is the Commission's task to balance these two competing 
responsibilities and to continue to revisit and evaluate that balance. 
So I fully agree that this NOI is timely and compelling and I look 
forward to moving forward on it.
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    \6\ See, e.g., Transactions Subject to FPA Section 203, Order 
No. 669, 113 FERC ] 61,315 (2005), order on reh'g, Order No. 669-A, 
115 FERC ] 61,097, order on reh'g, Order No. 669-B, 116 FERC ] 
61,076 (2006).
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    For these reasons, I respectfully concur.

Mark C. Christie,
Commissioner.

[FR Doc. 2023-28665 Filed 12-22-23; 2:00 pm]
BILLING CODE 6717-01-P