[ad_1]
The Federal Energy Regulatory Commission (FERC) issued a Notice of Investigation (NOI) in December 2023 amending FERC’s policy regarding granting blanket licenses to investment companies under Section 203(a)(2). We asked for comments on whether it should be done and, if so, how it should be fixed. ) of the Federal Power Act (FPA). This policy allowed certain inactive investors (such as mutual funds) to buy and sell stock in utilities and holding companies without undergoing normal investment review by FERC.
FERC also considers what control of a utility is when evaluating a holding company (including an investment company) application for a blanket license, and what factors it considers when evaluating control of a utility as part of an application for a blanket license. We are seeking comment on whether this should be considered.
The NOI follows two recent orders in which FERC analyzes whether investment companies assert control over public utilities, such as through investment advisory agreements, partnership agreements, or board appointments. These recent issuances demonstrate a higher level of oversight by FERC of investment companies’ investments in utilities and utility holding companies.
FERC’s Comprehensive Authorization Policy
Section 203(a)(2) of the FPA requires holding companies in the holding company system, including transmission or electric utilities, to obtain FERC approval before purchasing, acquiring, or acquiring securities in excess of $10 million. It stipulates that it must be obtained. or merge or consolidate, by any means, directly or indirectly, with an electric transmission operator, electric utility company, or holding company within a holding company system that includes an electric transmission operator or electric utility company with a value of more than $10 million. .
FERC promulgates rules that provide blanket authorization for certain types of transactions, including certain investments in transmission projects and electric utilities, and allow these transactions to occur without prior FERC review. I am.
FERC also granted a blanket authorization to investment companies authorizing them to acquire securities of public utilities in excess of $10 million and up to 20% of the outstanding voting securities of a particular utility. Published.
FERC has determined that these investor-specific authorizations are appropriate to increase public utility investments by investors who do not play an active role in the day-to-day management, such as mutual funds. These blanket authorizations are valid for three years, which allows FERC to periodically reassess whether each blanket authorization is consistent with the public interest.
Inquiry notice
Recognizing that the utility, financial, and banking industries continue to evolve, FERC will assess whether blanket authorization policies continue to function as intended and remain consistent with the public interest. issued an NOI to solicit industry input.
The NOI includes a variety of specific questions regarding existing blanket authorization policies and whether FERC should revise the policies. Whether and how FERC should consider the size of an investment company when evaluating applications for Section 203(a)(2) blanket authorization. Factors that FERC should consider when evaluating controls over public works projects as part of a blanket authorization application.
Questions mainly fall into the following categories:
- whether additional controls are required to ensure that these blanket sanctioned investments are truly non-controlling;
- Whether regulations or policies need to change
- whether existing policies raise competition concerns;
- What FERC Should Consider When Considering Granting Additional Investor-Specific Blanket Authorizations
- Whether investors who lack day-to-day control are in a position to control long-term planning and decision-making.
More specifically, FERC is seeking comment on whether current policy is sufficient to ensure that investment companies lack the ability to control the utilities or holding companies that acquire their securities. . FERC also commented on whether the current information submissions required of blanket license holders are sufficient to enable FERC to maintain an appropriate level of oversight of compliance with the conditions of the blanket license. I’m looking for.
Additionally, given the growth of index funds and the growing interest of investment companies in utility assets, FERC will consider the impact that a holding company has on a utility, regardless of its size, when considering blanket authorization. We are seeking comment on how influence and control can be effectively assessed. .
Finally, with respect to assessing control, FERC has advanced the argument that investing in a utility does not permit control of the utility and that the investment company can influence the utility’s actions. He pointed out that. It is not captured in FERC’s control analysis.
FERC will consider ways in which a holding company may exercise control over a utility that are not currently assessed under current policies and procedures, and what FERC will consider when evaluating whether an investment company may exercise control over a utility. We are seeking comments on questions such as what elements of corporate governance should be considered.
FERC invites interested parties to submit comments on all or part of the questions raised in the NOI. Initial comments are due by March 25, 2024, and reply comments are due by April 24, 2024. Issuance of an NOI by FERC does not necessarily result in a change in policy, but it does indicate that FERC continues to pay special attention to investments made by investment companies. Another issue is whether investment companies can exercise some form of control over public utilities in which they own interests.
Financial investments that at least one member of the commission claims is not involved in the day-to-day decision-making of the utility holding company, as reflected in a consent form released by Commissioner Mark C. Christie. Although there are doubts about whether a home should be given these blanket approvals, the company has simultaneously published an ESG-style investment policy that emphasizes the importance of making progress towards ESG goals through investment.
[ad_2]
Source link
