2024-09-17 19:10:04
Public Citizen News / September-October 2024
By Patrick Davis
This article appeared in the Sept/Oct 2024 edition of Public Citizen News. Download the full edition here.
When a global financial giant sets its sights on your local power company, who really ends up in control? BlackRock, one of the world’s largest asset management firms that also operates a private equity unit, is making a bold move to acquire Duluth, Minn. energy utility, ALLETE, in a $6.2 billion deal. The move, which Public Citizen has criticized, could leave consumers across Minnesota and Wisconsin paying the price.
BlackRock’s acquisition of ALLETE would leave more than 165,000 captive customers at the mercy of a private equity company that has taken an active interest in controlling fossil fuel infrastructure across the country over the past few years.
ALLETE plans to sell the utility to Global Infrastructure Partners (GIP) and the Canada Pension Plan (CPP) investment board for $6.2 billion. Global Infrastructure Partners is in the midst of attempting to be acquired by BlackRock for $12.5 billion.
BlackRock controls $9.5 trillion worth of assets and its gargantuan role as an overseer of voting securities is unparalleled in the history of modern capitalism. While BlackRock claims that its control over dozens of utilities is passive in nature, that changes when its private equity (corporate takeover) arm seeks to directly own and operate a utility like ALLETE.
Indeed, Public Citizen noted that BlackRock already is the largest shareholder of not only ALLETE’s regional competitors, but also two of its largest energy customers, U.S. Steel and Cleveland Cliffs.
“BlackRock’s acquisition of GIP, and, in turn, GIP’s purchase of ALLETE, fundamentally transforms BlackRock from the world’s largest passive investor into an entity with active control over significant fossil fuel and utility assets, threatening competition, rates and regulation,” said Tyson Slocum, director of Public Citizen’s Energy Program. “We therefore call on the Federal Energy Regulatory Commission to force a separation or divestiture between BlackRock’s role as an investment manager and its private equity arm that owns and controls energy assets.”
Public Citizen’s concerns have been echoed by Minnesota Attorney General Keith Ellison, who warned in a recent legal filing that “if the transaction is consummated, ALLETE and Minnesota Power will become subsidiaries of Global and Canada Pension. Global is itself set to be acquired by BlackRock, one of the world’s largest asset managers. All of these entities have numerous other investments in energy and non-energy industries, presenting opportunities for cross-subsidization and self-dealing that could harm Minnesota Power’s ratepayers and the public interest.”
Private Equity Utility Control is Part of a Growing Trend
Nearly 90 years ago, Congress demanded that public utilities and their customers be subjected to enhanced regulatory treatment, beyond that required of most other companies. The law governing utility ownership, the Federal Power Act, requires all rates and charges of public utilities to be “just and reasonable.”
And because public utilities are “affected with a public interest,” Congress sought to ensure any entity seeking to acquire or control a public utility must first obtain permission from the Federal Energy Regulatory Commission (FERC), giving the Commission the authority to ensure any change in control of a utility is in the public interest.
“The law dictates that utility ownership must be handled in the public interest, not for shareholders or to maximize profit,” said Slocum. “Yet, efforts by private equity to gain controlling interests in energy generation raises serious questions about what is in the public’s best interest.”
Public Citizen called on the Federal Trade Commission (FTC) in 2022 to open an investigation into whether private equity giant Blackstone controlling seats on the boards of directors of multiple U.S. utilities violates antitrust law. In the letter to FTC Chair Lina Khan, Public Citizen called on the FTC to step in and enforce Section 8 of the Clayton Act, prohibiting directors and officers from serving simultaneously on the boards of competitors, subject to limited exceptions.
Public Citizen’s call for the FTC to intervene came days after FERC rejected concerns raised by Public Citizen and Citizens Action Coalition about Blackstone’s plan to acquire a stake in an Indiana utility.
“Allowing a private equity behemoth like Blackstone to control multiple utilities is anticompetitive and risks harm to consumers,” commented Slocum.
For Minnesota ratepayers, FERC established a mid-September deadline for parties to intervene and raise issues, meaning a final decision isn’t likely until the first quarter of 2025.
“We’ll continue to challenge these types of dark acquisitions,” said Slocum. “When corporate power comes for local energy utilities, we need to fight to protect ratepayers.”
