American Electric Power Company, Inc. Docket No. EC24-60-000
I concur in today’s order authorizing, under section 203 of the Federal Power Act, a transaction in which a newly appointed member of American Electric Power Company, Inc.’s (AEP) Board of Directors (Board), representing the interests of the Icahn Group,[1] will receive voting rights with respect to his position on the AEP Board (Proposed Transaction). I concur because the Proposed Transaction is found to be consistent with the public interest under current Commission policy and regulations. I wish to write separately, however, to emphasize several critically important points.
As I have expressed previously, public utilities are not typical 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.[2]
Where there is the potential for a conflict—and there always is—it is the Commission’s responsibility, under section 203, to ensure that transactions are consistent with the public interest.[3] In my view, this must involve balancing consumer protection and potential impacts to reliability with the interests of investors in addition to evaluating traditional market power concerns. And for the Commission to be able to do this, the Commission must have a comprehensive understanding of the investors that ultimately own or control public utilities.
To that end, I believe it is time to consider whether the Commission’s conclusions in TransAlta Energy Marketing (U.S.) Inc.,[4] and its companion Evergy Kansas Central, Inc.,[5] should be extended. An investor seeks to place a director on the board of directors of a company for only one reason—to exert its influence on the company’s decision-making and actions. Whether that director is formally independent from the investor is immaterial; directors’ decision-making and actions inure to the benefit of all investors that own or control the company, including the investor that sought and secured that director’s placement on the board. So it is a compelling question whether an investor that appoints or places a director on the board of a public utility or public utility holding company should be deemed an affiliate of the public utility or public utility holding company, regardless of the “independence” of that director.
Investor influence on public utilities and public utility holding companies continues to grow, and in ways that may conflict with public utility service obligations. It is incumbent on the Commission to account for and address this influence.[6] These issues are ripe for action, and I look forward to continued consideration of them with my colleagues.
For these reasons, I respectfully concur.
[1] As noted in today’s order, AEP defines the Icahn Group as: Carl C. Icahn; Hunter Gary; Andrew Teno; Icahn Partners LP; Icahn Partners Master Fund LP; Icahn Enterprises G.P. Inc.; Icahn Enterprises Holdings L.P.; IPH GP LLC; Icahn Capital LP; Icahn Onshore LP; Icahn Offshore LP; and Beckton Corp. Order at P 1 n.4.
[2] Fed. Power Act Section 203 Blanket Authorizations for Inv. Cos., 185 FERC ¶ 61,192 (2023) (Blanket Authorization NOI) (Christie, Comm’r, concurring at P 1), https://www.ferc.gov/news-events/news/e-1-commissioner-christies-concurrence-federal-power-act-section-203-blanket.
[3] 16 U.S.C. § 824b(a)(4).
[4] TransAlta Energy Mktg (U.S.) Inc., 181 FERC ¶ 61,055, at P 29 (2022) (concluding that appointment of an investor’s own officers or directors, or other appointee accountable to the investor, to the board of a public utility or holding company that owns public utilities will require prior Commission approval under section 203).
[5] Evergy Kan. Cent., Inc., 181 FERC ¶ 61,044 (2022), order on reh’g, 184 FERC ¶ 61,003, at PP 23, 26 (2023) (finding that the appointment of a non-independent director rebuts the presumption of a lack of control under the Commission’s regulations and that such an appointment results in affiliation under the Commission’s regulations).
[6] The Commission recently sought comment on these issues. See Blanket Authorization NOI, 185 FERC ¶ 61,192 (requesting comment on inter alia current Commission policy on blanket authorizations under section 203 as well as control and influence more broadly).