Commissioner James Danly Statement
March 18, 2021
Docket No. EL21-14-000
We fully support the holding in today’s order finding that entities under the common control of institutional investors who have received blanket authorizations under Federal Power Act section 203(a)(2)[1] (institutional investors) are not affiliates. This is the most significant issue raised by the Petitioners,[2] and this holding is compelled by the underlying findings that the Commission makes in granting those blanket authorizations, i.e., that the conditions placed on the authorizations prevent the institutional investors from exercising control through their purchase of securities.
We also agree with today’s ruling that our past orders granting the blanket authorizations did not constitute holdings that securities purchased by the institutional investors are passive investments or that the institutional investors are not affiliated with the companies whose securities they purchase under those blanket authorizations. Further, we support our ruling that we should not waive the application of section 35.36(a)(9)(i) of our regulations,[3] which defines an affiliate as any person that owns 10% or more of a company’s voting securities, to institutional investors.
Nevertheless, we write separately to express our view that, under our current regime, there is little to no value in listing institutional investors as the ultimate upstream affiliate of market-based rate sellers in the relational database. Our granting of the blanket authorizations is premised on our finding that the institutional investors can exercise no control over the utilities whose securities they have purchased. In granting the blanket authorizations, we made a finding that the acquisition would not adversely affect competition.[4] The conclusion that the institutional investors cannot exercise control or influence sellers in a way that affects market power is bolstered by our holding that sellers under common control of an institutional investor are not affiliates.
Given those predicate determinations, we cannot understand why the Commission believes it important to include institutional investors in a database that is designed to enable the Commission to monitor the opportunity for market-based rate sellers (sellers) to exercise market power. For the same reason, we do not understand why the Commission should require change in status filings to be made whenever an institutional investor’s ownership of the seller’s voting securities crosses the 10% threshold in either direction. To the extent that a particular institutional investor’s ownership of voting securities ever becomes relevant to the Commission because it may have violated the conditions of its authorization, that information is easily ascertainable from the quarterly informational filings we require as a condition of granting the blanket authorizations, which provide transparency into each institutional investor’s ownership of the securities of market-based rate sellers.[5]
There is a simple solution that would allow the Commission to eliminate the requirement to include institutional investors in the relational database and in change of status filings without waiving the applicability of section 35.36(a)(9)(i) of our regulations. Section 35.36(b) provides: “The provisions of this subpart apply to all Sellers authorized, or seeking authorization, to make sales for resale of electric energy, capacity or ancillary services at market-based rates unless otherwise ordered by the Commission.”[6] Here the Commission could have—and in our opinion should have —used this authority to order that sellers are not obligated to report institutional investors in the relational database or to make change in status filings when institutional investors cross the 10% voting security threshold. The Commission would also need to make a minor amendment to its relational database regulations to provide that when an institutional investor is the ultimate upstream affiliate, sellers should instead list the next highest upstream affiliate in the database. For example, subsidiaries of NextEra should list NextEra as the ultimate upstream affiliate in the database if any institutional investor owns 10% or more of NextEra pursuant to a blanket authorization. This amendment would be similar to the amendment proposed in the Notice Seeking Comments issued today which is aimed at the implementation of the Commission’s ruling in this proceeding regarding cross-affiliation.[7]
We appreciate that the Commission has acted to reduce the burden on sellers resulting from the requirement to include institutional investors in the relational database and in change-in-status filings. But a pointless regulatory burden is a pointless regulatory burden, no matter how small.
For these reasons, we respectfully concur.
[1] 16 U.S.C. § 824b(a)(2).
[2] NextEra Energy, Inc. (NextEra), American Electric Power Company, Inc., Evergy, Inc., Exelon Corporation, and Xcel Energy Services Inc. on behalf of Xcel Energy Inc. (Petitioners).
[3] 18 C.F.R. § 35.36(a)(9)(i) (2020).
[4] See, e.g., Legg Mason, Inc., 121 FERC ¶ 61,061, at P 26 (2007).
[5] See, e.g., id. P 30.
[6] 18 C.F.R. § 35.36(b) (emphasis added).
[7] Data Collection for Analytics & Surveillance & Mkt.-Based Rate Purposes, 174 FERC ¶ 61,221 (2021).