State Attorneys General Act to Stop BlackRock from Acquiring Large Stakes in US Electric Utilities

A view of power lines in Santa Rosa, Calif., on Nov. 20, 2019. (Justin Sullivan/Getty Images)

State attorneys general of 17 states filed a motion this week with the Federal Energy Regulatory Commission (FERC) to stop BlackRock, the world’s largest asset manager and an outspoken advocate for replacing fossil fuels with wind and solar power, from acquiring large shares in America’s utility companies.

To protect the independence and stability of America’s electric grid, the FERC limits ownership of public utilities by a single entity to a 20 percent stake, although it sometimes allows exceptions for “passive” investors who do not get involved in management of the utility. If an active investor takes more than a 20 percent stake, they face additional scrutiny and regulations—something that BlackRock and other large asset managers want to avoid.

In their motion, state attorneys general argue that firms like BlackRock, who are members of clubs such as Climate Action 100+ and the Net Zero Asset Managers initiative (NZAM), whose members pledge to reduce fossil fuels across their investment portfolios, should not be permitted to own large stakes in America’s energy utilities.

“I think we see a lot of language from BlackRock’s own public statements, and from their actions putting pressure on various companies to achieve certain outcomes, that they are anything but passive,” Utah state attorney general Sean Reyes, one of the signers of the motion, told The Epoch Times.

The attorneys general claim that asset managers, who are also climate activists, are attempting to gain control of America’s energy sector by acquiring large stakes in America’s utilities, with the goal of implementing a global transition from coal and gas to wind and solar energy. In this way, they say, progressives are attempting to enact a progressive energy agenda that failed to gain public approval and failed to pass Congress in the form of the Green New Deal.

“This is yet another example of radical leftists trying to circumvent the will of the American people in order to implement their draconian mandates,” Indiana state attorney general Todd Rokita said. “The restrictions these elitists are trying to impose on energy companies and utilities would never win approval at the ballot box.”

This action comes at a time when federal regulators warn that America’s electricity grid is becoming increasingly unstable.

Electric Grid Facing a ‘Looming Reliability Crisis’

“The United States is heading for a very catastrophic situation in terms of reliability,” FERC commissioner Mark Christie stated at a Senate hearing on May 5.

Another FERC commissioner, James Danly, warned senators of a “looming reliability crisis in our electricity markets.”

And FERC acting chairman Willie Phillips stated: “We face unprecedented challenges to the reliability of our nation’s electric system.”

In a January interview with The Epoch Times, John Moura, director of reliability assessment at the North American Electricity Reliability Corp. (NERC), said that fossil fuel plants are being retired at a rate that exceeds the capacity of new wind and solar to fill the gap. “Running while we’re tying our shoes is the analogy I would give,” he said.

The NERC produces an annual long-term reliability assessment (LTRA). According to the 2022 LTRA, while some areas of the grid are expected to meet demand, several areas are at “high risk” of falling short.

“The projected shortfall continues an accelerating trend … as older coal, nuclear, and natural gas generation exit the system faster than replacement resources are connecting,” the LTRA states. In addition, the fact that wind and solar are intermittent and weather-dependent adds additional instability to the grid, compared to gas, coal, or nuclear plants.

“Our energy independence and the grid security and stability are all in grave danger, according to those who know best,” Reyes said. He argues that FERC should not only scrutinize whether BlackRock is a passive shareholder but also view the many asset managers who have signed pledges with climate clubs like NZAM as a single entity because they are united in the cause of reducing fossil fuel use.

“Beyond each individual fund, each individual entity, you should look collectively at the whole of these horizontally agreed entities,” Reyes said. “This syndicate of power players in the economic ecosystem that all have the same predetermined goal, this isn’t just examining data and making the best interest to maximize shareholder value and shareholder profit, this is trying to achieve a specific outcome.”

The motion regarding BlackRock follows a motion by 13 state attorneys general that urged the FERC not to approve a similar request from Vanguard, the world’s second-largest asset manager, to acquire large stakes in U.S. utilities. In the wake of this controversy, Vanguard pulled out of the Net Zero Asset Managers initiative last December.

Is BlackRock Too Aggressive or Not Aggressive Enough?

FERC already granted BlackRock an exemption to increase its shareholding beyond the 20 percent limit in April 2022. Even while voting to approve the exemption, however, FERC officials were skeptical that BlackRock would be a passive utility shareholder.

FERC commissioner Mark Christie stated at the time: “The claim that huge asset managers such as BlackRock, State Street, and Vanguard are merely passive investors in publicly held corporations, investing purely for the benefit of their beneficiaries—many of whom are retirees receiving pensions—is no longer credible.

“BlackRock, in particular, has been openly aggressive in using its massive financial power to influence corporate policy in areas far attenuated from the legitimate money-management goals of protecting the incomes and investment interests of its beneficiaries,” Christie said.

Some climate activist organizations also opposed FERC’s exclusion for BlackRock, though they did so on the grounds that BlackRock was not activist enough in pursuing climate goals.

Tyson Slocum, director of Public Citizen’s Energy Program, told The Epoch Times, “We noted some statistics, with BlackRock anyway, that they abstain from a number of climate-related votes, that instead of using their voting power to push companies harder on climate change, instead they’re giving management a pass.

“By failing to vote, you are sending a message to management: We’re an entity that controls a massive amount of your shares, and we’re not going to pressure you on these issues when the general public who own most of those shares actually want you to do those things,” Slocum said.

Membership in progressive clubs like NZAM and Climate Action 100+ is part of the environmental, social, and governance (ESG) movement, in which asset managers use their ownership of corporations to compel them to take actions like reducing their use of fossil fuels, promoting racial and gender equity, and implementing diversity, equity, and inclusion (DEI) programs for their employees. ESG criteria have been promoted by asset managers as a risk-management tool to enhance investor returns, and for this reason asset managers that promote the ESG agenda claim to be acting in alignment with their fiduciary duty to investors to maximize returns.

However, Vanguard CEO Tim Buckley stated in February that “our research indicates that ESG investing does not have any advantage over broad-based investing.”

The Epoch Times asked BlackRock to comment for this article but did not receive a response.