A pro-taxpayer ruling from the Federal Energy Regulatory Commission (FERC) last week will permit BlackRock to continue to hold investments of up to 20% of the value of public utility companies.
While this might seem like a pretty ho-hum ruling, it is a hopeful indication that this administration will take a more free market regulatory approach than its predecessor—even with regard to the hot-button topic of environment, social, and governance (ESG) policies.
FERC’s case became controversial when some critics of BlackRock claimed that the investment company’s previous affiliation with environmental causes should disqualify it from making investments in public utility companies. FERC disagreed and wisely declined to apply an ideological litmus test to this proceeding.
In his concurrence, FERC Chairman Mark Christie noted some concerns about market consolidation and large investment companies, though he struck a pragmatic note.
“Public utilities face already large and still growing capital needs, including to fund investment in greatly needed utility assets, such as power generation,” according to Christie’s concurrence.
Chairman Christie’s point is important, because if regulatory agencies were to exclude potential investors—either because some conservatives believe they are too involved with environmental groups, or because some progressives feel they are too cozy with the fossil fuel industry—they would effectively choke off sorely needed investments in infrastructure.
That would ultimately hit taxpayers right in the wallet.
While pretty much everyone has strong views when it comes to ESG, government regulators shouldn’t expand their authority by imposing ideological litmus tests on businesses. In this case, FERC made the right call by confining its review to the impact on rates that consumers will pay and the overall impact on competition.
Let’s hope that’s the beginning of a broader free market approach to regulation in this administration.