Response to the Federal Energy Regulatory Commission on Blanket Authorizations for Investment Companies

Summary The efforts of some investment companies to use their investments in electric utilities to force an uneconomic shift toward unconventional power technologies — wind and solar power in particular — will harm consumers and the economy writ large by increasing costs significantly and by reducing the reliability of electric power services. Such an outcome is inconsistent with the long-term and ongoing role of the Federal Energy Regulatory Commission to promote economic efficiency in the interstate power sector, but it is a predictable result of the ability of the investment companies to politicize utility operations while bearing few if any of the attendant costs. This is the case in particular given that even a complete elimination of greenhouse gas emissions from the entire electric power sector would reduce global temperatures in the year 2100 by 0.047°C, applying the Environmental Protection Agency climate model under a set of assumptions exaggerating the future climate impacts of reduced GHG emissions. That effect would not be detectable because it is less than half the standard deviation of the surface temperature record, and the GHG emissions effect of any plausible shift toward wind and solar power generation by electric utilities would be substantially smaller. Accordingly, FERC should eliminate the blanket authorization of investment companies’ investments above $10 million in public utilities in favor of a case-by-case approval process. This will serve to constrain the degree to which such investments can be used to force the utilities to engage in politicized management decisions. FERC’s regulatory role is likely to increase over time as technological advances and in particular the growing role of natural gas pipelines relative to transmission lines increases the interstate competition in the provision of electric power services. That increase in interstate competition carries crucial implications: Analyses of future electricity prices that focus only upon capital, fuel, labor, and other directly observable costs are likely to understate competitive market prices, and such competition, perhaps ironically, will increase scale economies in the industry by some factor and will lead utilities to compete over broader geographic regions and in unfamiliar markets. Read the full Response to the Notice of Inquiry/Proposed rule below. Zycher-response-AD24-6-000-FERC-Inquiry-Utilities-Asset-Managers-Investment-Interests-March-2024 Download