Commissioner James Danly Statement
September 21, 2023
Docket No. ER10-2502-010
I concur with the Commission’s Order Accepting Change in Status.[1]
I write separately to focus on Black Hills MBR Sellers’ affiliation with a new ultimate upstream affiliate, State Street Corporation (State Street). By way of background, Black Hills MBR Sellers explain in their January filing that “State Street has two lines of business: Investment Servicing and Investment Management.”[2] Black Hills MBR Sellers also state that “State Street has represented to the Black Hills MBR Sellers that it qualifies under 18 C.F.R. § 33.1(c)(9) for blanket authorization under Section 203(a)(2) of the [Federal Power Act (FPA)] to acquire and hold an unlimited amount of the securities of holding companies that include a transmitting utility or an electric utility company.”[3] Therefore, Black Hills MBR Sellers asserts that “Black Hills MBR Sellers also qualify for a blanket exemption under Section 203(a)(1) of the FPA to transfer their outstanding voting securities to State Street, as a holding company granted blanket authorization under Section 33.1(c)(9).”[4] In a filing made in August, the Black Hills MBR Sellers state that to the filers’ knowledge and “[a]s of the date of this supplement [, i.e., August 1, 2023], . . . State Street now owns more than 10% of the voting stock of the following relevant entity: New Jersey Resources Corp. (‘NJ Resources’) . . . .”[5]
I write to explain my misgivings regarding the foregoing. 18 C.F.R. § 33.1(c)(9) states the following:
A holding company, or a subsidiary of that company, that is regulated by the Board of Governors of the Federal Reserve Bank or by the Office of the Comptroller of the Currency, under the Bank Holding Company Act of 1956 as amended by the Gramm–Leach–Bliley Act of 1999, is granted a blanket authorization under section 203(a)(2) of the Federal Power Act to acquire and hold an unlimited amount of the securities of holding companies that include a transmitting utility or an electric utility company if such acquisitions and holdings are in the normal course of its business and the securities are held:
(i) As a fiduciary;
(ii) As principal for derivatives hedging purposes incidental to the business of banking and it commits not to vote such securities to the extent they exceed 10 percent of the outstanding shares;
(iii) As collateral for a loan; or
(iv) Solely for purposes of liquidation and in connection with a loan previously contracted for and owned beneficially for a period of not more than two years, with the following conditions and reporting requirement: The holding does not confer a right to control, positively or negatively, through debt covenants or any other means, the operation or management of the public utility or public utility holding company, except as to customary creditors’ rights or as provided under the United States Bankruptcy Code; and the parent holding company files with the Commission on a public basis and within 45 days of the close of each calendar quarter, both its total holdings and its holdings as principal, each by class, unless the holdings within a class are less than one percent of outstanding shares, irrespective of the capacity in which they were held.
It is not clear to me whether State Street satisfies the requirements above and nothing in Black Hills MBR Sellers’ filing demonstrates which, if any, of the elements of our regulation State Street satisfies. Is State Street “a holding company . . . regulated by the Board of Governors of the Federal Reserve Bank or by the Office of the Comptroller of the Currency, under the Bank Holding Company Act of 1956 as amended by the Gramm–Leach–Bliley Act of 1999” and is the acquisition by State Street of more than 10% of the voting securities of Black Hills Corporation, the parent company of Black Hills MBR Sellers, “[an] acquisition[] and holding[] . . . in the normal course of its business” where “the securities are held” for one of the four purposes set forth in subparts (i) through (iv) of 18 C.F.R. § 33.1(c)(9)? The only truthful answer the Commission can give to that question, on this record is: we do not know.
We need to know who owns what, and what they are doing with their ownership interests, or we will be unable to discharge our duties to oversee regulated utilities. For that reason, the Commission should issue an Order to Show Cause for State Street[6] in order to afford State Street the opportunity to demonstrate that it satisfies the requirements of 18 C.F.R. § 33.1(c)(9) and that it is thus entitled to blanket authorization under FPA section 203(a)(2).[7] If State Street cannot demonstrate that it satisfies the requirements of that regulation, then it is obligated to obtain Commission authorization under FPA section 203(a)(2).[8]
For these reasons, I respectfully concur.
[1] Black Hills Colo. Elec., LLC, 184 FERC ¶ 61,172 (2023).
[2] Black Hills MBR Sellers, et al., Docket Nos. ER10-1529, et al., Notice of Non-Material Change in Status, at 10-11 (Jan. 31, 2023) (“State Street’s Investment Servicing line of business performs core custody and related value-added functions, such as providing institutional investors with clearing, settlement, and payment services. State Street’s Investment Management line of business, State Street Global Advisors . . . operates through multiple wholly-owned indirect subsidiaries of State Street and provides a broad range of investment management strategies and products for clients.”).
[3] Id. at 11 (footnote omitted).
[4] Id. at 11 n.44 (citing 18 C.F.R. § 33.1(c)(9)).
[5] Black Hills MBR Sellers, et al., Docket Nos. ER10-1529, et al., Supplement to Notice of Non-Material Change in Status, at 1 n.2 (Aug. 1, 2023).
[6] The Commission may inquire about matters related to its jurisdiction and may investigate whether there are violations of the statute, of its regulations, or of its orders. See 16 U.S.C. § 825f(a) (“The Commission may investigate any facts, conditions, practices, or matters which it may find necessary or proper in order to determine whether any person, electric utility, transmitting utility, or other entity has violated or is about to violate any provision of this chapter or any rule, regulation, or order thereunder, or to aid in the enforcement of the provisions of this chapter or in prescribing rules or regulations thereunder, or in obtaining information to serve as a basis for recommending further legislation concerning the matters to which this chapter relates, or in obtaining information about the sale of electric energy at wholesale in interstate commerce and the transmission of electric energy in interstate commerce.”); id. § 825h (“The Commission shall have power to perform any and all acts, and to prescribe, issue, make, amend, and rescind such orders, rules, and regulations as it may find necessary or appropriate to carry out the provisions of this chapter . . . . For the purposes of its rules and regulations, the Commission may classify persons and matters within its jurisdiction and prescribe different requirements for different classes of persons or matters . . . .”). Cf. Ampersand Cranberry Lake Hydro, LLC, 177 FERC ¶ 61,028, at P 1 (2021) (“Pursuant to Rule 209(a)(2) of the Commission’s Rules of Practice and Procedure, the Commission directs Ampersand Cranberry Lake Hydro, LLC[,]. . . licensee for the Cranberry Lake Project No. 9685, to show cause why it should not be found to have violated Article 5 of the project license by failing to retain the possession of all project property covered by the license.”) (citing 18 C.F.R. § 389.209(a)(2)); New Fortress Energy LLC, 171 FERC ¶ 61,230, at P 1 (2020) (requiring a company “to show cause why the liquified natural gas . . . handling facility it . . . constructed adjacent to the San Juan Combined Cycle Power Plant at the Port of San Juan in Puerto Rico is not subject to the Commission’s jurisdiction under section 3 of the Natural Gas Act”). Alternatively, we can refer the matter to the Office of Enforcement to open an investigation. See Am. Transmission Co. LLC, 153 FERC ¶ 61,006, at P 7 n.12 (2015).
[7] 16 U.S.C. § 824b(a)(2).
[8] Id. (“No holding company in a holding company system that includes a transmitting utility or an electric utility shall purchase, acquire, or take any security with a value in excess of $10,000,000 of, or, by any means whatsoever, directly or indirectly, merge or consolidate with, a transmitting utility, an electric utility company, or a holding company in a holding company system that includes a transmitting utility, or an electric utility company, with a value in excess of $10,000,000 without first having secured an order of the Commission authorizing it to do so.”).