Challenge Affiliation of Blackstone and Icahn with FirstEnergy

By Tyson Slocum

Today we joined with Citizens Utility Board of Ohio asking the Federal Energy Regulatory Commission to require the private equity firm Blackstone and the corporate raider Carl Icahn to be affiliated with FirstEnergy.

FirstEnergy Corp is one of America’s largest utilities, serving 13.5 million people through its ten operating utilities across six U.S. states. Some FirstEnergy utilities operate as a monopoly franchise with hundreds of thousands of captive ratepayers.

Blackstone Inc. is a private equity and hedge fund behemoth, with $941 billion total assets under management, with affiliates (through Lightstone Generation) that have been granted market-based rate authority. Blackstone, Inc. is controlled by its co-founder and CEO, Stephen A. Schwarzman, through his holdings of Series preferred stock that vastly dilute powers of Blackstone’s common stockholders and provides him authority to control Blackstone’s board of directors, among many other powers.

Icahn Enterprises LP is a holding company conglomerate, with 88% of the corporation owned and controlled by Carl C. Icahn, the legendary billionaire “corporate raider”.

As a result of recent transactions, Messrs. Schwarzman and Icahn, through their affiliated financial entities, now control 25% of FirstEnergy’s board of directors.

One of FERC’s tests to determine affiliation is whether an investor secures representation “on the board through the appointment of the investor’s own officers or directors.” In the case of Mr. Schwarzman’s Blackstone and Icahn Enterprises, both activist investors have secured their officers on FirstEnergy’s board of directors. Combined, the two companies comprise 25% of FirstEnergy’s board, with Icahn’s two employees representing 16.7%. Their representation on FirstEnergy’s board of directors provides the activist investors’ access to material, non-public information on FirstEnergy’s business, including its affiliates with market-based rate authority. This presents challenges to just and reasonable rates and and threatens FirstEnergy’s captive customers. The Commission must determine that Mr. Schwarzman’s Blackstone and Icahn Enterprises are affiliates of FirstEnergy Corp., per 18 CFR § 35.36 (a)(9)(iii).

The protest was filed in FERC dockets ER10-1451-006, ER10-1467-007, ER10-1468-007, ER10-1469-007, ER10-1473-006, ER10-1474-006, ER10-1478-008, ER10-2687-006, ER10-2688-009, ER10-2689-009, ER10-2728-008 and ER12-273-002.

Read the complete, six page filing here: FirstEnergy