WASHINGTON, D.C. — FirstEnergy announced on Monday that Blackstone executive Brian Tierney will take over as President and CEO of FirstEnergy Corp. Five months ago, Public Citizen requested the Federal Energy Regulatory Commission to expedite action to deem the private equity giant Blackstone as an affiliate of utility FirstEnergy.
Public Citizen urged quick action by FERC because of concern that Blackstone’s control of FirstEnergy’s board would unduly influence the selection of the utility’s new CEO. Tyson Slocum, director of Public Citizen’s Energy Program, issued the following statement:
“Deeming activist private equity funds as affiliates of utilities they control is essential to protect consumers and market integrity. We warned FERC months ago that Blackstone’s control over FirstEnergy would influence the selection of a new CEO, making it imperative to determine Blackstone’s affiliation. Now Blackstone has used its control over the utility to install its own executive as CEO. In light of this private equity coup, the Commission must issue an order finding Blackstone to be affiliated with FirstEnergy.
“A typical tactic of activist investors and private equity firms is to acquire an investment stake of less than 10% in order to evade regulatory oversight, and then bully the target utility into giving up control over its board of directors and eventually its CEO. Classifying such activist investors as affiliates of the utility can help to nullify such corporate raider strategies used by hostile investors.
“Affiliation restores market integrity by requiring the inclusion of all of its power plants along with the utility’s when FERC calculates whether a utility has market power. This ensures that investors that control a public utility cannot engage in anti-competitive practices. This is particularly applicable to Blackstone, which owns a massive fleet of power plants in addition to its stake in FirstEnergy.
“For utilities with captive ratepayers, affiliates can only engage in financial transactions with the utility at arm’s length. This prevents an investor from selling services at inflated costs, and then having the utility recover those inflated costs from ratepayers. Affiliation is therefore important to ensure that Blackstone cannot engage in such abusive practices.
“We urge FERC to immediately act and deem Blackstone a legal affiliate of FirstEnergy.”
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