Senators Request Information from FERC on Investments by Index Funds in Public Utilities
Commentary by Steven Lofchie
A group of Republican Senators led by Senator Mike Lee (R-UT) asked the Federal Energy Regulatory Commission for information on whether index investment funds making investments in public utilities were truly passive or were attempting to influence the management of the utility companies to pursue a climate agenda.
In a letter to the FERC, the Senators argued that the index funds were not truly passive and thus their investments did not comply with FERC authorization of their acquisitions of large positions in the utility companies. The Senators requested information by August 11, 2023.
Commentary
The issues raised by the Senators on the application of the Federal Power Act to index funds' activities overlap with securities law: What does it mean to be "passive"? SEC Commissioner Hester Peirce suggested previously that advisers to index funds should not actively vote those shares, but should instead vote along with management. There may be other solutions as well, (see previous comment suggesting passive investors vote pro rata with all other investors). The Commissioner's proposal would seem to be a potential way to resolve the issue.