Corporate Raider’s ‘Substantial Influence’ Over Potomac Edison Requires Regulatory Oversight, Office of People’s Counsel Tells Court
BALTIMORE – The 2021 agreement of Potomac Edison’s parent company, FirstEnergy Corp., to give two board seats and other privileges to activist investor Carl Icahn should not have gone forward absent Public Service Commission approval, but did, the Office of People’s Counsel said in a court filing this week. The agreement authorizes Icahn-designated members of the FirstEnergy board of directors to weigh in and vote on every decision that comes before the board, including important matters related to Potomac Edison, OPC said.
“In 2006, the General Assembly determined that anyone who acquires ‘the power to exercise any substantial influence over the policies and actions’ of a Maryland utility must have prior regulatory approval to make sure the acquisition is in the public interest and benefits customers,” People’s Counsel David S. Lapp said. “The Icahn Group has acquired substantial influence over Potomac Edison, but no such review occurred, leaving unprotected a quarter million electric customers in Western Maryland.”
In May 2021, OPC petitioned the Public Service Commission for an investigation into FirstEnergy’s ownership and control over Potomac Edison, including FirstEnergy’s agreement with the Icahn Group. That agreement followed reports of Icahn’s plan to purchase “between $184 million and $920 million in FirstEnergy stock” related to efforts to secure representation on the company’s board of directors. FirstEnergy agreed to give the Icahn Group the right to nominate two board directors and other governance rights not enjoyed by other board members.
OPC asked the Commission to initiate a proceeding under a Maryland law that requires review of transactions that give persons the ability to exercise “substantial influence” over a Maryland utility, in part, relying on a previous PSC decision finding that giving an investor a corporate board seat results in substantial influence. Under a previous Commission chair and prior commissioner appointments, the Commission refused to review the transaction, describing the Icahn agreement as a “personnel decision.” OPC has asked a Maryland court to reverse that determination.
“By statute, Potomac Edison’s customers are entitled to protection from an investor’s ability to make governance decisions concerning the utility’s parent company, and the utility.” Lapp said.
The Maryland Office of People’s Counsel is an independent state agency that represents Maryland’s residential consumers of electric, natural gas, telecommunications, private water and certain transportation matters before the Public Service Commission, federal regulatory agencies and the courts.
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