A bid by financial giant BlackRock to acquire a Minnesota electric utility could push up already-soaring utility bills, opponents warn.
The private equity firm Global Infrastructure Partners, a division of BlackRock, announced a $6.2bn deal last year to take over the parent company of a Duluth-based electric utility which serves more than 150,000 customers, if the state’s public utilities commission gives the green light.
A decision is expected during the first week of October.
Some environmental and consumer protection advocates are exhorting the commission to turn down the proposal, which would see BlackRock become the controlling shareholder of the utility Minnesota Power.
“If the deal goes through, it will force ratepayers to be beholden to the private equity agenda: prioritizing profits for executives while rising prices for everyday people,” said Jenna Yeakle, Duluth-based campaign manager with the Sierra Club, said.
BlackRock, the world’s largest asset manager, has previously come under fire for its climate-warming investments.
In July, Minnesota’s department of commerce, which initially opposed the purchase, backed the bid from Global Infrastructure Partners and the Canada Pension Plan Investment Board to purchase Minnesota Power and its parent company, Allete, after the firms agreed to freeze utility rates for one year and invest in green energy.
Opponents say these provisions do little to assuage their fears. Since rate increases do not currently happen each year, they say the rate freeze amounts to business as usual. And the commitment to fund renewable power is non-binding, they say.
“These capitalist vultures do not have our best interests at heart,” Cody Pals, a member of the tenants union Duluth Tenants, said at a Wednesday press conference.
Brett Christophers, author of Our Lives in Their Portfolios: Why Asset Managers Own the Worldsaid the proposal “looks to be a classic private-equity play: buy, own for a few years and then sell at a profit”.
“As such, money will only be invested in decarbonizing Minnesota Power if [Global Infrastructure Partners] thinks that the market will reward it for undertaking that investment when it comes time to exit,” said Christophers, an economic geographer at Uppsala University.
That prospect “seems very doubtful, given the negative investor sentiment around all things clean energy-related since Trump’s return to power”, he said.
Other financial giants have also set sights on utilities. In May, private equity behemoth Blackstone announced plans to acquire a utility with 800,000 customers in the south-west US, pending Texas regulators’ approval.
Though Wall Street firms have historically shown little interest in electric utilities because they produce slow returns, that is changing amid rapid increases in energy demand due to AI datacenters.
The current landscape poses “enormous” financial opportunity, BlackRock’s CEO and founder, Larry Fink, said in a recent interview.
“Utilities make money by investing in new energy infrastructure,” said Matt Parr, communications director for the watchdog organization Private Equity Stakeholder Project. “With huge power demand comes huge ability to profit, especially if there’s an environment where utility commissions are approving rate increases.”
If approved, the Minnesota proposal could “open the floodgates” for private equity firms eyeing utilities, he said.
Reached for comment, Minnesota Power referred the Guardian to previous statements by the utility and Allete.
“Many have highlighted how the proposed partnership provides the financial strength and scale to make the clean energy investments needed to meet our state’s carbon-free energy goals while keeping bills as low as possible for all our customers,” said Allete’s CEO, Bethany Owen, in an August statement.
Owen noted that the sale enjoys backing from not only some clean energy advocates but also labor unions, businesses and the Salvation Army. (Opponents of the deal, for their part, have alleged some of those backers may have been courted or even coerced by BlackRock’s allies.)
BlackRock and Global Infrastructure Partners declined to comment on the proposal. The Canada Pension Plan Investment Board did not respond to a request for comment.
Utility prices
Private equity firms have a history of raising utility prices rapidly at ratepayers’ expense, opponents say.
When one such firm bought a water utility in New Jersey, it oversaw a 28% increase in consumers’ bills over four years, despite promises to freeze rates across that period, the New York Times found.
In 2023, the state of Kansas sued another private equity firm for allegedly price-gouging gas customers during February 2021’s winter storm. Ratepayers saw a 200% price increase, state officials say, while the firm reaped $215m in profitsaccording to the Wall Street Journal.
“Why would there be private equity interest in a utility if it weren’t for their ability to achieve the kind rates of return and profit margins that they expect?” said Maggie Schuppert, a director at the rural environmental justice group Cure Minnesota. “One way to achieve those high margins is by increasing bills.”
In another example, after an electric cooperative in Michigan was bought by a private equity firm, it’s rates soared. Its prices were 9 cents per kilowatt higher than the average private utility in the state as of late last year, according to a July ruling from a Minnesota judge that unambiguously recommends state regulators reject BlackRock’s proposal.
Global Infrastructure Partners has “not met their burden of proof to show the transaction is consistent with the public interest”, administrative law judge Megan McKenzie wrote in the emphatic ruling, which followed months of hearings. While non-binding, the opinion will inform regulators’ decision on whether or not to approve the deal.
“The Partners’ expertise is unlikely to provide a material benefit to Minnesota Power or its ratepayers,” the opinion says, adding that Global Infrastructure Partners’ private documents and communications with potential investors make clear that it is “planning on significant rate increases” that would surpass inflation and up the percentage of income ratepayers spend on utilities.
The prospective buyers and Allete rebutted the judge’s report, saying it was “not an accurate or balanced summary or analysis of the record” and that it “does not even attempt to provide a meaningful discussion of the evidence, arguments and counterarguments”.
In addition to the year-long rate freeze, the firms have agreed to lower their return on equity from 9.78% to 9.65%, the filing says, “resulting in immediate benefits for customers”.
Renewable energy
Allete has claimed the private equity firms “are aligned with the company’s vision of continuing to advance the State of Minnesota’s clean energy goals”. And in recent weeks, some clean energy advocates have also come out in support of the deal, saying it could provide Minnesota Power with the necessary capital to meet the state’s goal of decarbonizing its energy by 2040.
“The primary goal of the Acquisition is to equip the Company with reliable access to equity capital necessary to finance the investments in clean energy technologies,” Allete and the prospective buyers say.
But there is “significant risk” that Global Infrastructure Partners would not be willing or able to provide the capital needed to transition Minnesota Power away from fossil fuels, McKenzie wrote in her ruling. In fact, Allete is “planning significant capital spending on fossil fuels”, she wrote.
Global Infrastructure Partners often touts its focus on sustainability. “We aspire to be one of the world’s leading owners, developers, and operators of renewable energy assets,” its website says.
Yet the firm is a major investor in a south Texas gas terminal and other fossil fuel infrastructure, said Parr. When BlackRock acquired Global Infrastructure Partners, it more than doubled the number of fossil fuel companies in its portfolio, from nine to 22. This year, BlackRock also exited a group of asset managers committed to net zero investments amid political pressure.
Schuppert said she does not believe BlackRock is ideologically committed to either renewable energy or fossil fuels. “They’re committed to whatever makes them the most freaking money,” she said.
But even if the firm does advance renewable energy goals, if it does so at the expense of ratepayers’ energy bills. “That is not a win,” Schuppert said.
“That should be really concerning for people who say they want us to do decarbonization in a way that is equitable.”
If approved, the deal will also hamstring the public’s ability to control their electricity supply, said Yeakle, because though the state’s public utilities commission would still regulate Minnesota Power, its investors would have more control over its operations.
“It would further erode democracy and governance for the people by the people, by handing over political control,” she said. “We shouldn’t be further privatizing our crucial energy resource, adding more and more barriers to public oversight, to public transparency, to the public accessing the halls of power.”
