Rising electricity bills are becoming a pressing concern for consumers in the United States as private equity firms increasingly target utility companies for acquisition. A significant event in this trend occurred in October 2023 when Minnesota regulators approved the acquisition of Allete, the parent company of Minnesota Power, by BlackRock and the Canada Pension Plan Investment Board. This acquisition marks a shift from a publicly traded to a privately held company, despite considerable community opposition and recommendations against the deal from an administrative law judge.
The approval came amid fears that private equity ownership could diminish transparency and inflate electricity rates. Critics, including Alissa Jean Schafer, climate director at the Private Equity Stakeholder Project, argue that this move signals a troubling trend where essential services are sold to the highest bidder. She described the approval as “precedent-setting” for the growing encroachment of private equity into the utility sector.
BlackRock announced a $6.2 billion deal to acquire Allete in May 2024, which faced strong opposition from local community members and activists. Concerns about the potential decline in service quality and increased rates were heightened when an administrative law judge’s report suggested the Minnesota Public Utilities Commission (PUC) reject the acquisition. The report warned that BlackRock would prioritize profit over public interest.
Despite this, Minnesota’s PUC ultimately approved the deal, implementing a one-year freeze on base rates and other short-term concessions. Critics contend these measures do not address the long-term implications of privatizing essential services. As Maggie Schuppert, an organizer with the advocacy group CURE, noted, the decision appeared politically motivated amidst a backdrop of lobbying and strategic concessions.
Private equity’s growing interest in utilities is largely fueled by the increasing demand for electricity from data centers, which consume enormous amounts of power. A recent study indicates that this could lead to a 25 percent rise in electricity bills in certain regions. Analysts suggest that the financial model employed by private equity firms could jeopardize service reliability and safety as they focus on maximizing returns for investors.
The acquisition of utilities by private equity firms raises significant concerns regarding regulatory oversight. Experts caution that the financial complexity of these firms will outpace the capability of already under-resourced regulators. Tyson Slocum, director of Public Citizen’s Energy Program, emphasized that regulators may struggle to obtain critical information necessary to monitor these private entities effectively.
Sandeep Vaheesan, author of “Democracy in Power: A History of Electrification in the United States,” expressed fears that private equity ownership will mirror the extractive practices seen in other sectors, leading to subpar services. He warned of the potential for high returns for investors achieved at the expense of consumers and service quality.
Opponents of the Allete acquisition foresee that the deal sets a dangerous precedent, encouraging similar moves by private equity giants in other states. The pressure from powerful financial interests and the political leverage they wield complicate the regulatory landscape. Slocum cautioned that the approval process in Minnesota reflects a growing trend where financial muscle can outweigh public interest.
As public outcry continues following the Minnesota PUC’s decision, advocates are calling for a reassessment of the utility sector’s privatization. The rise in electric bills and the encroachment of Wall Street into essential services may bolster support for public power initiatives, which propose a more democratic and accountable approach to energy distribution.
Public power campaigns are gaining traction across the U.S., advocating for utilities that prioritize consumer welfare over profit. Activists like Schuppert believe that the recent events surrounding the Allete acquisition may serve as a rallying point for broader movements advocating for decommodified, publicly owned utilities.
The growing trend of private equity firms acquiring utilities poses serious implications for consumers and the future of energy infrastructure, raising essential questions about accountability, transparency, and the sustainability of energy services in the long term.
