FERC Complaint Lodged Against CenterPoint Over Secret Hedge Fund Involvement

Houston-based CenterPoint Energy is the target of a recent Federal Power Act complaint filed by two consumer adversary groups with the Federal Energy Regulatory Commission. Public Citizen and Citizens Action Coalition of Indiana allege CenterPoint Energy failed to disclose its financial affiliation with New York-based hedge fund, Elliott Management Corp., led by billionaire Paul Elliott Singer.

The complaint states the utility company failed to notify FERC that the hedge fund invested $1.35 billion during May in exchange for significant concessions by CenterPoint’s management including Elliott’s preferred choice for board members and a new CEO. The extent of Elliott’s control may be subject to two different confidentiality agreements between the utility and the hedge fund. The agreements remain hidden to the public according to published news reports.

The complaint states, “Although the companies providing the equity investment own less than 10% of CenterPoint Energy, Inc., the delivery of the cash was a quid pro quo for a management overhaul that results in the new investors exerting control over CenterPoint Energy, Inc., and therefore the leader of these investors, Elliott Management, should now be considered an affiliate of CenterPoint Energy, Inc.”

“CenterPoint is a regulated utility serving energy customers in Houston. In Texas, we’re not used to seeing Cayman Islands hedge funds wrest control of our local utilities,” said Adrian Shelley, director of Public Citizen’s Texas Office. “Major cash infusions and rapid management changes require federal oversight. Elliott Management is flaunting that oversight, and we’re worried about what that could mean for clean, reliable, affordable energy in Texas.”

The complaint notes that federal rules require utilities to disclose any significant change related to control of the company to FERC within 30 days. CenterPoint failed to notify FERC of these changes.

“FERC’s change in status requirements are essential to ensure utilities are fully transparent about which entities own and control their operations,” said Tyson Slocum, Energy Program director for Public Citizen and author of the complaint. “FERC should require CenterPoint to report this change and identify Elliott Management Corp as an affiliate.”

FERC will allow public comments regarding to the complaint prior to issuing its decision.