Transition Finance Weekly - October 31, 2024
Anti-ESG Loses in OK; Returns from the Dead in MO; FL Ratepayers on the Hook
1. Oklahoma Judge Expands Ruling Against Anti-ESG Law
State court Judge Sheila Stinson laid out three new reasons why the law is unconstitutional.
In previous rulings, the judge had blocked the Energy Discrimination Elimination Act of 2022, in a challenge by retiree Don Keenan. Now she’s formally ruled for Keenan, and the law is dead unless the state wins on appeal.
She found the Oklahoma law unconstitutional for multiple new reasons: it requires challengers to pay attorneys’ fees even if they win, it creates a monetary barrier to court access, and it creates a special class of litigants. She had previously objected to the law on due process and vagueness grounds.
Oklahoma AG Gentner Drummond will be appealing. He threw State Treasurer Todd Russ off the case (and fired off nasty comments in the press) after Stinson’s earlier ruling suspending the law.
Tim Hill, Alliance for Prosperity and a Secure Retirement: “First responders, teachers, and other public employees deserve sound financial management of their pensions without the increased risks that come when political agendas are added to the mix.”
2. Missouri SOS Jay Ashcroft Issues Brazen “Emergency” Edicts Resurrecting Anti-ESG Rules
Ashcroft’s anti-ESG play lost in the courts and at the ballot box. Now he’s making one last try before his term ends.
Missouri’s outgoing Secretary of State Jay Ashcroft issued a set of six-month “emergency” rules prohibiting investment advisors from taking climate risk into consideration. Calling ESG an “immediate” threat to “public welfare,” he reannounced almost verbatim two sets of anti-ESG rules that a federal judge previously found unconstitutional. Unsuccessfully defending the illegal rules from a challenge by SIFMA cost taxpayers up to $2 million in legal fees to a politically-connected law firm before Ashcroft surrendered in the case.
Ashcroft received the original language used in his rules from the Foundation for Government Accountability, an anti-ESG group that has pushed bills in multiple states. The FGA also provided the same to Wyoming Secretary of State Chuck Gray, who attempted to implement a similar rule.
Anti-ESG has been a political loser for Ashcroft. In the governor’s race this year he ran hard on the issue, hoping to bolster his conservative credentials — and lost.
3. Ratepayers On the Hook After Hurricanes
Florida utilities push for permission to recover rebuilding and resilience upgrade costs from ratepayers.
Florida Power & Light hopes to bill customers an additional $1.2 billion to help it recover from three hurricanes this season, and Duke Energy and Tampa Electric are expected to do likewise. Fossil gas, one of the least storm-resistant generation sources, provides 73% of FPL’s power.
FPL has previously lobbied for legislation that lets it raise rates to pay for resilience upgrades like burying transmission and distribution lines and hardening supply channels. The company has also pocketed tax cuts for itself while passing tax increases on to customers, and lobbied to fight clean energy and discredit political opponents.
Climate-related upcharges can leave customers paying off storm damage for decades. The current upcharges are hitting at the same time that spiking demand by AI data centers is driving plans for rapid capacity growth nationwide, much of which will end up being paid for by residential and small-business ratepayers, too.
4. When Hurricane Helene Struck, Marginalized Groups Were Hit Especially Hard
People of color are at elevated risk of eviction, homelessness, and bankruptcy due to flood and storm damage.
Studies show that evictions and housing prices spike in hurricane-damaged areas, and right on schedule, within days after Asheville’s Buncombe County Courthouse reopened following Hurricane Helene, 40 evictions were already on the docket. Advocates across North Carolina, Florida, and Georgia have asked the states to suspend evictions while recovery is underway, noting that Black residents are disproportionately at risk of being left with nowhere to go.
Black residents receive less FEMA aid than others; they’re also 1.5 times less likely to have property insurance and twice as likely to be evicted as other households. For socioeconomic and historical reasons, marginalized groups are much more likely to be living in disaster-prone areas in the first place, and even new resilience infrastructure for other communities can create new flooding problems for them.
Pastor Timothy Williams, whose Alabama home has been subject to more frequent flooding: “Our homes are still sinking, and we’re still losing…. Our people are scared…. We done lost everything already. What other community would have to deal with this for six years if they weren’t African American?”
5. Biden Administration Extends Tax Credits for Renewables’ Supply Chains
New rules bolster domestic manufacturing of clean energy equipment and components.
The IRA provided for investment not just in new clean energy facilities, but in U.S. manufacturing of the inputs to those facilities. Now final rules have locked in Section 45X tax credits to protect that domestic supply chain, including the mining of metals and minerals critical to the manufacturing of clean energy.
The Biden administration is also extending the Section 48D manufacturing credit, from the CHIPS Act, to include solar wafers, the small silicone “slices” used to make solar panels, alongside an IRA manufacturing tax credit. Most solar wafers currently come from China; these credits can help bolster U.S. solar wafer manufacturing, which has struggled to take off domestically.
RACES WE’RE WATCHING
As Americans head to the polls, races for statewide financial offices could impact transition finance, including two in North Carolina:
Democrat Natasha Marcus hopes to unseat industry-funded GOP Insurance Commissioner Mike Causey. Marcus says he’s approved premium increases without due process and let insurers use a legislative loophole to raise rates.
Anti-ESG investment manager Brad Briner hopes to become State Treasurer. He says “the ESG crowd has driven a lemming-like abandonment of… the traditional energy sector that — like tobacco a generation ago — creates compelling returns for the non-politicized investors who remain.”
In Oregon, Elizabeth Steiner — who pressed for coal divestment as a state legislator — promises as State Treasurer to “leverage the power of Oregon's investments to build toward a net zero portfolio and push companies to adopt clean energy goals." She’s running against Mary King, another divestment supporter, and Brian Boquist, an ammunition company executive.
Utah Treasurer Marlo Oaks has made anti-ESG a core part of his platform. In Arkansas, Secretary of State John Thurston, now running for Treasurer, has backed the state’s controversial anti-ESG law, too.
More: Pensions & Investments, NYT