FERC on Wednesday approved a market power mitigation plan for an investment fund’s $4.3 billion purchase of El Paso Electric and rejected rehearing requests challenging the commission’s approval of the deal (EC19-120).
The commission’s March 30 order approving the transaction directed the companies to file a mitigation plan to address market power concerns that could arise from a premature termination of power purchase agreements for Mesquite Power, part owner of the 595-MW Mesquite Generating Station in Arizona. Mesquite Power is owned by EPE’s purchaser, the Infrastructure Investments Fund (IIF). (See FERC Conditionally OKs Purchase of EPE.)
The applicants offered two options to reduce their controlled capacity if the “surplus output contracts” for Mesquite are terminated before their scheduled expiration on May 1, 2021.
Under the first option, EPE would sell a 14-MW block of firm energy during peak periods. The energy would be supplied by an EPE generation facility that would be economic during the seasons and load periods with market power screen failures and backed by system power if the designated unit is unavailable.
Under the second option, EPE would sell a 14-MW block of firm energy from its share of the Palo Verde nuclear plant during peak periods to a nonaffiliated third party at the Four Corners trading hub. EPE would pay liquidated damages if it is unable to deliver.
“Either option would be sufficient to mitigate the competitive harms identified by applicants’ sensitivity analysis,” FERC said in approving the proposal. It required the applicants to notify it if the contracts are terminated and which mitigation proposal will be enacted within 60 days of Mesquite receiving notice of early termination.
The commission rejected a request to rehear the March order by Public Citizen, which contends JPMorgan Chase should be considered an affiliate of IIF in FERC’s analysis of the merger. J.P. Morgan Investment Management has acknowledged it is an investment adviser of IIF, but FERC ruled that its market power analysis showed the transaction would have no adverse effect on rates even if J.P. Morgan were considered an affiliate.
“The commission did not, as Public Citizen argues, ignore the information it provided in its various pleadings. Indeed, it was partly in response to Public Citizen’s various pleadings, and applicants’ responses to them, that commission staff took the extra step of requesting additional information and explanation from applicants,” FERC said.
The commission also rejected a rehearing request on similar grounds from U.S. Sens. Jeff Merkley (D-Ore.), Ed Markey (D-Mass.) and Bernie Sanders (I-Vt.), saying they lacked standing because they did not file motions to intervene in the proceeding and were not otherwise made parties to it.
