FERC on Thursday conditionally approved NextEra Energy Transmission’s $660 million purchase of GridLiance transmission operations in MISO, SPP and CAISO, saying it would not harm competition or increase rates for customers (EC21-10).
NEET announced in September it would buy GridLiance West, GridLiance High Plains and GridLiance Heartland from a subsidiary of Blackstone Energy Partners. (See NextEra Buying GridLiance for $660M.)
FERC concluded the transaction would not harm horizontal competition because it “does not involve the change in ownership or control of any generating assets or capacity” or vertical competition even though the “proposed transaction involves the upstream change in control over transmission and related assets.
“However, there is no change in control over electric products or inputs to electric products,” FERC said. “NEET and its subsidiaries do not currently have any jurisdictional transmission facilities in MISO and SPP. NEET’s subsidiaries do have jurisdictional transmission facilities in CAISO, and they are under CAISO’s operational control and subject to CAISO’s OATT [Open Access Transmission Tariff].”
Rates would increase for some transmission customers after the sale, but NEET would mitigate the increase by “creating an offsetting rate reduction in the formula rates during the first five years after the proposed transaction closes,” FERC said. “Specifically, applicants propose that NEET will push down a portion of the tax amortization from goodwill created by the proposed transaction at the holding company level in an amount sufficient to reduce the income tax allowance of GridLiance West and GridLiance HP and fully offset the rate increase associated with the reversal of the ADIT [Accumulated Deferred Income Taxes] balances.”
FERC said it had faith that NEET’s proposal would avoid rate increases over the ADIT calculations.
In addition, FERC noted, “applicants also commit to hold transmission and wholesale customers harmless from the transaction and transition costs associated with the proposed transaction in excess of transaction savings for five years.”
Ameren, a utility that serves 2.4 million customers in Illinois and Missouri, expressed concerns that its customers would bear the costs of NEET’s acquisition of GridLiance Heartland, but the commission said NEET’s cost mitigation measures and commitment to hold customers harmless would prevent that outcome.
FERC, however, found that NEET’s explanation of how the deal “will not result in the cross-subsidization of a non-utility associate company” insufficient and ordered it to file additional information within 60 days.
Launched in 2014, GridLiance markets its expertise in planning, engineering, construction and operations to small transmission owners, including electric cooperatives and public power. Backed by Blackstone Energy Partners, an affiliate of The Blackstone Group, it also offers its “partners” a source of capital investment for transmission projects.
Among other ventures, the independent transmission company owns 700 miles of high-voltage lines in Illinois, Kansas, Kentucky, Missouri, Nevada and Oklahoma.
NEET develops, owns and operates transmission facilities across the U.S. and Canada. It has operating assets in California, New Hampshire and Texas, including Lone Star Transmission in Central Texas (330 miles of double-circuit 345-kV line and six substations). For Florida-based NextEra, the acquisition will give it a bigger foothold in the Midwest after failing in its 2016 bid for Texas’ Oncor.
NextEra’s subsidiaries own or operate merchant generating facilities in 37 states and Canada with a combined net generating capacity of approximately 24,000 MW. NextEra also owns Florida Power & Light and Gulf Power, public utilities that serve wholesale and retail electric customers in Florida.