By Tom Kleckner
FERC on Thursday conditionally approved NextEra Energy’s acquisition of Florida utility Gulf Power as being “consistent with the public interest” (EC18-117).
Separately, the commission granted Gulf Power’s request to make limited market-based rate sales of capacity and energy during the transition ownership period (ER18-1952) and accepted the utility’s new, standalone tariff, effective upon the transaction’s closing (ER18-1953). The latter order also established hearing and settlement judge procedures addressing Gulf Power’s proposed base return on equity and protocols.
Gulf Power, a subsidiary of Southern Co. in the Florida Panhandle, serves about 450,000 customers in eight counties. The utility owns or controls approximately 2,277 MW of generating capacity, a 2,700-mile transmission system and a 7,700-mile distribution system, and service over its transmission system is currently covered under Southern’s tariff.
NextEra announced in May it had reached an agreement with Southern to acquire Gulf Power, Florida City Gas and two gas-fired plants in Florida for almost $6.5 billion. NextEra completed acquisition of the gas plants in December.
Gulf Power will continue to operate in the Southern Company Pool and in Southern’s balancing authority area during the transition period, until it can operate on a standalone basis.
FERC said it found no adverse effect to generation markets in its analysis of Florida-based NextEra’s acquisition of Gulf Power. It said the applicants’ commitment to “indefinite rate de-pancaking” addressed any horizontal market power concerns that might arise, and it noted that Southern-affiliated generation would continue to compete in the Gulf Power balancing authority area, and vice versa.
The commission determined vertical competition would be unaffected as well, pointing to an unconcentrated upstream natural gas delivery market in the existing Southern balancing authority.
It also accepted the transaction’s proposed ratepayer protections, which included extending a rate cap period beyond five years, should the transition period take longer than five years, and charging grandfathered transmission customers the lower of Southern’s or the new Gulf Power rates during the transition.
In allowing Gulf Power to continue to make limited market-based rate sales of capacity and energy during the transition period, FERC also designated the utility as a Category 2 seller in the Southeast region and a Category 1 seller in the Northeast, Southwest, Northwest, SPP and Central regions.
The commission defines Category 1 sellers as wholesale power marketers and power producers that:
- own or control 500 MW or less of generation in aggregate per region;
- do not own, operate or control transmission facilities other than limited equipment necessary to connect individual generation facilities to the transmission grid (or have been granted waiver of the requirements of Order 888);
- are not affiliated with anyone that owns, operates or controls transmission facilities in the same region as the seller’s generation assets;
- that are not affiliated with a franchised public utility in the same region as the seller’s generation assets; and
- that do not raise other vertical market power issues.
Sellers that don’t fall into Category 1 are designated as Category 2 sellers and are required to file updated market power analyses.
FERC accepted Gulf Power’s proposed tariff, which included a 10.5% ROE, but ordered a public hearing on its justness and reasonableness. The commission held the hearing in abeyance to provide time for settlement judge procedures.
Commissioner Kevin McIntyre did not vote on the orders, while Commissioner Bernard McNamee, who was only sworn in Dec. 11, voted present on each one.
NextEra’s share price lost $2.27 at one point during another bloody day on Wall Street, before recovering to close up 16 cents, at $174.91/share, in after-hours trading.
