FERC approved Constellation Energy’s $26.6 billion purchase of Calpine, creating an IPP with nearly 60 GW of generation around the country (EC25-43). 

In an order issued after the markets closed July 23, the commission found the deal, with divestment commitments and a settlement on bidding behavior with PJM’s Independent Market Monitor, is in the public interest. 

While Constellation is the surviving firm in the deal, Calpine’s main owners — ECP and AI Holdings — each still will control less than 10% of the new firm, which is below FERC’s standard for a controlling interest in a utility. 

The mitigation plan includes selling off 3,546 MW of generation, all of it located in PJM, that comes from the 1,134-MW natural gas combined cycle Bethlehem Energy Center, the 569-MW dual-fuel combined cycle York Energy Center Unit 1, the 1,136-MW dual-fuel combined cycle Hay Road Energy Center and the 707-MW simple cycle gas-fired Edge Moor Energy Center. 

The two firms have overlapping generation in ISO/RTOs around the country, but PJM is their biggest shared market, where, after consummation, Constellation will control 26.4 GW, or 14.9%, of its installed capacity. In some submarkets to the RTO, absent the mitigation plan, the merger would have given Constellation enough market power to fail standard screens, FERC said. 

Constellation and the IMM signed a deal July 3 where the firm agreed to some post-merger behavioral commitments to deal with the monitor’s concerns over its impact on market power. The deal is based on one that Constellation entered into with the IMM before the merger and extends behavioral commitments on its generation out to the 2035/36 capacity delivery year. 

The deal prevents the firm from selling any of 3,546 MW of generation to be divested to Dominion Energy and American Electric Power, or their subsidiaries. The IMM could disagree on other deals, including seeking restrictions at FERC, but Constellation would be able to oppose those arguments. 

The IMM settlement includes commitments for Constellation to bid into the capacity and energy markets at specific prices and requires notice for retirements. It also limits Constellation’s ability to enter into co-location deals with large loads such as data centers. 

“For a period of one year from the execution of this settlement agreement, Constellation agrees not to enter into any co-location arrangements under which the capacity serving the load delists, until and only if the commission issues an order, regulations or policy statement subsequent to the date of this agreement authorizing such a configuration,” it said. “For the avoidance of doubt, nothing in this agreement restricts the ability of Constellation or the [PJM] IMM to advocate for any particular co-location configuration or restriction on such configurations.” 

FERC found the mitigation plan appropriately addresses market power concerns brought up by Constellation’s acquisition of Calpine. 

“We accept Constellation Energy’s commitment to abide by the terms of the Constellation-PJM IMM agreements, and we condition our authorization of the proposed transaction on that commitment,” FERC said. 

The deal addresses market power concerns that the IMM and other intervenors made in the case, extending bidding rules Constellation already must follow in PJM to its newly acquired units and for an additional four years from the previous deal. Any changes to that deal before May 2036 would have to come before FERC to get approved, as the regulator is basing the deal’s approval on the commitments made there. 

Pennsylvania’s Consumer Advocate asked FERC to weigh the impact of the merger on the state’s competitive market and the default service auctions for customers who stay with the utility. FERC has said it would examine retail market impacts, but only if a state commission asks it to do so, and the PUC did not in this case. 

FERC also was unpersuaded by protesters’ arguments that it needed to examine the impact of ECP continuing to own less than 10% of the firm after the merger. Staying below that mark creates a rebuttable presumption that an entity lacks control. 

“ECP and AI Holdings will each hold less than 10% of the voting equity interests in Constellation and will not have any right to appoint a board member to the boards of Constellation or any of its subsidiaries,” FERC said. “Furthermore, applicants represent that there is no contract that gives ECP influence on the decision-making of Constellation or its public utility subsidiaries after consummation of the proposed transaction.”