156 FERC 62,165 UNITED STATES OF AMERICA FEDERAL ENERGY REGULATORY COMMISSION

Transcription

1 156 FERC 62,165 UNITED STATES OF AMERICA FEDERAL ENERGY REGULATORY COMMISSION Duquesne Light Company Duquesne Power, LLC Three Rivers Utility Holdings, LLC Docket No. EC ORDER AUTHORIZING DISPOSITION AND ACQUISITION OF JURISDICTIONAL FACILITIES (Issued September 2, 2016) On July 1, 2016, Duquesne Light Company (Duquesne Light), Duquesne Power, LLC (Duquesne Power), and Three Rivers Utility Holdings, LLC (Three Rivers) (collectively, Applicants) filed an application pursuant to sections 203(a)(1) and 203(a)(2) of the Federal Power Act (FPA) 1 requesting authorization for the disposition and acquisition of jurisdictional facilities resulting from a transaction in which Three Rivers will acquire from CLH Holdings, GP (CLH Holdings) the entirety of CLH Holding s interest in DQE Holdings LLC (DQE Holdings), which is approximately 30.4 percent of the membership interests in DQE Holdings (Proposed Transaction). The jurisdictional facilities involved in the Proposed Transaction consist of tariffs, service agreements, transmission and interconnection facilities, and associated books and records. According to Applicants, DQE Holdings is the indirect parent company of Duquesne Light and Duquesne Power. Applicants state that DQE Holdings is owned by a group of investment entities which are private investment funds that are not publicly traded. According to Applicants, none of the entities own a majority of membership interests in DQE Holdings. Applicants explain that CLH Holdings is owned by funds managed by Macquarie Infrastructure Partners and Macquarie Global Infrastructure Funds II. Applicants state that Duquesne Light purchases, transmits, and distributes electric energy to customers in southwestern Pennsylvania. Duquesne Light owns no generation resources and its transmission facilities are under the operational control of PJM Interconnection, L.L.C. (PJM), and service on Duquesne Light's transmission facilities is provided pursuant to PJM's Open Access Transmission Tariff (OATT). According to Applicants, Duquesne Power is a power marketer that does not own or control any 1 16 U.S.C. 824b (2012).

2 Docket No. EC electric generation, transmission, or distribution facilities. Applicants state that Three Rivers is percent owned by Stichting Depositary PGGM Infrastructure Funds (PGGM Infrastructure Fund), and percent collectively owned by John Hancock Life Insurance Company (U.S.A.) (John Hancock USA), John Hancock Life Insurance Company of New York, and John Hancock Life & Health Insurance Company (collectively, the John Hancock Companies). PGGM Vermogensbeheer B.V. (PGGM Fund Manager) has control over the membership interests in Three Rivers held by PGGM Infrastructure Fund. PGGM Fund Manager is an indirect, wholly owned subsidiary of PGGM N.V. (PGGM), which is a wholly-owned subsidiary of PGGM Coperatie U.A, a nonprofit organization in which no member has more than a 10 percent interest. Applicants state that PGGM Infrastructure Fund is a stand-alone vehicle with no members or share capital. PGGM Infrastructure Fund acts only at the instruction of the PGGM Fund Manager. The board members of PGGM Infrastructure Fund consist of three individuals who are senior executives of PGGM Fund Manager. Applicants state that neither PGGM nor any of its affiliates is primarily engaged in any energy related business activities in the United States, and that none is a traditional franchised utility, or owns, operates or controls energy related facilities located in the United States other than passive, non-managing or controlling interests in investment funds. While PGGM or its affiliates own or control passive, non-managing interests in entities that are engaged in electric generation and other energy related businesses, as well as private investment funds that may have direct or indirect passive ownership interests in such entities, management control of those entities is held by the controlling general partner or managing member that is not affiliated with PGGM or its affiliates. According to Applicants, PGGM has greater than 10 percent limited partnership interests indirectly in the several natural gas companies (Peoples Entities), but those interests are also passive. Applicants state that PGGM and its affiliates have no energy subsidiaries or affiliates located in the United States. Applicants state that the John Hancock Companies are divisions of Manulife Financial Corporation (Manulife), a financial services group with operations in both the United States and Canada that is publicly traded on the Toronto and New York Stock Exchanges. The John Hancock Companies have greater than 10 percent limited partnership interests indirectly in the Peoples Entities, but those interests are passive in nature with only limited consent or veto rights necessary to protect its investments. Applicants represent that John Hancock USA has a 9 percent general and limited partnership interest in Cleco Partners L.P. (Cleco Partners), which owns 100 percent of the indirect equity ownership interests in Cleco Power LLC (Cleco Power), Perryville

3 Docket No. EC Energy Partners, L.L.C. (Perryville), and Attala Transmission LLC (Attala) (collectively, the Cleco Entities). According to Applicants, Cleco Power is an investor-owned public utility company with market-based rate authority which is primarily engaged in the generation, transmission, distribution, and sale of electricity and is a public utility company regulated by the Louisiana Public Service Commission. Cleco Power owns or has an interest in 11 generation facilities with 4,461 megawatts of cumulative generation capacity located in the Midcontinent Independent System Operator, Inc. (MISO) market. MISO controls Cleco Power's transmission facilities and all requests for transmission service on Cleco Power's transmission system are made in accordance with the terms of the MISO OATT. Attala and Perryville own limited and discrete interconnection facilities located in Mississippi and Louisiana, respectively, which are used to connect unaffiliated generation facilities to the transmission system owned by Entergy Mississippi, Inc. and Entergy Louisiana, LLC. Attala and Perryville only provide jurisdictional interconnection services at these locations. Applicants state that none of the Cleco Entities own or operate intrastate natural gas pipeline or intrastate natural gas storage facilities. Cleco Power owns and operates a 50 percent interest in the Dolet Hills generation facility, and also owns a 50 percent interest in lignite reserves that are used to fuel the facility. Cleco Power also controls a fleet of rail cars exclusively dedicated to delivering coal from the Powder River Basin in Wyoming to Cleco Power's Madison 3 generating plant and its Rodemacher 2 generation facility, which is operated and partially owned by Cleco Power. None of the Cleco Entities owns or controls any other inputs to electric power production in the United States. According to Applicants, except for the interest in the Cleco Entities, neither the John Hancock Companies nor any of their affiliates are primarily engaged in any energy related business activities in the United States, are traditional franchised utilities, or own, operate or control any energy related facilities located in the United States other than passive, non-managing or controlling interests in investment funds. Applicants further state that the John Hancock Companies or their affiliates own or control passive, non-managing, limited partnership or limited liability company interests in entities that are engaged directly or indirectly in electric generation and other energy related businesses. The John Hancock Companies or their affiliates also own or control passive, non-managing, limited partnership or limited liability company interests in private investment funds, some of which may have direct or indirect ownership interests in entities that are engaged in electric generation and other energy related businesses. The passive interests held by John Hancock Companies or their affiliates provide only limited consent or veto rights necessary to protect their investments. Management control of such entities, investment companies, and investment funds

4 Docket No. EC resides solely with the relevant general partner or managing member and in no case is any such controlling general partner or managing member affiliated with the John Hancock Companies or their affiliates. The John Hancock Companies and their affiliates have no energy subsidiaries or affiliates located in the United States. Applicants assert that, pursuant to the terms of the Purchase and Sale Agreement, CLH Holdings will transfer its shares in DQE Holdings to Three Rivers, which represents approximately 30.4 percent of the membership interests in DQE Holdings. The remaining equity interests in DQE Holdings are unaffected by the Proposed Transaction and the Duquesne Entities management and operations teams will remain in place. Applicants assert that PGGM and the John Hancock Companies have committed, under separate equity commitment letters, to fund Three Rivers to pay the purchase price. Applicants state that following consummation of the Proposed Transaction, Three Rivers will be entitled to appoint two Member Directors to the DQE Holdings Board of Directors, and the two Member Directors will collectively cast a vote equal to 30.4 percent of the vote. According to Applicants, the Proposed Transaction is consistent with the public interest and will not have an adverse effect on competition, rates, or regulation and will not result in cross-subsidization of a non-utility associate company or pledge or encumbrance of utility assets for the benefit of an associate company. Applicants assert that the relevant geographic market for the Proposed Transaction is the PJM market. Applicants state that the Proposed Transaction raises no horizontal market power concerns because neither Three Rivers nor any of its affiliates own or control 10 percent or more of the voting securities in any electric generation in PJM, or anywhere else in the United States. Applicants further represent that the Proposed Transaction does not result in an overlap in any generation market between Three Rivers and its affiliates or the Duquesne Entities. Therefore, according to Applicants, the Proposed Transaction will not have an adverse impact on horizontal competition. Applicants represent that the Proposed Transaction raises no vertical market power concerns. According to Applicants, neither Three Rivers nor any of its affiliates own or control 10 percent or more of the voting securities in any electric transmission assets, interstate or intrastate natural gas pipelines, coal transportation facilities, generating sites, or other material inputs to electricity production in PJM, or anywhere in the United States. Applicants state that, due to the existing affiliation between the Duquesne Entities and the Cleco Entities, the John Hancock Companies existing interest in the Cleco Entities facilities results in no new overlap between Three Rivers and its affiliates. Applicants assert that the transmission facilities owned by Duquesne Light are under the operational control of PJM, and service on the transmission facilities owned by Duquesne Light is provided pursuant to the PJM OATT. Therefore, according to Applicants, the Proposed Transaction will not have an adverse impact on vertical competition.

5 Docket No. EC According to Applicants, the Proposed Transaction will have no adverse effect on rates because all wholesale sales of electric energy made by Duquesne Light and Duquesne Power will continue to be made at market-based rates, and transmission service rates will continue to be charged pursuant to the PJM OATT. Further, Applicants commit that they will not seek to recover any acquisition premium and will not seek to recover any transaction related costs incurred to consummate the Proposed Transaction from any transmission customer. Therefore, according to Applicants, the Proposed Transaction will have no adverse effect on rates. Applicants state that the Proposed Transaction will not have an adverse effect on regulation at the state or federal level. According to Applicants, the Proposed Transaction will not remove any facilities from Commission jurisdiction and will have no adverse effect on state regulation. After the Proposed Transaction, the Commission will continue to have the same jurisdiction over the wholesale sales of electric energy by Duquesne Light and Duquesne Power and the provision of transmission service as it had before. Therefore, according to Applicants, the Proposed Transaction will not have an adverse impact on regulation. According to Applicants, the Proposed Transaction will not result in crosssubsidization of a non-utility associate company Applicants represent that, based on facts and circumstances known to them or that are reasonably foreseeable, the Proposed Transaction will not result in, at the time of the transaction or in the future, crosssubsidization of a non-utility associate company or pledge or encumbrance of utility assets for the benefit of an associate company, including: (1) Any transfer of facilities between a traditional public utility associate company that has captive customers or that owns or provides transmission service over jurisdictional transmission facilities, and an associate company; (2) Any new issuance of securities by a traditional public utility associate company that has captive customers or that owns or provides transmission service over jurisdictional transmission facilities, for the benefit of an associate company; (3) Any new pledge or encumbrance of assets of a traditional public utility associate company that has captive customers or that owns or provides transmission service over jurisdictional transmission facilities, for the benefit of an associate company; or (4) Any new affiliate contract between a non-utility associate company and a traditional public utility associate company that has captive customers or that owns or provides transmission service over jurisdictional transmission facilities, other than non-power goods and services agreements subject to review under sections 205 and 206 of the FPA. Therefore, according to Applicants, the Proposed Transaction does not raise any issue with respect to cross-subsidization. This filing was noticed on July 5, 2016, with comments, protests or interventions due on or before July 22, None were received.

6 Docket No. EC Information and/or systems connected to the bulk system involved in these transactions may be subject to reliability and cybersecurity standards approved by the Commission pursuant to FPA section 215. Compliance with these standards is mandatory and enforceable regardless of the physical location of the affiliates or investors, information database, and operating systems. If affiliates, personnel or investors are not authorized for access to such information and/or systems connected to the bulk power system, a public utility is obligated to take the appropriate measures to deny access to this information and/or the equipment/software connected to the bulk power system. The mechanisms that deny access to information, procedures, software, equipment, etc., must comply with all applicable reliability and cybersecurity standards. The Commission, North America Electric Reliability Corporation or the relevant regional entity may audit compliance with reliability and cybersecurity standards. When a controlling interest in a public utility is acquired by another company, whether a domestic company or a foreign company, the Commission s ability to adequately protect public utility customers against inappropriate cross-subsidization may be impaired absent access to the parent company s books and records. Section 301(c) of the FPA gives the Commission authority to examine the books and records of any person who controls, directly or indirectly, a jurisdictional public utility insofar as the books and records relate to transactions with or the business of such public utility. The approval of the Proposed Transaction is based on such examination ability. Order No. 652 requires that sellers with market-based rate authority timely report to the Commission any change in status that would reflect a departure from the characteristics the Commission relied upon in granting market-based rate authority. 2 To the extent that a transaction authorized under FPA section 203 results in a change in status, sellers that have market-based rates are advised that they must comply with the requirements of Order No After consideration, it is concluded that the Proposed Transaction is consistent with the public interest and is authorized, subject to the following conditions: (1) The Proposed Transaction is authorized upon the terms and conditions and for the purposes set forth in the application; (2) Applicants must inform the Commission of any material change in circumstances that departs from the facts or representations that the Commission relied upon in authorizing the Proposed Transaction within 30 days from the date of the material change in circumstances; 2 Reporting Requirement for Changes in Status for Public Utilities with Market- Based Rate Authority, Order No. 652, FERC Stats. & Regs. 31,175, order on reh g, 111 FERC 61,413 (2005).

7 Docket No. EC (3) The foregoing authorization is without prejudice to the authority of the Commission or any other regulatory body with respect to rates, service, accounts, valuation, estimates or determinations of costs, or any other matter whatsoever now pending or which may come before the Commission; (4) Nothing in this order shall be construed to imply acquiescence in any estimate or determination of cost or any valuation of property claimed or asserted; (5) If the Proposed Transaction results in changes in the status or upstream ownership of Applicants affiliated qualifying facilities, an appropriate filing for recertification pursuant to 18 C.F.R (2015) shall be made; (6) The Commission retains authority under sections 203(b) and 309 of the FPA to issue supplemental orders as appropriate; (7) Applicants shall make any appropriate filings under section 205 of the FPA, as necessary, to implement the Proposed Transaction; and (8) Applicants shall notify the Commission within 10 days of the date that the Proposed Transaction has been consummated. This action is taken pursuant to the authority delegated to the Director, Division of Electric Power Regulation - West, under 18 C.F.R (2015). This order constitutes final agency action. Requests for rehearing by the Commission may be filed within 30 days of the date of issuance of this order, pursuant to 18 C.F.R (2015). Steve P. Rodgers, Director Division of Electric Power Regulation - West

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