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FERC Issues Order Authorizing Disposition of Jurisdictional and Generating Facilities and Acquisition of Generating Facilities Re Elkhorn Ridge Wind,...
[October 22, 2014]

FERC Issues Order Authorizing Disposition of Jurisdictional and Generating Facilities and Acquisition of Generating Facilities Re Elkhorn Ridge Wind,...


(Targeted News Service Via Acquire Media NewsEdge) FERC Issues Order Authorizing Disposition of Jurisdictional and Generating Facilities and Acquisition of Generating Facilities Re Elkhorn Ridge Wind, LLC et al Under EC14-132 WASHINGTON, Oct. 21 -- The U.S. Department of Energy's Federal Energy Regulatory Commission issued the text of the following delegated order: Docket No. EC14-132-000 Elkhorn Ridge Wind, LLC Forward WindPower, LLC Jeffers Wind 20, LLC Lookout WindPower, LLC San Juan Mesa Wind Project, LLC Sleeping Bear, LLC Wildorado Wind, LLC ORDER AUTHORIZING DISPOSITION OF JURISDICTIONAL AND GENERATING FACILITIES AND ACQUISITION OF GENERATING FACILITIES (Issued October 21, 2014) On September 4, 2014, Elkhorn Ridge Wind, LLC (Elkhorn Wind), Forward WindPower, LLC (Forward Wind) Jeffers Wind 20, LLC (Jeffers Wind), Lookout WindPower, LLC (Lookout Wind), San Juan Mesa Wind Project, LLC (San Juan Wind), Sleeping Bear, LLC (Sleeping Bear), and Wildorado Wind, LLC (Wildorado Wind) (collectively, Applicants), filed an application pursuant to sections 203 of the Federal Power Act (FPA) requesting Commission authorization for the disposition of jurisdictional facilities in connection with a transaction (Transaction) in which JPM Capital Corporation (JPM Capital) and an as yet unidentified investor (Co-Investor) will acquire interests in NRG Wind TE Holdco LLC (Holdco) (Transaction). The jurisdictional facilities involved in the Transaction include limited interconnection facilities.



Applicants state that Holdco, a newly formed indirect subsidiary of NRG Energy, Inc. (NRG Energy), will hold all of NRG Energy's interests in some or all of Applicants, various qualifying facilities (QFs), and two entities (ERCOT Entities) that own and operate facilities in the Electric Reliability Council of Texas (ERCOT) (collectively, Project Companies).

According to Applicants, NRG Energy is a publicly held Delaware corporation and an integrated wholesale power generation and retail electricity company. Through various subsidiaries, NRG Energy engages in three related electric businesses: (1) wholesale power generation and electricity and fuel trading; (2) retail electric supply and demand response; and (3) deployment and commercialization of alternative energy technologies. Applicants state that, in connection with the first of these business segments, NRG Energy, through wholly and partially owned subsidiaries, owns or controls over 53,000 megawatts (MW) of electric generating capacity throughout the United States.


Applicants state that NRG Energy currently holds its interests in the Project Companies through various intermediate holding companies, including Viento Funding, LLC (Viento I), Viento Funding II, LLC (Viento II), Mission Minnesota Wind III, LLC (Mission Minnesota), Mission Wind Utah, LLC (Mission Utah), Mission Wind Texas II, LLC (Mission Texas), Mission Wind Goat Mountain, LLC (Mission Goat Mountain) and NRG Wind Development, LLC (NRG Wind Development). Viento I, Mission Minnesota, Mission Utah, Mission Texas and Mission Goat Mountain are wholly owned subsidiaries of NRG Wind, LLC (NRG Wind). NRG Wind, Viento II and Holdco are wholly owned subsidiaries of NRG Energy Gas & Wind Holdings, Inc. (NRG Gas & Wind), which is a wholly owned subsidiary of NRG Acquisition Holdings, Inc. (Acquisition Holdings). Acquisition Holdings and NRG Wind Development are wholly owned subsidiaries of NRG Energy.

Applicants state that Elkhorn Wind is a QF that owns and operates an approximately 80 MW wind-powered generation facility in Nebraska, in the Southwest Power Pool, Inc. (SPP) market. According to Applicants, NRG Energy holds its interest in Elkhorn Wind through Viento I, which has a partial interest in Elkhorn Wind.

Applicants state that Forward Wind is an exempt wholesale generator (EWG) that owns and operates an approximately 29 MW wind-powered generation facility in Pennsylvania, in the PJM Interconnection, L.L.C. (PJM) market. According to Applicants, NRG Energy holds its interest in Forward Wind through Viento I, which indirectly wholly owns Forward Wind.

Applicants state that Jeffers Wind is an EWG that owns and operates an approximately 50 MW wind-powered generation facility in Minnesota in the Midcontinent Independent System Operator, Inc. (MISO) market. According to Applicants, NRG Energy holds its interest in Jeffers Wind through Mission Minnesota, which has a partial interest in Jeffers Wind.

Applicants state that Lookout Wind is an EWG that owns and operates an approximately 38 MW wind-powered generation facility (Lookout Facility) in Pennsylvania, in the PJM market. According to Applicants, NRG Energy holds its interest in Lookout Wind through Viento I, which indirectly wholly owns Lookout Wind.

Applicants state that San Juan Wind is an EWG that owns and operates an approximately 120 MW wind-powered generation facility in New Mexico, in the SPP market. According to Applicants, NRG Energy holds its interest in San Juan Wind through Viento II, which partially owns San Juan Wind.

Applicants state that Sleeping Bear is an EWG that owns and operates an approximately 95 MW wind-powered generation facility in Oklahoma, in the SPP market. According to Applicants, NRG Energy holds its interest in Sleeping Bear through Viento I, which partially owns Sleeping Bear.

Applicants state that Wildorado Wind is an EWG that owns and operates an approximately 161 MW wind-powered generation facility in Oldham County, Texas, in the SPP market. According to Applicants, NRG Energy holds its interest in Wildorado Wind through Viento II, which partially owns Wildorado Wind.

Applicants state that the ERCOT Entities are Elbow Creek Wind Project, LLC, an EWG wholly owned by NRG Wind Development that owns and operates an approximately 122 MW wind-powered generation facility in the ERCOT market, and Goat Wind, LP, an WEG partially owned by Mission Texas and Mission Goat Mountain that owns and operates an approximately 150 MW wind-powered generation facility in the ERCOT market.

Applicants state that JPM Capital is an indirect, wholly-owned subsidiary of JPMorgan Chase & Co. (JPMorgan Chase). JPMorgan Chase is a publicly-owned Delaware corporation, headquartered in New York, New York, that is a financial holding company regulated by the Board of Governors of the Federal Reserve System under the Bank Holding Company Act of 1956. According to Applicants, JPM Capital and JPMorgan Chase are not primarily engaged in energy-related business activities and do not directly own or control any electric generating or transmission assets or generation output. Applicants state that none of JPMorgan Chase's affiliates owns any electric transmission facilities (other than limited facilities used to interconnect generation with the transmission grid) or interstate natural gas facilities.

According to Applicants, JPMorgan Chase has a number of subsidiaries that own various interests in electric generation facilities in various markets across the United States. None of these energy affiliates is a traditional franchised utility.

Applicants state that affiliates of JPM Capital own or control 764 MW of generation in the MISO market, 685 MW of generation in the SPP market, and 422 MW of generation in the PJM market, the relevant markets for the transaction, in which the Project Companies own or control generating facilities. According to Applicants, JPM Capital also owns additional passive, tax equity interests in certain other entities that own or control wind-powered generation facilities, including facilities in markets in which the Project Companies own or control generation. Applicants submit that JPM Capital has previously represented to the Commission that the interests in these entities are substantially similar to the passive tax equity investors in AES Creative and thus do not create affiliation between JPM Capital and these entities.

Applicants state that, in addition, J.P. Morgan Ventures Energy Corporation (JPM Energy), a non-banking affiliate of JPM Capital and wholly-owned subsidiary of JPMorgan Chase, is authorized to sell capacity, energy and certain ancillary services at market-based rates. According to Applicants, JPM Energy and its subsidiaries are parties to one or more tolling agreements that convey the exclusive right to the output of generation facilities in various markets, but none of these agreements convey control over generation located in any of the markets in which the Project Companies own or control generation. Applicants submit that JPM Energy also has subsidiaries that have interests in electric generation facilities, but none of these subsidiaries, other than AlphaGen Power LLC and KMC Thermo, L.L.C., owns or controls electric generation facilities in any of the markets in which the Project Companies own or control generation.

Applicants state that certain subsidiaries of JPMorgan Chase may hold other debt and equity positions from time to time in energy companies in connection with their broker/dealer, financial trading, or banking activities. According to Applicants, these interests are transitory, non-controlling interests that change frequently, are passive, and do not give JPMorgan Chase any discretion as to how and when power may be sold. Subsidiaries of JPMorgan Chase also may be engaged in the management of mutual funds and/or other collective investment vehicles as a fiduciary on behalf of persons who hold interests in such funds or other investment vehicles, and such funds or other investment vehicles may buy and sell securities of public utilities and other companies engaged in energy-related activities without exercising control over such public utilities or other companies.

According to Applicants, other than as identified above, neither JPM Capital nor any of its affiliates owns or controls in any market in which the Project Companies own or control generation facilities a voting interest of 10 percent or more in any entity that owns or controls electric transmission facilities (other than limited facilities used to interconnect generation with the transmission grid), electric distribution facilities, inputs to electric power production or a franchised public utility.

Applicants state that NRG Energy and JPM Capital are seeking a potential tax equity investor to participate in the Transaction by acquiring those Class A membership interests of Holdco not acquired by JPM Capital. Co-Investor cannot be identified in this Application, because this process is ongoing. According to Applicants, Co-Investor will satisfy the following criteria which the Commission has previously accepted as sufficient to ensure that a proposed transaction will not have an adverse effect on competition, rates, or regulation, and does not raise any cross-subsidization issues: - To the extent Co-Investor and its affiliates own or control electric generation facilities in any of the relevant markets, the overlap between generation capacity owned or controlled by the Project Companies and generation capacity owned or controlled by Co-Investor, JPM Capital and their respective affiliates in any such market will be de minimis. Further, upon closing of the Transaction, Applicants, JPM Capital, Co-Investor and their respective affiliates together will lack horizontal market power in the relevant markets consistent with the standards set forth in the Commission's Merger Policy Statement and Order No. 642.

- Co-Investor and its affiliates will not own or control any electric transmission or distribution facilities in the United States, except for limited interconnection facilities used to connect a generating facilities to the transmission grid.

- Co-Investor and its affiliates will not own or control any essential inputs to electric generation in the relevant market.

- None of Co-Investor or its affiliates will be a franchised public utility in the United States.

Applicants will inform the Commission of Co-Investor's identity in the notice of consummation of the Transaction or in a subsequent notice of consummation if Co-Investor acquires its Class A membership interests at a later date. To the extent that Co-Investor does not satisfy all of the foregoing criteria, Applicants commit to seek prior FPA Section 203 approval, either through an amendment to this Application or a separate application, with respect to its participation in the Transaction.

The principal terms of the Transaction are set forth in the proposal letter, dated May 21, 2014, from JPM Capital to NRG Energy (Proposal Letter). The Transaction involves a tax equity investment by JPM Capital and, possibly, Co-Investor in some or all of the Project Companies through Holdco.

Applicants state that prior to consummation of the Transaction, NRG Energy will undertake an internal corporate reorganization pursuant to which (1) NRG Gas & Wind will transfer the interests in Viento II to Holdco; (2) NRG Wind will transfer the interests in Mission Minnesota, Viento I, Mission Utah, Mission Texas, Mission Goat Mountain to NRG Gas & Wind, which will then transfer those interests to Holdco; and (3) NRG Wind Development will transfer the interests in Elbow Creek to Holdco.

According to Applicants, the Proposal Letter contemplates that at closing, JPM Capital will acquire up to 75 percent of the Class A membership interests of Holdco, and Co-Investor will acquire up to 35 percent of the Class A membership interests. In the aggregate, Applicants expect the Class A membership interests to represent approximately 20-40 percent of the economic interests in Holdco. Applicants state that, in the event that a Co-Investor cannot be identified prior to closing of JPM Capital's acquisition of up to 75 percent of the Class A membership interests of Holdco, NRG Gas & Wind and/or JPM Capital will acquire the remaining Class A membership interests and may sell such interests to Co-Investor at a later date. Applicants request that such a subsequent sale be considered part of the Transaction for which authorization is requested in this Application, provided the acquiring Co-Investor satisfies the criteria set forth above and the sale occurs within six months of the issuance of the Commission's order approving this Application. Following the Transaction, the Class A membership interests will be owned by JPM Capital (up to 100 percent), Co-Investor (up to 35 percent) and NRG Gas & Wind (up to 25 percent). Applicants will identify the owners of the Class A membership interests and their percentage interests in their notice of consummation of the Transaction, and will file a second notice of consummation if the sale of Class A membership interests to Co-Investor occurs at a later date than the sale to JPM Capital. NRG Gas & Wind will own 100 percent of the Class B membership interests and will also be the managing member of Holdco.

Applicants state that the rights and obligations of Holdco's Class A and Class B members will be set forth in an amended and restated limited liability company operating agreement of Holdco. According to Applicants, the Class A membership interests will not convey control over the day-to-day operations of Holdco, the Project Companies or any of Holdco's other subsidiaries. Applicants state that the Class A membership interests are passive, economic interests conveying only limited consent rights. Applicants submit that control over the day-to-day operations of Holdco will reside with NRG Gas & Wind, in its capacity as managing member.

Applicants state that the Transaction is consistent with the public interest because it will have no adverse effect on competition, rates, or regulation and will not result in cross-subsidization or the pledge or encumbrance of utility assets for the benefit of an associate company.

Applicants state that the Transaction raises no concerns with respect to horizontal market power because there is either no overlap or de minimis overlap in each of the geographic markets relevant to the Transaction, i.e., the PacifiCorp East (PACE) and Western Area Power Administration, Upper Great Plains Region (WAPA-UPGM) BAAs, and the MISO, SPP and PJM markets, where the Project Companies facilities are located. According to Applicants, to the extent that there is any overlap between generation capacity owned or controlled by the Project Companies and generation capacity owned or controlled by Co-Investor and its affiliates in any market, such overlap will be no greater than 2.5 percent and thus de minimis.

Applicants add that, to the extent that there is any overlap between generation capacity owned or controlled by the Project Companies and generation capacity owned or controlled by JPM Capital and its affiliates in any market, such overlap will be de minimis. First, there is no overlap at all between generation capacity owned or controlled by the Project Companies and generation capacity owned or controlled by JPM Capital and its affiliates in the PACE or WAPA-UPGM BAAs. The Transaction thus presents no horizontal market power issues in these markets. Second, while there is some overlap in the MISO and SPP markets, all of the Project Companies' generation capacity in these markets is committed to non-affiliated third parties under long-term contracts. Third, combining the generation capacity owned or controlled by the Project Companies in the PJM market that is not committed to a non-affiliated third party under a long-term contract with the generation capacity owned or controlled by JPM Capital and its affiliates in the PJM market yields a market share of 0.4 percent relative to the approximately 183,000 MW of installed capacity in the PJM market. Thus, Applicants submit that the extent of the business activities of the entities to be combined as a result of the Transaction in the PJM market is de minimis.

According to Applicants, the Transaction does not raise any vertical market power concerns. The Transaction does involve any Commission-jurisdictional transmission facilities, other than those limited facilities necessary to interconnect Applicants' generating facilities to the transmission grid. Applicants state that none of Applicants, JPM Capital, Co-Investor or their affiliates owns or controls any Commission-jurisdictional transmission facilities, except for limited facilities necessary to interconnect generating facilities to the transmission grid. Further, none of Applicants, JPM Capital, Co-Investor or any of their affiliates owns or controls inputs to electricity products that could be used to erect barriers to entry, and the Transaction does not involve inputs to electricity products.

Applicants state that the Transaction will not adversely affect rates. Wholesale sales of electric energy, capacity, and ancillary services by Applicants will continue to be made pursuant to their market-based rate tariffs on file with the Commission and the terms of contracts entered into thereunder, and the Transaction will have no effect on the rates for such sales. Moreover, none of Applicants has any captive retail or wholesale customers or provides unbundled transmission service. According to Applicants, the Project Companies currently make sales solely at market-based rates, and thus no cost-based rate schedules are involved in the Transaction. Accordingly, the Transaction will not have not have an adverse impact on rates charged to captive wholesale or transmission customers.

According to Applicants, the Transaction will not have any adverse effect on the effectiveness of federal or state regulation, as Applicants' regulatory status will remain unchanged and no gaps in regulation will be created. Similarly, the Transaction will not affect the extent to which any state authority can regulate retail rates.

With respect to cross-subsidization, Applicants state that the Transaction falls into the safe harbor for transfers that do not involve a franchised public utility with captive customers. Furthermore, the Transaction is a bona fide, arm's-length, bargained for exchange between non-affiliated entities. Applicants thus submit that the Transaction poses on concerns with respect to cross-subsidization.

Nonetheless, Applicants verify that the Transaction will not now or in the future result in: (1) transfers 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) new issuances of securities by traditional public utility associate companies that have captive customers or that own or provide transmission service over jurisdictional transmission facilities, for the benefit of an associate company; (3) new pledges or encumbrances 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) new affiliate contracts between non-utility associate companies and traditional public utility associate companies that have captive customers or that own or provide transmission service over jurisdictional transmission facilities, other than non-power goods and services agreements subject to review pursuant to FPA Sections 205 and 206.

The Application was noticed on September 4, 2014, with comments, protests or interventions due on or before September 25, 2014. None were filed. Notices of intervention and unopposed timely filed motions to intervene are granted pursuant to the operation of Rule 214 of the Commission's Rules of Practice and Procedure (18 C.F.R. section 385.214). Any opposed or untimely filed motion to intervene is governed by the provision of Rule 214.

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. The foregoing authorization may result in a change in status. Accordingly, Applicants are advised that they must comply with the requirements of Order No. 652. In addition, Applicants shall make appropriate filings under section 205 of the FPA, to implement the Transaction.

Information and/or systems connected to the bulk system involved in this transaction 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 the 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, NERC or the relevant regional entity may audit compliance with reliability and cybersecurity standards.

After consideration, it is concluded that the Transaction is consistent with the public interest and is hereby authorized, subject to the following conditions: (1) The Transaction is authorized upon the terms and conditions described in this Order and for the purposes set forth in the application; (2) 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 determination of cost or any other matter whatsoever now pending or which may come before the Commission; (3) 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; (4) The Commission retains authority under sections 203(b) and 309 of the FPA, to issue supplemental orders as appropriate; (5) If the Transaction results in changes in the status or the upstream ownership of Applicants' affiliated Qualifying Facilities, if any, an appropriate filing for recertification pursuant to 18 C.F.R. section 292.207 (2012) shall be made; (6) Applicants shall make appropriate filings under section 205 of the FPA, as necessary, to implement the Transaction; (7) Applicants must inform the Commission of any change in circumstances that would reflect a departure from the facts the Commission relied upon in authorizing the Transaction; and (8) Applicant shall notify the Commission within 10 days of the date that the 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. section 375.307. 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. section 385.713.

Steve P. Rodgers Director Division of Electric Power Regulation - West TNS 18EstebanLiz-141022-30FurigayJane-4907674 30FurigayJane (c) 2014 Targeted News Service

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