FERC Issues Order on West Deptford Energy’s Request of Jurisdictional Facilities

WASHINGTON, Dec. 21 -- The U.S. Department of Energy's Federal Energy Regulatory Commission issued the text of the following delegated order approving West Deptford Energy request to dispose of certain jurisdictional facilities:

West Deptford Energy, LLC

Docket No. EC17-29-000

ORDER AUTHORIZING DISPOSITION OF JURISDICTIONAL FACILITIES

On November 7, 2016, West Deptford Energy, LLC (West Deptford) filed an application pursuant to section 203(a)(1)(A) of the Federal Power Act (FPA)(1) requesting authorization for a transaction whereby MC West Deptford Energy Investments, LLC (MC West Deptford) will dispose of certain interests in West Deptford to KPIC USA, LLC (Buyer) (Proposed Transaction). The jurisdictional facilities involved in the Proposed Transaction consist of limited interconnection facilities, West Deptford's market-based rate tariff, certain wholesale power sales contracts and books and records, and West Deptford's rate schedule for providing reactive supply and voltage control.

West Deptford states that it leases and operates an approximately 669 megawatt (MW) natural gas-fired generating facility (West Deptford Facility) located in New Jersey and interconnected with the transmission grid controlled by PJM Interconnection, L.L.C. (PJM).(2) Additionally, West Deptford has on file a rate schedule establishing a revenue requirement for reactive supply and voltage control (the Reactive Rate Schedule) provided from the West Deptford Facility pursuant to Schedule 2 to PJM's Open Access Transmission Tariff (PJM Tariff).

West Deptford states that all of its membership interests are owned by West Deptford Energy Holdings, LLC (Holdings). All of the membership interests of Holdings are owned by Pirlo Energy Investments, LLC, all of whose membership interests are owned by Pirlo Energy Holdings, LLC (PEH). According to West Deptford, the Class A membership interests of PEH are owned by: (1) MC West Deptford (35 percent); (2) WDE Partners, L.P. (17.84 percent); (3) Prudential Insurance Company of America (8.87 percent); (4) Lincoln National Life Insurance Company (2.22 percent); (5) Ullico Infrastructure West Deptford Holdco, LLC (14.48 percent); (6) ASRC Capital, LLC (11.58 percent); and (7) Perennial West Deptford, LLC (10.00 percent). Pirlo Class B Holdings, LLC owns 100 percent of PEH's Class B membership interests and is the managing member of PEH.

West Deptford states that Buyer is a wholly owned subsidiary of The Kansai Electric Power Co., Inc. (Kansai) that invests in electric power and other energy related businesses globally. Kansai, a corporation organized under the laws of Japan, is a vertically integrated power company that provides electricity to the Kansai region of Japan. West Deptford states that, none of Buyer, Kansai, or their affiliates owns or controls electric generating or transmission facilities in the United States.(3)

West Deptford states that, pursuant to the terms set forth in a purchase and sale agreement, Buyer will acquire 17.50 percent of PEH's Class A membership interests from MC West Deptford.

West Deptford states that the Proposed Transaction will not have an adverse effect on competition. With respect to horizontal competition, West Deptford states that Buyer and its affiliates do not own or control generation facilities in the PJM market, where the West Deptford Facility is located, thus they do not conduct business in the same geographic market. With regard to vertical competition, West Deptford states that the Proposed Transaction does not involve any electric transmission facilities, other than facilities used to interconnect the West Deptford Facility to the transmission grid. Additionally the Proposed Transaction does not involve any other upstream inputs to electricity products. West Deptford states that none of Buyer or any of its affiliates owns or controls any electric transmission facilities in, or into, the PJM market, or any inputs to electricity production in the PJM market.

According to West Deptford, the Proposed Transaction will not adversely affect wholesale ratepayers or transmission customers. West Deptford asserts that all wholesale sales of electric energy, capacity, and ancillary services by West Deptford will continue to be made at market-based rates or at cost-based rates pursuant to the Reactive Rate Schedule and Schedule 2 to the PJM Tariff. Furthermore, West Deptford represents that neither the Reactive Rate Schedule nor the PJM Tariff allows for the pass-through of costs associated with the Proposed Transaction without Commission authorization under Section 205 of the FPA.

West Deptford states that the Proposed Transaction will not will not have any adverse effect on the effectiveness of federal or state regulation nor will it impair federal or state regulation. West Deptford states that wholesale sales by West Deptford and from the West Deptford Facility will continue to be subject to the Commission's ratemaking jurisdiction. Additionally, West Deptford asserts that the Proposed Transaction will not affect the ability of any state authority to regulate retail rates.

According to West Deptford, the Proposed Transaction falls within one of the "safe harbors" established by the Commission for which detailed explanation and evidentiary support to demonstrate a lack of cross-subsidization is not required. Specifically, West Deptford states that the Proposed Transaction falls within the "safe harbor" for transactions that do not involve a franchised public utility with captive customers.

Additionally, West Deptford verifies that, based on facts and circumstances known to it or that are reasonably foreseeable, the Proposed Transaction will not result in, at the time of the Proposed Transaction or in the future, any cross-subsidization of a non-utility associate company or pledge or encumbrance of utility assets for the benefit of an associate company, including: (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 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) new pledges 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) new affiliate contracts 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 service agreements subject to review under sections 205 and 206 of the FPA.

The filing was noticed on November 8, 2016, with comments, protests, or interventions due on or before November 28, 2016. None were filed.

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.(4) 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. 652.

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) West Deptford 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;

(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 West Deptford's affiliated qualifying facilities, an appropriate filing for recertification pursuant to 18 C.F.R. Section 292.207 (2016) shall be made;

(6) The Commission retains authority under sections 203(b) and 309 of the FPA to issue supplemental orders as appropriate;

(7) West Deptford shall make any appropriate filings under section 205 of the FPA, as necessary, to implement the Proposed Transaction; and

(8) West Deptford shall notify the Commission within 10 days of the date that the disposition of jurisdictional facilities 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 (2016). 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 (2016).

Steve P. Rodgers, Director

Division of Electric Power

Regulation - West

Footnotes:

1 16 U.S.C. Section 824b (2012).

2 Specifically, the West Deptford Facility is located within PJM East submarket.

3 West Deptford notes that Buyer owns a 25 percent interest in TKK power, LLC, which entered into an agreement to acquire an approximately 653 MW natural gas-fired generating facility in New York. Empire Generating Co. LLC 157 FERC 62,181 (2016).

4 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).

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