FERC has approved a final rule that sets a $10 million threshold for requiring FERC prior approval of public utility mergers and consolidations and requires public utilities to simply notify FERC of mergers and consolidations with a value over $1 million but less than $10 million. The changes place mergers and consolidations under the same value threshold as other types of transactions and eliminate the need for low-value mergers and consolidations to secure FERC approval. This new rule will be of interest to entities that anticipate merging or consolidating facilities that are subject to the jurisdiction of FERC.
FERC’s new rule was directed by a recent amendment to section 203(a)(1)(B) of the Federal Power Act (FPA): Public Law No. 115-247. We described the legislation and FERC’s proposed rule in an earlier post to this blog.
In its recently issued Order No. 855, FERC adopted the proposed rule along with one addition and some clarifications. FERC revised its regulations with respect to FPA section 203 to apply to mergers or consolidations that have a value in excess of $10 million. In addition, FERC’s regulations now require a notification filing for mergers and consolidations with a value over $1 million but less than $10 million.
The new rule requires a public utility to notify FERC of any merger or consolidation with a value of less than $10 million but more than $1 million not later than 30 days after the transaction is consummated. The notice must provide a narrative description of the transaction, including:
- The identity of all parties involved in the transaction, whether such parties are affiliates, and all jurisdictional facilities associated with or affected by the transaction,
- The location of such jurisdictional facilities involved in the transaction,
- The date on which the transaction was consummated,
- The consideration for the transaction, and
- The effect of the transaction on the ownership and control of such jurisdictional facilities.
In response to comments, FERC adopted the requirement that the narrative contain a statement regarding whether the parties to the transaction are affiliates to allow additional transparency as to whether the transactions are negotiated at arm’s length and could have an effect on a public utility’s rates.
FERC clarified that it will not notice the notification filings, will not accept responsive comments on them, and will not act on them. Because the notification filings are informational in nature, FERC found there is no requirement to serve copies of them.
Scope of Authority Issue
Relying on court precedent, FERC has interpreted the pre-amendment FPA section 203(a)(1)(B) provisions to be applicable to public utility acquisitions of facilities that are owned by public utilities and by non-public utilities. However, two commenters argued that the revised statutory language addressing the monetary threshold also limits FERC’s jurisdiction to review only public utility acquisitions of facilities that are owned by public utilities.
Amended FPA section 203(a)(1)(B) requires FERC authorization for a public utility to “merge or consolidate, directly or indirectly, its facilities subject to the jurisdiction of the Commission, or any part thereof, with the facilities of any other person, or any part thereof, that are subject to the jurisdiction of the Commission and have a value in excess of $10 million, by any means whatsoever.”
The italicized words, among others, do not appear in the pre-amendment FPA provision. The commenters argued that this language limits FERC’s authority to review only acquisitions of facilities that are owned by public utilities. FERC did not agree, arguing that by adding “subject to the jurisdiction of the Commission” to describe the facilities of a “public utility,” Congress intended to exclude facilities, such as distribution facilities, that are not otherwise subject to the jurisdiction of the Commission. In addition, FERC observed that Congress did not intend to so limit its jurisdiction because Congress retained the language requiring that the facilities being acquired be owned by a “person,” instead of changing the language to require that the facilities be owned by a “public utility.”
Public Law No. 115-247 becomes effective March 27, 2019. The FERC final rule is effective 30 days after publication in the Federal Register. The law requires FERC to submit a report to Congress by September 28, 2020 assessing the effects of the revisions to FPA section 203(a)(1)(B).