Power & Pipes

FERC, CFTC, and State Energy Law Developments

An amendment to FERC’s M&A statute, Section 203 of the Federal Power Act, was signed into law on September 28. Public Law 115-247 (PL 115-347 or the amendment) makes a minor but helpful change to one provision of FPA Section 203 by immunizing one particular class of transactions from pre-consummation FERC M&A application and approval requirements.

Section 203’s sweep is broad; essentially any direct or indirect “disposition” of voting control over any FERC-jurisdictional “public utility” (almost every US generating company, wholesale power marketer, transmission provider, and traditional franchised utility) requires pre-consummation Section 203 authorization. Only selected types of transactions are exempt, usually those involving smaller “qualifying facility” generators and purely retail businesses and facilities. Some classes of “holding companies” of electric power businesses and assets are also subject to Section 203’s requirements. Numerous technically defined classes of transactions, such as many internal reorganizations, are blanket-authorized under FERC regulations and require no Section 203 applications or orders.

PL 115-247 provides a limited exemption from Section 203 for physical facility consolidation transactions valued at no greater than $10 million. The amendment is narrow in nature; in practical terms, it addresses one situation that has been commonly encountered in the transmission sector. When a FERC-regulated transmitting utility has a new generation or transmission customer that is physically interconnected to the public utility, the ownership and control of the interconnection facilities must often be turned over to the public utility. In most cases, the customer facilities being turned over to the transmitting public utility are not yet FERC-jurisdictional, but in a number of cases, turnover took place only after the facilities became subject to Section 203, and in several of these cases, FERC has deemed some facility turnover transactions, conducted without Section 203 approvals, to be FPA violations and has publicly imposed penalties.

PL 115-247 does not take effect until March 27, 2019. Transactions involving asset values of over $1 million that are subject to the amendment must be reported to FERC, and FERC must report to Congress, by September 28, 2020, on the efficacy and impact of the amendment.

The amendment will likely save FERC-regulated parties from the need to file the one to three dozen interconnection turnover applications that are typically filed each year. FERC has had few substantive legal issues to review in these applications, and the amendment should largely be viewed as a paperwork-reduction measure. FERC has not yet released the rulemaking to implement the new reporting requirement that the amendment directs.