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FERC Orders Additional Mitigation Measures for PPL Energy Supply-Riverstone Combination

December 19, 2014

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Copyright 2010-14 EnergyChoiceMatters.com
Reporting by Karen Abbott • kabbott@energychoicematters.com

FERC has ordered additional mitigation in approving a multi-step transaction under which PPL Energy Supply, LLC and RJS Power Holdings LLC are to combine to form Talen Energy

"[W]e find that Applicants have not demonstrated that the Proposed Transaction, with the mitigation as proposed by Applicants, will not have an adverse effect on horizontal competition. Applicants have not demonstrated that their proposed mitigation would adequately mitigate the market power screen failures in the 5004/5005 submarket. We therefore condition approval of the Proposed Transaction on additional mitigation measures in the 5004/5005 submarket," FERC said.

Under the additional mitigation measures required by FERC, Applicants may choose to either: (1) limit offers from the so-called Mitigated Assets that Talen Energy continues to own after completing the divestiture of the Option 1 or Option 2 assets to cost-based offers in the energy market within the 5004/5005 submarket; or (2) divest all of the Mitigated Assets, that is, units included in both Option 1 and Option 2.

The Mitigated Assets total about 2,000 MW that were considered for divestiture, but the Applicants only propose, under either Option 1 or Option 2, to divest about 1,300 MW of this total.

Alternatively, Applicants may submit a compliance filing in which they propose different mitigation measures to address the adverse effect on competition in the 5004/5005 submarket, FERC said.

FERC accepted the Applicants' commitment to exclude, as eligible buyers of divested assets, entities that own more than 10 percent of the total installed capacity (based on summer ratings) in the 5004/5005 submarket. Under this limitation, the only excluded buyers are PSEG, Exelon, and NRG Energy, and their respective affiliates.

While FERC shares the Market Monitor's concern that mitigation (divestiture of all of the Option 1 and Option 2 Mitigated Assets) may not be adequate if the Mitigated Assets are acquired in a single bundle by another PJM market participant, because the sale of the Mitigated Assets will require separate approval under section 203 of the FPA, FERC did not find it necessary to preclude the purchase of the Mitigated Assets by any PJM market participant with more than three percent of the installed capacity in the overall PJM market, in the PJM MAAC submarket, or in the PJM 5004/5005 submarket, as the Market Monitor suggested.

Docket No. EC14-112

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