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Update: Vistra-Dynegy Confirm Texas Units Subject To Sale Process; Proposes Mitigation Alternative If Sale Not Consummated

November 27, 2017

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Copyright 2010-17 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

Vistra Energy, in filing for approval at the Texas PUC of its merger with Dynegy, has confirmed the units subject to a sale process, which would result in the combined entity being under the 20% market power threshold, but, to the extent the sale processes are not consummated, the company sought a declaration from the PUCT concerning imports that would result in the combined entity still being under the 20% threshold, or, alternatively, the company proposes mitigation measures related to imports

Vistra confirmed that it is currently engaging in a sales process to sell one or more units at four sites: Big Brown, Graham, Stryker Creek, and Trinidad

"Luminant is also considering potential sales of other generation units," Vistra said

However, Vistra could choose not to consummate the sales of any of those gas-fired units (i.e., units at Graham, Stryker Creek, and Trinidad) if the Commission does one of the following:

(i) Determines the DC Ties capacity should be excluded from the numerator used when calculating market share, because the Combined Entity commits to not import power over the North and East DC Ties; or

(ii) Determines that though the DC Ties capacity should be accounted for in the numerator, the Combined Entity's commitment not to import over the DC Ties is reasonable mitigation for any potential market power abuse.

Whether imports over the DC Ties are counted as capacity owned and controlled by the Combined Entity will dictate whether the Combined Entity will be at or under the Cap at closing with its current generation capacity

Excluding 820 MW of DC Ties import capacity from the market share calculation would result in the merged entity remaining under the 20% threshold "If the Commission does not accept (i) or (ii) above, then the Applicants will consummate sales of the units at two or more of the above three gas plant sites such that it will not exceed the Cap upon closing and, in that event, would retain its ability to fully use the North and East DC Ties," Vistra said

The numerators for the Combined Entity range from 16,354 MW (if the DC Ties' capacity is included and Applicants sell all gas steam units at all three sites that are currently in some phase of sales negotiation) to 17,896 MW (if the DC Ties' capacity is included and Applicants do not sell any of those units), with market share percentages ranging from 18.68 to 20.73 percent. An additional variable impacting the market share percentages (as described further below) is that Applicants might sell their Big Brown units, rather than retire those units in accordance with a Notice of Suspension of Operations (NSO) recently approved by ERCOT; if those units are sold, they would be included in the denominator, and if they are retired, they would be excluded from the denominator.

Vistra presented three alternatives by which the Commission could find that the merged entity lacks market power

First, Applicants are willing to commit that upon closing of the Transaction, the Combined Entity will not import power into ERCOT across the North and East DC Ties. Therefore, Applicants argue that the Dynegy capacity outside of ERCOT is not capable of delivery into ERCOT and should not be included in the Combined Entity's numerator, such that the capacity owned and controlled by the Combined Entity will not exceed the Cap with its current generating capacity. As a result, the Application meets the standard for approval under PURA § 39.158, without mitigation or further action by the Applicants (Alternative 1).

Second, if the Commission concludes that the Dynegy capacity located outside of ERCOT is capable of delivery into ERCOT over the North or East DC Tie and thus should be included in the Combined Entity's numerator, thereby causing the Combined Entity's market share to exceed the Cap, then Applicants urge the Commission to use its discretion and approve the Application by finding that the Combined Entity's commitment to not import power into ERCOT over those ties is a reasonable means of mitigation. Therefore, the Application meets the standard for approval under PURA § 39.158(a) even if the DC Ties capacity is included in the Combined Entity's numerator, without further action by the Applicants, beyond complying with the commitment not to import power into ERCOT across the North or East DC Ties (Alternative 2).

Third, whether or not the import capability of the North and East DC Ties is included in the Combined Entity's numerator, if the Applicants divest additional generation capacity in ERCOT, they will not exceed the Cap at closing, such that the Application will meet the standard for approval under PURA § 39.158 by the time of closing, without any need for mitigation (Alternative 3).

Docket 47801

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