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Dynegy, ECP file plan to address market power resulting from Engie deal

Just days after FERC conditionally approved its plan to purchase several thousand megawatts of mostly natural gas-fired generating plants in the U.S. from Engie, Atlas Power Finance LLC, a joint venture of Dynegy Inc. and Energy Capital Partners LLC, filed a proposal for addressing any market power concerns stemming from the transaction.

FERC on Dec. 22 found that the deal, under which Atlas will purchase Engie subsidiary GDF SUEZ Energy North America, or GSENA, and its public utility subsidiaries for $3.3 billion, may adversely affect competition in the PJM Interconnection LLC and ISO New England Inc. capacity markets, specifically in the Commonwealth Edison Co. load delivery area, or ComEd LDA, and the Southeast New England, or SENE, zone, respectively.

But Atlas insisted that Dynegy's sale of its 50% interest in the 1,350-MW Elwood Energy plant, which was approved by FERC on Nov. 2 and consummated on Nov. 21, more than offsets the 327 MW that Dynegy will add to its existing capacity in the ComEd LDA once Atlas has acquired GSENA's Calumet power plant. Dynegy accordingly "will own significantly less generation capacity after the sale of Elwood and the consummation of the ... transaction than it owned" previously, Atlas said.

The company also noted that Exelon Corp. has indicated that the planned retirement of its Quad Cities generating facility, which FERC took into account when conducting the pivotal supplier test for the Engie transaction, may be postponed for 10 years or more now that Illinois has enacted a bill that will provide compensation for the zero-emissions attributes of nuclear power plants.

"This announcement by Exelon means that the Quad Cities unit most likely will not be retired, contrary to the commission's understanding that formed part of the basis for its finding that the transactions will adversely affect competition in the PJM capacity market in the ComEd LDA," Atlas said.

However, should FERC find that those two developments do not adequately mitigate Atlas' market power in the ComEd LDA, the company agreed to divest at least 327 MW of capacity from Dynegy's 623.5-MW Lee County Generating Station, 1,137.7-MW Kendall County Generation Facility or 1,108-MW Kincaid Generation facility. Atlas said it would not sell that capacity to an entity that is, or would become, pivotal in the relevant zone or whose market share following the transaction would trigger any market power screen failures.

As for the SENE zone, Atlas committed to divest at least 224 MW of generation, which is the amount Dynegy and ECP now own in that zone. Specifically, the company will divest one or more units from the 164-MW Dighton, 29.7-MW Wheelabrator North Andover, 30.1-MW Wheelabrator Saugus, 138.8-MW Bellingham, 501.1-MW ANP Bellingham, 484.5-MW ANP Blackstone or 149-MW Milford Power CC facilities.

"This ensures that after the mitigation is implemented the applicants will own or control less capacity in SENE than GSENA does today, and thus that the applicants will be less pivotal after the transactions than GSENA is prior to the transactions," Atlas said.

Recognizing that selling the generation will take some time, Atlas also proposed as an interim measure to offer all of its capacity in the ComEd LDA, except capacity that has been committed previously through prior auctions or bilateral agreements, at prices that are at or below the approved market seller offer caps. Atlas also committed not to retire any generation located in either the ComEd LDA or the SENE zone during the interim period, and to limit bids into the ISO-NE's annual and monthly capacity auctions to a level no greater than the forward capacity auction clearing price for the applicable planning period. (FERC dockets EC16-93 and EC16-94)