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FERC approves $3.3B purchase of Engie plants, orders market power mitigation

FERC has conditionally approved Atlas Power Finance LLC's acquisition of several thousand megawatts of mostly natural gas-fired generating plants in the U.S. from Engie. Atlas Power, a joint venture between Dynegy Inc. and Energy Capital Partners LLC., and a wholly owned subsidiary of Atlas Power LLC, was formed in February specifically to purchase Engie subsidiary GDF SUEZ Energy North America and its public utility subsidiaries for $3.3 billion.

In a Dec. 22 order, FERC approved the transaction, but said the companies had not adequately proven that the deal does not raise competitive concerns for certain portions of the PJM Interconnection LLC and ISO New England Inc. markets.

The companies in a March request to the commission insisted that the deal would raise no public interest concerns. According to that filing, 1,225 MW of the generating capacity subject to the acquisition are in the ISO-NE, while 2,377 MW are in PJM and the remainder of the assets are in the Electric Reliability Council of Texas Inc. region. Dynegy and Energy Capital Partners previously said Atlas Power would acquire 8,731 MW of generation, 8,044 MW of which are natural gas assets.

FERC agreed with the applicants that the deal would have no adverse effect on horizontal competition in the energy or ancillary services markets in PJM or the ISO-NE. But the agency said they failed to show that the proposed acquisition will not adversely affect competition in the PJM and ISO-NE capacity markets, specifically in the Commonwealth Edison Co. load delivery area, or ComEd LDA, and the Southeast New England, or SENE, zone, respectively. Even though the possible adverse market impacts fell just under the threshold for the commission to order more information, FERC nevertheless directed the applicants to conduct additional analyses on market concentrations in those specific regions and propose measures to mitigate market power concerns.

For the ComEd LDA, FERC factored in planned retirements in PJM and found that the assets that will be owned by Atlas Power after the transaction is consummated will be pivotal for the region in the 2020/2021 base residual auction. As for the SENE zone, FERC said it is concerned that the proposed acquisition would make Atlas Power more pivotal in that capacity market.

The commission agreed with the applicants' assertion that the deal will have no adverse market impacts for the New York ISO, Midcontinent Independent System Operator Inc. or California ISO. The actual generation capacity that will be purchased as part of that transaction are not located in any of the three system operators' footprints.

The parties will have 30 days to file a proposed mitigation plan to the commission if they wish to continue with the acquisition. Dynegy is expected to assume full ownership of Atlas Power in a related transaction. (FERC dockets EC16-93 and EC16-94)