FERC authorizes disposition of facilities to DTE Energy

FERC on Aug. 7 issued an order authorizing the disposition of jurisdictional facilities to DTE Energy Services, a subsidiary of DTE Energy (NYSE: DTE).

On July 20, DTE Energy Services filed an application requesting authorization for the disposition of jurisdictional facilities to allow the company to acquire the respective ownership interests of Duke Energy Generation Services Holding Co. and SUEZ Energy Solutions in St. Paul Cogeneration and SUEZ-DEGS of Tuscola LLC.

“After consideration, it is concluded that the transaction is consistent with the public interest and is authorized,” FERC said in a statement.

St. Paul Cogeneration owns a 37 MW qualifying cogeneration facility in St. Paul, Minn. DEGS of St. Paul LLC owns 50% interest in St. Paul Cogeneration. DEGS of St. Paul is a subsidiary of Duke Energy Generation Services, which is a subsidiary of Duke Energy (NYSE:DUK).

The thermal energy from St. Paul Cogeneration will be sold to District Heating Development Co. The facility is operated by Ever-Green Energy, which holds the remaining 50% voting interest in St. Paul Cogeneration. Ever-Green Energy is owned by District Energy St. Paul and District Cooling St. Paul. Ever-Green Energy’s interests in St. Paul Cogeneration will not change as a consequence of the transaction.

Tuscola operates and maintains Tuscola Cogen, an 18 MW qualifying cogeneration facility in Tuscola, Ill., pursuant to a 20-year energy, water and wastewater services agreement with Equistar Chemical. Under the agreement, Tuscola provides Equistar with electricity services up to the energy contract capacity of 9 MW, along with other services, such as steam-water processing, demineralized water, compressed air, and water and waste-water services at Equistar’s chemical manufacturing plant.

Pursuant to the terms of the equity purchase agreement dated July 2, DTE Energy Services will acquire 100% of the outstanding equity of Duke Energy Generation Services in both St. Paul Cogeneration and Tuscola.

Duke Energy Generation Services is the legal and beneficial owner of 50% of all of the outstanding equity of St. Paul Cogeneration and 49% of Tuscola. In addition, DTE Energy Services will acquire the remaining 51% of all of the outstanding equity of Tuscola from SUEZ. As a result, DTE Energy Services will hold 50% of the voting interests in St. Paul Cogeneration and 100% of the voting interests in Tuscola.

According to DTE Energy Services, the transaction is consistent with the public interest and will have no adverse effect on competition, rates, or regulation, nor will it result in any cross-subsidization or the pledge or encumbrance of utility assets to any associated company.

With respect to competition, DTE Energy Services said that the relevant market for purposes of the transaction is the Midwest ISO (MISO) market where the project companies are located. DTE Energy Services asserts that even if the full 55 MW capacity of the electric generating assets of the project companies was not considered to be fully committed under long-term contracts, these 55 MW represent only nominal 0.04% of the total MISO installed generating capacity of approximately 127,900 MW.

DTE Energy Services also states that the transaction does not raise any vertical market power concerns. According to the application, neither DTE Energy Services nor any of its direct or indirect affiliates owns or controls any transmission facilities in the MISO balancing authority area (BAA) other than: certain limited facilities required to interconnect to the grid; and certain limited and discrete transmission facilities that do not form an integrated transmission grid. Finally, the company said it has not erected barriers to entry in the MISO market and will not erect barriers to entry in such market.

FERC asked DTE Energy Services to comply with the requirements of Order No. 652.

“Order No. 652 requires that sellers with market-based rate authority timely report to the commission any change in status that would reflect a departure from the characteristics the commission relied upon in granting market-based rate authority. The foregoing authorization may result in a change in status. Accordingly, DTE Energy Services is advised that it must comply with the requirements of Order No. 652. In addition, DTE Energy Services shall make any necessary filings under section 205 of the Federal Power Act (FPA) to implement the transaction,” FERC said in the filing.