The Federal Energy Regulatory Commission on Nov. 27 signed off on a deal where affiliates of General Electric (NYSE: GE) are taking over operation of the coal-fired, 1,884-MW Homer City power plant in central Pennsylvania.
On Oct. 9, two affiliates of Edison International (NYSE: EIX) – EME Homer City Generation LP (EMEHC) and Edison Mission Marketing & Trading Inc. (EMMT) – filed a request with FERC along with newly-created General Electric affiliate Homer City Generation LP (HCGen). They were seeking authorization under the Federal Power Act for the transfer of control of the Homer City plant (HC Facility) by EMEHC and certain HC Facility-related wholesale capacity, energy and ancillary services sales contracts from EMEHC and/or EMMT to HCGen (Proposed Transaction).
Affiliates of General Electric have owned the plant for years, but now, faced with slumping power market prices and an expensive need to install SO2 scrubbers on two of Homer City’s three units, the Edison International affiliates are giving up leases on and control of the Homer City operation.
The HC Facility is a coal-fired plant consisting of three units with a combined capacity of 1,884 MW located near Indiana, Pa., within the geographic footprint of PJM Interconnection LLC (PJM). The HC Facility is interconnected with the transmission systems owned by Pennsylvania Electric (Penelec) and New York State Electric & Gas (NYSEG). The HC Facility is a capacity resource in PJM that has been sold into the PJM reliability pricing model through delivery year 2016.
HCGen, established to be in the business of owning the HC Facility and selling energy, capacity and ancillary services produced by the HC Facility, is an indirect subsidiary of General Electric Capital Corp. and currently owns no assets. HCGen is owned by EFS HC GP LLC as the general partner and EFS Homer City LLC as the limited partner. EFS HC GP LLC is wholly owned by EFS Equity Holdings LLC, which is wholly owned by Aircraft Services Corp., which in turn is wholly owned by General Electric Capital. General Electric is a wholly owned subsidiary of General Electric.
Through its subsidiaries, GE is a passive owner of, and investor in, generating facilities in the United States, the FERC order noted. In the PJM market, GE affiliates own non-passive interests in:
- the Linden Unit 6 at the Linden Cogeneration facility, with 158.8 MW (net summer rating), located in Linden, N.J., of which 85 MW is committed under a long-term agreement with ConocoPhillips Bayway Refinery;
- EFS Parlin Holdings LLC, which owns Parlin, a 118-MW (net summer rating) facility located in Parlin. N.J.; and
- Birchwood Power Partners LP, which owns the Birchwood facility, a 237.8 MW (net summer rating), coal-fired plant located in King George County, Va.
GE has interests in other generating capacity
GE also is affiliated with Cogen Technologies Linden Venture LP, which owns Linden Units 1-5, with 738.5 MW (net summer rating), that are directly interconnected to the Consolidated Edison Co. of New York (ConEd) transmission system within the New York Independent System Operator (NYISO) control area. Additionally, GE is affiliated with Linden VFT LLC, which owns a variable frequency transformer system that is a component of a merchant transmission facility located in Linden, N.J., that connects to PJM and NYISO.
EMEHC is a limited partnership engaged in the business of operating and selling the energy, capacity and ancillary services provided by the HC Facility. EMEHC is an EWG under the Public Utility Holding Company Act of 2005 (PUHCA) and has been authorized by the commission to sell energy, capacity and ancillary services at market-based rates. EMEHC is an indirect wholly owned subsidiary of Edison International. Edison International wholly owns Edison Mission Group, which in turn wholly owns Mission Energy Holding, which in turn wholly owns Edison Mission Energy, which in turn wholly owns Edison Mission Holdings. EMEHC is affiliated with Midwest Generation LLC which owns 4,643 MW of mostly coal-fired generation capacity in the PJM market. EMEHC is also affiliated with an additional 442 MW of primarily wind generation in the PJM market.
Under the Proposed Transaction, the existing HC Facility lease and certain other sale/leaseback related agreements will be terminated and control of the HC Facility will be transferred by EMEHC and EMMT to HCGen. The owner-lessor subsidiaries of GE and Metropolitan Life Insurance (Met Life) will merge into HCGen, which will be the sole surviving entity that will own, control and operate the HC Facility.
Applicants told FERC that the Proposed Transaction raises no horizontal market power concerns. In the PJM market, applicants stated that the HC Facility is currently affiliated with substantially more generation than it will be after closing the Proposed Transaction such that the effect of the Proposed Transaction is deconcentrating. Currently, EMEHC is affiliated with 5,085 MW of generating capacity. Following the Proposed Transaction the HC Facility will be affiliated, through GE, with 514.6 MW of generation in PJM, or 1.3% market share in PJM, a de minimis amount.
Applicants stated that although the HC Facility is not a NYISO capacity resource, the HC Facility substation to which it directly interconnects is a NYISO-PJM interconnection point and is 50% owned by NYSEG, whose facilities are under the operational control of NYISO. Applicants stated that a GE affiliate owns and controls 738.5 MW (net summer capacity) in NYISO which are directly interconnected to the ConEd system in the NYISO. Of that capacity, HCGen is affiliated with 93.5 MW that is not under a long term power purchase agreement, or 0.2% of the NYISO market, a de minimis amount. Furthermore, applicants stated that the affiliated generation is in the New York City submarket while the HC Facility is located outside of that submarket. Therefore applicants concluded there is no geographic overlap in any relevant submarket in the NYISO.
The Nov. 27 approval was from Steve Rodgers, FERC’s Director, Division of Electric Power Regulation-West.