PPL, RJS Power Holdings ask for more time on potential power plant divestiture

PPL Corp. and RJS Power Holdings LLC, which were ordered by the Federal Energy Regulatory Commission to potentially divest more power plants than they wanted to in creating the new independent power producer Talen Energy, on Jan. 14 asked FERC for more time to work out the issues.

They requested that the commission extend the due date to Jan. 30 for them to comply with the requirements in the commission’s Dec. 18 order conditionally approving the proposed transaction based on more market power mitigation than the companies had proposed. “This extension of time is necessary to allow Applicants sufficient opportunity to properly analyze the various compliance options proposed by the Commission in the December Order,” said the companies. 

Both PPL and RJS would contribute a number of power plants, including PPL’s big Brunner Island and Montour coal plants in Pennsylvania, into Talen Energy. The commission approved the deal on Dec. 18, but said that to mitigate market power concerns, the companies would potentially have to divest all of the power plants in two sets of proposed plants to be sold, not just the plants in either set.

Said the Jan. 14 delay request about the commission mandate: “Specifically, the Commission stated that Applicants may choose among three alternatives: (1) limit offers from the mitigated assets that Talen Energy continues to own after completing the divestiture of either of the proposed divestiture packages to cost-based offers in the energy market within the 5004/5005 submarket; (2) divest all of the assets included in both divestiture packages; or (3) choose to submit a different mitigation proposal to address the Commission’s concerns regarding the 5004/5005 submarket.

“The Commission also required Applicants to submit, within 30 days of the December Order, an informational filing stating that they have chosen either the first or second alternative set forth in the December Order or submit a compliance filing with an alternative mitigation proposal. If Applicants choose to submit an alternative mitigation proposal, the Commission ordered Applicants to include a horizontal market power analysis demonstrating that the Transaction, including the revised mitigation proposal, will have no adverse effect on competition in the 5004/5005 submarket. The required informational or compliance filing is due on January 20, 2015.

“Applicants are considering the three options presented by the Commission to address the horizontal market power concerns in the 5004/5005 submarket. However,consideration of such options requires extensive analysis of the implication of each alternative on the business of Talen Energy. In addition, analysis of potential alternative mitigation proposals requires consideration of whether such proposals would address the Commission’s horizontal market power concerns in the 5004/5005 submarket. It has taken longer than anticipated to assess the potential alternatives as well as their business implications, which is why Applicants did not file a motion for an extension earlier. Moreover, efforts to complete these analyses and decide on which options to pursue have been slowed, in part, by the intervening holiday season. Applicants therefore request additional time to properly complete these analyses and, if an alternative mitigation proposal is selected, prepare the required compliance filing. Accordingly, Applicants request a short extension to January 30, 2015 to submit either the informational or compliance filing as required by the Commission’s December Order.”

The issue is the potential market power of Talen Energy in a PJM submarket

FERC on Dec. 18 had approved the transactions needed to turn PPL Corp. (NYSE: PPL) and Riverstone Holdings LLC power plants over to the newly-created Talen Energy. The companies told FERC that they have committed to a market power mitigation plan that consists of two alternative divestiture options (Option 1 and Option 2), comprising two sets of generating plants. These sales are particularly designed to ease concerns in the PJM Interconnection 5004/5005 submarket. Both options call for divestiture to a third party of a subset of the assets, totaling approximately 1,300 MW, which would otherwise be part of Talen Energy.

  • Under Option 1, the Ironwood, Bayonne, Camden, Elmwood Park, Newark Bay, Pedricktown, and York power plants would be divested and sold to a third party.
  • Under Option 2, the CP Crane, Holtwood, Bayonne, Camden, Elmwood Park, Newark Bay, Pedricktown, York, and Wallenpaupack plants would be divested and sold to a third party.

Applicants explained that the proposed divestiture plan is to offer the Option 1 units in at least two bundles, consisting of the following: the Sapphire Units (Bayonne, Camden, Elmwood Park, Newark Bay, Pedricktown, and York); and the PPL Ironwood facility. Applicants stated that the proposed divestiture is to offer the Option 2 units in at least three bundles, consisting of the following: the Sapphire Units; the coal-fired CP Crane facility; and the PPL Holtwood and Wallenpaupack facilities.

They said that only three market participants have been identified as ineligible: affiliates of Public Service Enterprise Group (PSEG), Exelon Corp. and NRG Energy. Applicants stated that all other buyers could acquire one bundle and almost all other buyers theoretically could acquire more than one of the bundles without causing any Economic Capacity screen failures, depending on who the other buyers are.

“We find Applicants’ proposed mitigation is insufficient to address the competitiveness concerns identified in the 5004/5005 submarket, one of the submarkets with the greatest overlap of Applicants’ generation resources, as explained below,” said the Dec. 18 FERC order. “Accordingly, we condition our authorization of the Proposed Transaction on additional mitigation measures to address the competitiveness concerns in the 5004/5005 submarket, as explained below. Specifically, we find that Applicants have not demonstrated that the Proposed Transaction, with Applicants’ proposed mitigation, will not have an adverse effect on competition because Applicants have not demonstrated that their proposed mitigation would adequately mitigate the market power screen failures in the 5004/5005 submarket.”

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.