Docket No. EC23-99-000
I concur with today’s order because it is consistent with the Commission’s practice for years regarding evaluating applications under section 203 of the Federal Power Act. I write separately to emphasize my belief that this pattern of practice raises questions as to whether the Commission is adequately enforcing its regulations implementing section 203.
The Commission’s usual practice is evident in today’s order. Of course, today’s order applies the Commission’s public interest analysis, and on its face, the order concludes that the Proposed Transaction does not result in an adverse effect on horizontal and vertical competition, rates, and regulation and does not result in cross-subsidization contrary to the statute. I support this determination because it is consistent with past practice.
Per the letter of the regulations, however, the Applicants’ submission in this proceeding was incomplete: they were required to file a vertical Competitive Analysis, as described in the regulations, which they did not do. Section 33.4(a) of the Commission’s regulations[1] provides that an applicant must file a vertical Competitive Analysis unless the applicant can affirmatively demonstrate either of the following:
(i) The merging entities currently do not provide inputs to electricity products (i.e., upstream products) and electricity products (i.e., downstream relevant products) in the same geographic markets or that the extent of the business transactions in the same geographic market is de minimis, and no intervenor has alleged that one of the merging entities is a perceived potential competitor in the same geographic market as the order.
(ii) The extent of the upstream relevant products currently provided by the merging entities is used to produce a de minimis amount of the relevant downstream products in the relevant destination markets.[2]
Neither exception applies here. As discussed in the order, Blackstone is affiliated with Midcoast Pipelines (East Texas) L.P., which owns a pipeline that is partially in MISO, and thus the merging entities “provide inputs to electricity products . . . and electricity products . . . in the same geographic market[].” Further, Applicants do not attempt to make a de minimis showing in their representations regarding the Proposed Transaction’s effect on vertical market power.[3]
In recent years, the Commission has rarely, if ever, required a vertical Competitive Analysis when approving section 203 applications—even where, as here, the merging entities participate in the same geographic market. The Commission has relied on other evidence presented by the applicant to confirm that there are no vertical market power concerns.[4] Although this may be a more administratively convenient approach, it ultimately does not conform to the Commission’s regulations. Given this current practice of the Commission, it may be time to revisit the Commission’s policy and regulations implementing section 203.[5]
Of course, there cannot be an absence of policy or regulations implementing section 203. This is especially true in the face of increased partial acquisitions in public utilities and public utility holding companies. I have previously written separately about my concerns over these partial acquisitions and what they may mean for the public interest, competition, and reliability.[6] There is an inherent tension between the profit-seeking motivations of large investment management entities and public utilities with the responsibility to provide reliable power at just and reasonable rates.[7] It is the Commission’s responsibility under section 203 to evaluate transactions involving these large investment management entities to determine whether they comport with the public interest. To do so, and to effectively administer section 203, the Commission must have regulations it can enforce that capture the concerns present in the types of transactions that occur today.
For these reasons, I respectfully concur.
[1] 18 C.F.R. § 33.4(a).
[2] 18 C.F.R. § 33.4(a)(2) (2022). Applicants even identify the requirements of this regulation themselves in their application. Application at 16-17.
[3] See Application at 16-18; Applicants’ Answer at 6. Applicants’ de minimis arguments are limited to the horizontal competition context. See Application at 16; Applicants’ Answer at 5.
[4] See, e.g., AZ Solar 1, LLC, 181 FERC ¶ 61,265, at P 50 (2022) (finding that the transactions at issue did not raise concerns that the applicants or their affiliates would exercise vertical market power in the relevant markets because the output of the project companies located in those markets was fully committed under long-term firm agreements to unaffiliated buyers).
[5] The Commission even has an open, but long dormant, proceeding in which it could do exactly this. Modifications to Comm’n Requirements for Review of Transactions under Section 203 of the Fed. Power Act and Mkt.-Based Rate Applications under Section 205 of the Fed. Power Act, Notice of Inquiry, 156 FERC ¶ 61,214 (2016).
[6] See BlackRock, Inc., 179 FERC ¶ 61,049 (2022) (Christie, Comm’r, concurring), https://www.ferc.gov/news-events/news/commissioner-christies-concurrence-blackrocks-authorization-buy-voting-securities.
[7] I would note that herein, Blackstone, the investment fund acquiring nearly 20% of NIPSCO’s direct parent company, is also getting two seats on that direct parent company’s board of directors, a clear indicator of control.