News Column

FERC Issues Order Authorizing Disposition and Acquisition of Jurisdictional Facilities re J.P. Morgan Ventures Energy Corporation et al Under EC14-85

July 8, 2014



WASHINGTON, July 8 -- The U.S. Department of Energy'sFederal Energy Regulatory Commission issued the text of the following delegated order:

J.P. Morgan Ventures Energy Corporation

J.P. Morgan Commodities Canada Corporation BE Alabama LLC

Mercuria Energy America, Inc.

Docket No. EC14-85-000

ORDER AUTHORIZING DISPOSITION AND ACQUISITION OF JURISDICTIONAL FACILITIES

(Issued July 8, 2014)

On May 5, 2014, J. P. Morgan Ventures Energy Corporation (JPM Ventures), J.P. Morgan Commodities Canada Corporation (JPM Canada), BE Alabama LLC (BE Alabama), and Mercuria Energy America, Inc. (Mercuria America) (collectively, the Applicants) filed an application pursuant to section 203(a)(1) of the Federal Power Act (FPA) requesting Commission authorization for the disposition of jurisdictional facilities resulting from a transaction under which: (1) BE Alabama will transfer its rights, obligations and interests pursuant to a tolling agreement, including its control over a generation facility, to Mercuria America; (2) 100 percent of the ownership interests in JPM Canada will be transferred from JPM Ventures to a special purpose vehicle wholly-owned by Mercuria Energy GL, Mercuria America's ultimate parent, or another wholly-owned subsidiary of that parent; and (3) JPM Ventures will assign its rights, obligations and interests in various full requirements power sales agreements with certain electric membership cooperatives in Georgia (Georgia EMC Agreements) to Mercuria America (Proposed Transaction). The jurisdictional facilities involved in the Proposed Transaction are JPM Canada's market-based rate tariff, related contracts, agreements, books and records as well as BE Alabama's rights, obligations and interests pursuant to a tolling agreement with Tenaska Alabama Partners, L.P. (Tenaska Toll), and JPM Ventures' rights, obligations and interests in the Georgia EMC Agreements.

The Applicants state that Mercuria America is an independent energy marketing and trading company with its principal place of business located in Houston, Texas. Mercuria America is wholly-owned by Mercuria Energy Company, LLC. Both Mercuria America and Mercuria Energy Company, LLC are wholly-owned subsidiaries of Mercuria Energy GL, the parent holding company of an international group of companies principally engaged in the sourcing, trading, marketing, shipping and/or logistics relative to energy products. Mercuria America owns a 49.185 percent interest in Distributed Generation Solutions, LLC, which owns interests in two peaking generation plants totaling approximately 50 megawatts (MW) of capacity in the Electric Reliability Council of Texas (ERCOT). Mercuria is a lender to Helios Power Capital, LLC, which owns the Danskammer Generating Station (Station), a non-operational station that has a nameplate capacity of approximately 500 MW in the New York Independent System Operator, Inc.Mercuria America's current interest in the Station is limited to debt; however, there is an effort to restart the Station. The Applicants state that Mercuria America will make filings with the Commission as appropriate. The Applicants state that neither Mercuria America nor any of its affiliates owns or controls the following in the United States, except as described above, (1) electric generation, transmission or distribution facilities; (2) intrastate natural gas transportation, storage or distribution facilities, sites for generation capacity development, physical coal supply sources or ownership or control over who may access transportation of coal supplies; or (3) any franchised public utility.

The Applicants state that JPMorgan is a publicly-traded financial holding company and is not primarily engaged in energy-related business activities. However, through direct or indirect, wholly-owned subsidiaries, JPMorgan has a number of energy affiliates that engage in wholesale sales of electricity in the United States and that own various interests in electric generating facilities. JPMorgan also, through subsidiaries, makes investments in wind-powered generation facilities. BE Alabama and JPM Canada are each wholly-owned indirect subsidiaries of JPM Ventures and each is authorized to make sales at market-based rates. BE Alabama has the right pursuant to the Tenaska Toll to dispatch and purchase the output from an approximately 844 MW generation facility located in Alabama, but BE Alabama does not otherwise own or control electric generation capacity. The Georgia EMC Agreements are various full requirements power sales agreements with certain electric membership cooperatives in Georgia (Georgia Cooperatives), whereby JPM Ventures supplies the full electric requirements of those electric membership cooperatives under JPM Ventures' market-based rate authority. The Georgia Cooperatives have rights to the output of certain generation facilities in Georgia. JPM Ventures has the right to call on the megawatts that each Georgia Cooperative is entitled to, as needed. However, the call option does not entitle JPM Ventures to the output of any specific generation facility, nor does it provide JPM Ventures with the right to control or otherwise direct the operations of a specific generation facility. The Applicants state that JPM Canada does not directly own or control electric generation capacity.

The Proposed Transaction involves a transfer of certain contract rights from two power marketers (BE Alabama and JPM Ventures) to Mercuria America and separately, the transfer of control over a market-based rate schedule and associate books and records of JPM Canada, another power marketer. The Applicants state that the Proposed Transaction is consistent with the public interest because it will have no adverse impact on competition, rates, or regulation and will not result in cross-subsidization or the pledge or encumbrance of utility assets for the benefit of an associate company.

The Applicants state that the Proposed Transaction raises no horizontal market power concerns, because, according to Applicants, neither Mercuria America, nor its affiliates owns or controls any generation in the United States, except for the 50 MW of generation in ERCOT. The Applicants state that the Proposed Transaction involves jurisdictional assets located in Alabama and Georgia but the Proposed Transaction does not involve any combination of generating facilities in those states. Therefore, according to the Applicants, the Proposed Transaction does not raise any horizontal market power concerns.

The Applicants state that the Proposed Transaction raises no vertical market power concerns, because the Proposed Transaction does not involve any transmission facilities, or any other upstream input to electricity products. Moreover, the Applicants state that, except as described herein, neither Mercuria America nor its affiliates own or control any essential inputs to electric power generation such as intrastate gas transportation, sites for generation capacity development, or sources of coal supplies and the transportation of coal supplies, such as barges and rail cars, in any market. Therefore, the Applicants state that the Proposed Transaction does not raise any vertical market power concerns.

The Applicants state that the Proposed Transaction will have no adverse effect on rates because the Applicants do not have any captive wholesale requirements customers and do not have any cost-based wholesale power sales customers or transmission service customers. The Applicants state that only contracts with market-based rates that were negotiated at arms-length are involved in the Proposed Transaction and Mercuria America will not acquire any physical facilities. The Applicants state that Mercuria America will simply be the successor in interest to BE Alabama and JPM Ventures under the Tenaska Toll and Georgia EMC Agreements, respectively. The Applicants state that the rates, terms and conditions of the Tenaska Toll and Georgia EMC Agreements will not change as a result of the Proposed Transaction. The Applicants state that all sales of electric energy, capacity, and ancillary services by JPM Canada will continue to be made pursuant to its market-based rate tariff. The Applicants also state that the Proposed Transaction does not involve any transmission rates or transmission customers. Therefore, the Applicants state that the Proposed Transaction will have no adverse effect on rates.

The Applicants state that the Proposed Transaction will have no adverse effect on regulation. The Applicants state that only contracts, related to transactions in Alabama and Georgia, and control of JPM Canada, a power marketer, will be transferred as a result of the Proposed Transaction and Mercuria America will not acquire any physical facilities. The Applicants state that following consummation of the Proposed Transaction, any sales of electric energy by JPM Canada will remain subject to the Commission's jurisdiction. The Applicants represent that the Tenaska Toll and the Georgia EMC Agreements will remain subject to the Commission's jurisdiction to the same extent as before the Proposed Transaction. The Applicants state that no facilities will be removed from Commission jurisdiction as a result of the Proposed Transaction. The Applicants also state that the Proposed Transaction will have no adverse effect on state regulation and does not require approval of any state utility commission. Therefore, the Applicants state that the Proposed Transaction will not impair the effectiveness of regulation.

The Applicants state that, based on facts and circumstances known to them or that are reasonably foreseeable, the Proposed Transaction will not result in, at the time of the Proposed Transaction or in the future, cross-subsidization of a non-utility associate company or the pledge or encumbrance of utility assets of a traditional public utility associate company that has captive customers or that owns or provides transmission service over jurisdictional facilities for the benefit of an associate company, including: (1) any transfer of facilities between a traditional public utility associate company that has captive customers or that owns or provides transmission service over jurisdictional transmission facilities, and an associate company; (2) any new issuance of securities by a traditional public utility associate company that has captive customers or that owns, or provides transmission service over, jurisdictional transmission facilities, for the benefit of an associate company; (3) any new pledge or encumbrance of assets of a traditional public utility associate company that has captive customers or that owns or provides transmission service over jurisdictional transmission facilities, for the benefit of an associate company; or (4) any new affiliate contracts between a non-utility associate company and a traditional public utility associate company that has captive customers or that owns or provides transmission service over jurisdictional transmission facilities, other than non-power goods and service agreements subject to review under sections 205 and 206 of the FPA. The filing was noticed on May 5, 2014, with comments, protests or interventions due on or before May 27, 2014. None was filed. Notices of intervention and unopposed timely filed motions to intervene are granted pursuant to the operation of Rule 214 of the Commission's Rules of Practice and Procedure (18 C.F.R. section 385.214 (2013)). Any opposed or untimely filed motion to intervene is governed by the provision of Rule 214.

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, the Applicants are advised that they must comply with the requirements of Order No. 652. In addition, the Applicants shall make appropriate filings under section 205 of the FPA, to implement the Proposed Transaction.

Information and/or systems connected to the bulk system involved in this transaction may be subject to reliability and cybersecurity standards approved by the Commission pursuant to FPA section 215. Compliance with these standards is mandatory and enforceable regardless of the physical location of the affiliates or investors, information database, and operating systems. If affiliates, personnel or investors are not authorized for access to such information and/or systems connected to the bulk power system, a public utility is obligated to take the appropriate measures to deny access to the information and/or the equipment/software connected to the bulk power system. The mechanisms that deny access to information, procedures, software, equipment, etc. must comply with all applicable reliability and cybersecurity standards. The Commission, NERC or the relevant regional entity may audit compliance with reliability and cybersecurity standards.

After consideration, it is concluded that the Proposed Transaction is consistent with the public interest and is hereby authorized, subject to the following conditions:

(1) The Proposed Transaction is authorized upon the terms and conditions described in this Order and for the purposes set forth in the application;

(2) The foregoing authorization is without prejudice to the authority of the Commission or any other regulatory body with respect to rates, service, accounts, valuation, estimates or determination of cost or any other matter whatsoever now pending or which may come before the Commission;

(3) Nothing in this order shall be construed to imply acquiescence in any estimate or determination of cost or any valuation of property claimed or asserted;

(4) The Commission retains authority under sections 203(b) and 309 of the FPA, to issue supplemental orders as appropriate;

(5) If the Proposed Transaction results in changes in the status or the upstream ownership of the Applicants' affiliated Qualifying Facilities, if any, an appropriate filing for recertification pursuant to 18 C.F.R. section 292.207 (2013) shall be made;

(6) Applicants shall make appropriate filings under section 205 of the FPA, as necessary, to implement the Proposed Transaction;

(7) Applicants must inform the Commission of any change in circumstances that would reflect a departure from the facts the Commission relied upon in authorizing the Proposed Transaction; and

(8) Applicants shall notify the Commission within 10 days of the date that the Proposed Transaction has been consummated.

This action is taken pursuant to the authority delegated to the Director, Division of Electric Power Regulation - West under 18 C.F.R. section 375.307 (2013). This order constitutes final agency action. Requests for rehearing by the Commission may be filed within 30 days of the date of issuance of this order pursuant to 18 C.F.R. section 385.713 (2013).

Steve P. Rodgers

Director, Division of Electric Power Regulation - West

TNS 18EstebanLiz-140709-30FurigayJane-4791144 30FurigayJane


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