February 22, 2019

FERC Sets $10 Million Threshold on Public Utility Merger Approvals

Holland & Knight Energy and Natural Resources Blog
Brendan H. Connors | F. Alvin Taylor Jr.

On Feb. 21, 2019, the Federal Energy Regulation Commission (FERC) issued a final rule revising its regulations governing public utility mergers or consolidations. The primary effect of this rule is to set a $10 million threshold on such transactions before public utilities must seek FERC's approval before completing these lower-market deals.

The final rule follows a notice of proposed rulemaking FERC issued on Nov. 15, 2018, implementing certain amendments to Section 203 of the Federal Power Act. Before Congress passed these amendments, there was no value threshold triggering FERC approval of public utility mergers and consolidations, and FERC had required approval of any such transaction, regardless of value.

In the final rule, styled as "Order No. 855," FERC clarified that any utility contemplating a merger or consolidation of its facilities with another utility's facilities falling under FERC's jurisdiction must seek FERC's express authorization under Section 203 if the value of the acquired facilities exceeds $10 million in value. If the acquired facilities' value is less than $10 million but exceeds $1 million, then the utility does not have to seek FERC's permission for the merger or consolidation, but the utility does still have to notify the Commission.

In reaching this ruling, FERC responded to targeted comments offered by interested parties. In response to one set of concerns, the Commission clarified what filing requirements should be followed when making the notification filings described above. Moreover, the Commission established that it has no jurisdiction over the acquisition of facilities that fall outside of its ambit, even when such facilities are owned by a public utility.

According to FERC's press release, the rule "will reduce the regulatory burden on utilities for lower-value transactions," noting as well that the Commission's final action comes within the 180-day period set by Congress.

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