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New Brunswick Power Generation Says Emera, Algonquin Transactions Will Increase Market Power in Northern Maine
June 8, 2011
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New Brunswick Power Generation Corporation has protested at FERC several transactions involving Emera, Algonquin Power & Utilities Corp., and First Wind Holdings, alleging that the transactions would, "adversely affect competition by creating affiliated entities possessing horizontal and vertical market power in the northern Maine region."
Among other things, Emera, which owns Maine Public Service, is seeking to increase its holdings in Algonquin to approximately 15%. Additionally, a newly formed holding company jointly owned by Emera and Algonquin are seeking to acquire 49% of several First Wind Holdings generating facilities.
"[T]he transactions would enhance the existing market power held by Algonquin in the northern Maine capacity market and, as a result, 'will result in higher prices or reduced output in electricity markets,'" New Brunswick Power Generation alleged.
"[A]side from NBP Generation, Algonquin is the only Maine licensed Competitive Energy Provider serving northern Maine. Aggregating the Emera, Algonquin, and First Wind assets into a related ownership group will increase the horizontal market power of this related group in the northern Maine retail market," New Brunswick Power Generation alleged.
Algonquin holds 48.5% of the currently available capacity resources in the Northern Maine Independent System Administrator Northern Region, New Brunswick Power Generation holds 24%, Boralex 19.8%, and Evergreen Wind 7.8%. Following the transactions, Algonquin and its affiliates (Emera and First Wind) would hold about 56% of the capacity resources currently available to serve load in the NMISA Northern Region, New Brunswick Power Generation said.
The NMISA capacity market is a bilateral market. NMISA determines the capacity needs of the system, and allocates responsibility for these needs among load serving entities based upon their peak demand. Each load serving entity is then individually responsible to arrange qualifying capacity resources to meet these obligations.
"Because of its dominant position in the northern Maine capacity market, Algonquin has the ability to exercise market power and, indeed, has abused its market dominant position in the northern Maine capacity market to drive up capacity prices," New Brunswick Power Generation alleged.
"For instance, while NBP Generation has been successful in reaching commercial arrangements with Domtar, Boralex and Evergreen Wind for the purchase of capacity to serve northern Maine loads, NBP Generation was unable to reach similar commercial arrangements with Algonquin. Because of this failure, the Northern Maine ISA subsequently entered into independent arrangements to purchase capacity from Algonquin at a cost premium over market prices negotiated through standard commercial arrangements," New Brunswick Power Generation alleged.
"Increased prices in the capacity market directly impact retail customers through higher prices for retail electricity service provided on a competitive and Standard Offer basis. NBP Generation believes that Northern Maine ISA's decision to purchase this additional capacity from Algonquin was and is unreasonable," New Brunswick Power Generation said.
New Brunswick Power Generation said that Algonquin has 47 MW of generation resources located in northern Maine along with Algonquin's 34 MW of firm transmission in New Brunswick into northern Maine. "[B]ecause its generating capacity alone exceeds its peak load and capacity obligation of approximately 21 MW, Algonquin makes little, if any, current use of its 34 MW firm transmission reservation on the NBSO system for delivery into the northern Maine system. This transmission capacity is therefore fully available to meet regional capacity needs ... However, again, Algonquin has been unwilling to make this capacity available on a firm basis or enter into a reasonable commercial arrangement to share firm transmission service into northern Maine," New Brunswick Power Generation alleged.
The Northern Maine Independent System Administrator also filed a protest, requesting that any approval of the transaction providing Emera with a 15% stake in Algonquin include an express ruling by the Commission that Emera's subsidiary Maine Public Service is subject to the Standards of Conduct set forth in Part 358 of the Commission's regulations, and that the Standards of Conduct waiver previously granted to MPS is no longer valid.
"Such a ruling is necessary because MPS is a subsidiary of Emera, and Emera's ownership interest in Northern Maine generation resources will more than double as a direct result of the proposed transaction," NMISA said.
Under the NMISA arrangement, MPS is responsible for overseeing the scheduling, dispatching and facilitating of all energy, capacity and ancillary services transactions in the Northern Maine Market.
NMISA noted that the Standards of Conduct define "affiliate" to include an entity that is under "common control" with another, and a voting interest of 10 percent or more creates a rebuttable presumption of control. Hence, if the proposed transaction is consummated, MPS will be affiliated with a large share of the generation in Northern Maine, NMISA said.
"MPS is responsible for the scheduling and dispatching of all generation facilities in Northern Maine -- affiliated and unaffiliated. It would therefore be untenable if MPS did not have to abide by the functional separation requirements, disclosure prohibitions, and transparency requirements set forth in the standards," NMISA said.
The dockets are EC11-79 and EC11-80.
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