Vistra Nears Closing Of Energy Harbor Acquisition After Receiving FERC Approval

February 19, 2024

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Copyright 2010-23 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

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Vistra said that it has now received approval from the Federal Energy Regulatory Commission (FERC) to acquire Energy Harbor.

Vistra announced last March the purchase of Energy Harbor, which includes a 4,000-megawatt nuclear generation fleet and retail energy business of ~1 million customers

FERC's approval was the last regulatory approval needed for the companies to close the transaction.

Vistra said that it anticipates closing in the coming weeks.

FERC conditioned approval of the transaction on Vistra's commitment to divest the only generation facilities owned by Vistra in the ATSI transmission zone: the Richland and Stryker generating facilities

See more background on Vistra's proposed divestiture here

Under the order, Vistra must sell Richland-Stryker to a buyer that: (1) is not affiliated with Vistra, and (2) will not fail the horizontal Competitive Analysis Screens, including the Delivered Price Test, for the PJM market or any relevant submarket, post-Transaction. As part of the divestiture transaction, Vistra is not permitted to retain operational control of Richland-Stryker, or otherwise control or manage dispatch or output from Richland-Stryker, or otherwise maintain rights to output or capacity from Richland-Stryker

Mitigation measures, as proposed by Vistra, will apply during an interim period until the Richland-Stryker divestiture is complete. The mitigation measures include the use of cost-based offers and offer caps for sales from Richland-Stryker, and the engagement of an independent entity to oversee compliance, and to file quarterly reports with FERC

In the approval order, FERC disagreed with protestors and found that the Class B interests in Vistra Vision held by Nuveen Asset Management and Avenue Capital, including the consent/veto rights as to the acquisition of a fossil fuel generating asset, represent passive ownership interests. Accordingly, Nuveen Asset Management and Avenue Capital were not considered affiliates of Vistra Vision or Vistra post-Transaction for purposes of FERC's FPA section 203 analysis

FERC further said that the PJM IMM and OCC made broad arguments that there are inadequacies in the Commission’s process for evaluating competition in section 203 transactions and with the implementation of PJM’s market power mitigation. FERC said that the PJM IMM relies on perceived existing limitations in PJM’s market power mitigation as the basis for proposing additional behavioral mitigation as part of the transaction.

"These arguments are directed at the effectiveness of the PJM markets and mitigation measures as a general matter. As the Commission has previously found, arguments based on general concerns about certain elements of PJM’s market design that are not specific to a proposed transaction under review are beyond the scope of the Commission’s review of the proposed transaction," FERC said

FERC also declined the DOJ Antitrust Division’s request that FERC conduct a supply curve analysis of the Proposed Transaction, as FERC said, "the Divestiture Commitment appears to alleviate DOJ Antitrust Division’s specific concern about the Proposed Transaction given that the divestiture of Richland-Stryker eliminates Vistra’s 'ability' to engage in strategic withholding using that facility".

FERC declined to examine the impact of the Proposed Transaction on the Ohio CRES [competitive retail electric service] and SSO retail and retail supply markets, "because the Ohio Commission [PUCO] has not requested that the Commission do so."

The Public Utilities Commission of Ohio’s Office of the Federal Energy Advocate (Ohio Energy Advocate) did ask that FERC conduct an analysis of the transaction's potential effect on retail markets and competition in Ohio to determine if the transaction is in the public interest

However, FERC, citing the state statute creating the Ohio Energy Advocate, said that the Ohio Energy Advocate is not a state commission

FERC said, "in the Merger Policy Statement and Order No. 642, the Commission stated that it would evaluate a proposed transaction’s impact on retail competition if a state lacks authority and asks the Commission to do so".

"As to the first condition, it is undisputed that the Ohio Commission does not have authority to review the Proposed Transaction. However, with respect to the second condition, the Ohio Commission has not made a request for this Commission to perform such a review. Contrary to assertions by protesters, the Ohio Energy Advocate is not the Ohio Commission, and the Ohio Energy Advocate’s request is not a request by the Ohio Commission," FERC said

"The enabling statute does not provide the Ohio Energy Advocate with authority to regulate rates or charges and does not identify the Ohio Energy Advocate as a representative of the Ohio Commission’s interests or otherwise empower the Ohio Energy Advocate to speak on behalf of the Ohio Commission. Instead, the Ohio Energy Advocate is charged with advocating on behalf of Ohio retail customers and monitoring federal proceedings. As such, the Ohio Energy Advocate is not a state commission," FERC said

"[B]ecause we have not received a request from a state commission to undertake a review of the effect of the Proposed Transaction on retail markets and competition, we decline to perform such a review, consistent with our long-standing policy," FERC said

EC23-74

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