On April 27, 2020, FERC granted renewable energy company Goldman Sachs Renewable Power Marketing, LLC (“GSRPM”) authority to make wholesale sales of energy, capacity, and ancillary services at market-based rates. However, FERC also found GSRPM to be affiliated with the investment bank Goldman Sachs Group, Inc. (“Goldman Sachs”). On the basis of that finding, FERC concluded that GSRPM would be subject to enhanced reporting requirements as a Category 2 Seller in the northwest region of the United States. The order reflects FERC’s increasing interest in the disclosure of corporate structure for purposes of affiliation determinations in market-based rate applications.
GSRPM’s application for market-based rate authority explained that it is a wholly owned subsidiary of Goldman Sachs Renewable Power, LLC (“GSRP”) and that management and control of both GSRPM and GSRP is held exclusively by GSRP’s three-member Board of Directors. In addition, GSRPM explained that Goldman Sachs Asset Management, L.P. (“Asset Management”), itself a wholly-owned subsidiary and business division of Goldman Sachs, provides investment and management services to GSRP as its investment manager. GSRPM argued that it is not affiliated with Goldman Sachs for purposes of FERC’s regulations, because GSRP’s Board is independent of Goldman Sachs, and because Goldman Sachs’ ownership in GSRP is capped at 4.9%. As background, FERC allows power sales at market-based rates so long as the Seller and its affiliates do not have, or have adequately mitigated, horizontal market power (which focuses on generation) and vertical market power (which focuses on transmission and other inputs to electric power generation). Under FERC’s regulations, an affiliate is any person that directly or indirectly owns, controls, or holds with power to vote, 10% or more of the outstanding voting securities of the specified company.
GSRPM’s application faced opposition from public interest group Public Citizen, which raised questions about the independence of GSRP’s Board, stating that the three Board members serve as corporate directors for 61 other companies, 55 of which share a principal address and phone number with Goldman Sachs. Public Citizen also focused on Asset Management’s role in the investment decisions of GSRPM and its connection to Goldman Sachs, arguing that permitting Goldman Sachs to run the day-to-day investment affairs for a private equity fund would present inherent financial conflicts of interest.
In finding an affiliation between Goldman Sachs and GSRPM, FERC focused on Goldman Sachs’ ownership of Asset Management, and Asset Management’s control of the voting securities in GSRPM though a Management Services Agreement that permits Asset Management to exercise all of GSRP’s rights in GSRPM, including its voting rights. FERC concluded that the Management Services Agreement gave Asset Management authority to manage, direct, or control GSRPM’s activities, and that Asset Management therefore controls more than 10% of the outstanding voting securities of GSRPM. FERC also rejected GSRPM’s arguments that information barriers separate Asset Management and Goldman Sachs. Rather, FERC concluded that Asset Management’s status as a wholly-owned subsidiary and business division of Goldman Sachs is sufficient to establish affiliation under its regulations. As a result, FERC concluded that GSRPM is a Category 2 Seller in the northwest region of the United States.
FERC’s April 27 order is available here.