On July 22, 2020, FERC approved a mitigation proposal that Sun Jupiter Holdings, LLC (“Sun Jupiter”) and El Paso Electric Company (“El Paso”) (together, “Applicants”) submitted in response to FERC’s March 30, 2020 order (“March 2020 Order”) conditioning approval of Sun Jupiter’s merger with and into El Paso and requiring the Applicants to address the transaction’s adverse impact on competition in certain circumstances. FERC also dismissed, on procedural grounds, United States Senators Jeffrey A. Merkley (D-OR), Edward J. Markey (D-MA), and Bernard Sanders (D-VT) (collectively, “Senators”) request for rehearing, and denied Public Citizen, Inc.’s  (“Public Citizen”) request for rehearing of FERC’s March 2020 Order.

In the March 2020 Order, FERC conditionally authorized the proposed merger on the condition that Applicants propose, and FERC approve, mitigation measures to address the merger’s adverse impact on competition whenever certain third-party contracts are terminated early. As a result, Applicants proposed two options for mitigation: one that commits El Paso to enter into a power sales agreement for the block sale of firm energy during peak periods that is backed by system power; and the one that commits El Paso to sell from its Palo Verde generation capacity a similar block of firm energy during peak periods to a non-affiliated third party at the Four Corners trading hub. FERC approved Applicants’ mitigation proposal, finding that if the third-party contracts are terminated early, the Applicants’ proposal sufficiently mitigates the competitive harms identified in Applicants’ competition analysis. FERC also required Applicants to notify FERC if the contracts are terminated early, as well as which mitigation proposal will be enacted, within 60 days of the early termination notice.

In response to FERC’s March 2020 Order, Senators Merkley, Markey, and Sanders wrote a letter requesting rehearing, arguing, like Public Citizen, that FERC ignored evidence that J.P. Morgan’s potential affiliation with the Sun Jupiter’s ultimate upstream owner may harm rates that El Paso’s captive customers pay. Public Citizen further asserted that FERC erred by not collecting additional corporate information regarding the affiliation. FERC dismissed the Senators’ request on procedural grounds, finding that they did not move to intervene in the proceeding and thus lacked standing to request rehearing. Despite the dismissal, FERC substantively addressed the issues raised by the Senators and Public Citizen.

First, FERC was not persuaded that it did not address evidence demonstrating harm to rates stemming from J.P. Morgan’s potential affiliation with the Sun Jupiter’s upstream owner. FERC noted that it took the extra step of requesting additional information and explanation from Applicants in a deficiency letter and that its analysis confirmed that the merger would not have a negative impact on rates even assuming an affiliation existed. FERC also found that Public Citizen’s evidence of alleged self-dealing is unrelated to El Paso and does not establish an effect, let alone an adverse impact, on rates resulting from the merger.

Second, FERC disagreed that it erred in failing to obtain additional corporate documents from Sun Jupiter’s upstream owner. In response, FERC reiterated that it considered the proposed merger based on the evidence in the record and the assumption that J.P. Morgan and Sun Jupiter are affiliated, and found that it did not need additional information to reach its conclusion to conditionally authorize the proposed merger as consistent with the public interest.

Click here to read the Order.