Dive Brief:
- The Federal Energy Regulatory Commission on Thursday proposed a rule to narrow the scope of utility mergers subject to its jurisdiction in response to recent amendments to the Federal Power Act.
- In September, President Trump signed into law changes to the FPA that set a minimum of $10 million for the value of merger transactions that must be reviewed by FERC. Previously, there was no minimum threshold.
- FERC's proposal seeks to implement those changes while still requiring transactions with more than $1 million in value to report information to the commission. Comments on the proposal are due in 30 days.
Dive Insight:
Changes to FERC's jurisdiction over mergers and acquisitions in the power sector are unlikely to alter the outcome of many deals. State regulators, not federal officials, are typically the biggest hurdle for controversial mergers to clear.
However, narrowing FERC's scope in the M&A space could help alleviate procedural headaches for the commission and its regulated entities. As lawyers from the firm Gibson Dunn noted in September, the absence of a minimum threshold for merger consideration has led to a glut of small mergers coming before regulators.
"Since the [FPA] was silent regarding any sort of de minimis threshold utility merger approvals, FERC interpreted its authority to extend to all such mergers regardless of the value of the facilities," they wrote in a blog post. "This has led to numerous applications to FERC for approval of transactions involving minimally valued assets (some as low as $1), frustration on the part of some utilities, and some entities incurring fines from the FERC Office of Enforcement due to erroneous reading of a $10 million threshold into the statute.”
Under FERC's proposed rule, only mergers above the $10 million threshold will be subject to pre-approval from regulators, but entities in a deal with a value of $1 million or more will still need to notify the commission within one month of closing.
"[T]he information the Commission proposes to require in the notification filing will allow the Commission to collect information about the transaction should a question arise related to the underlying facilities and the Commission's oversight under the Federal Power Act," the proposed rule states.
FERC regulators also stressed that the new amendments do not change its interpretation of the FPA for mergers larger than $10 million.
"That is, the Commission interprets the amendment by Congress to [the FPA] as establishing a $10 million threshold, but not removing the Commission's jurisdiction to review transactions with a higher value that involve a public utility's acquisition of facilities from non-public utilities if those facilities will be subject to the Commission's jurisdiction after the transaction is consummated," regulators wrote.
