Stating that "reducing barriers to investment is particularly important in current market conditions," the Federal Energy Regulatory Commission, on November 5, 2008, addressed issues concerning investment company ownership in utilities under Section 203 of the Federal Power Act. In authorizing certain corporate transactions in four separate orders, the FERC demonstrated its commitment to reducing such barriers by showing flexibility and accommodation and by avoiding the imposition of certain additional burdens on the applicants. In these orders FERC has shown that, given the economic climate, it is willing to make accommodations in its once-rigid rules and requirements in order to allow for investment in the utility industry.
Expansion of Blanket Authorization. Pursuant to Section 203, entities are required to seek FERC approval prior to certain acquisitions and dispositions of public utility companies, securities or assets. Section 203, however, provides for certain "blanket authorizations" that, if applicable, eliminate the requirement to seek FERC approval prior to such acquisitions or dispositions by rendering such transaction, effectively, "pre-approved." One such "blanket authorization" permits an entity that is a "holding company" solely because of its ownership of Exempt Wholesale Generators, Qualifying Facilities or Foreign Utility Companies to acquire securities of additional EWGs, QFs or FUCOs. In its November 5 Orders, FERC expanded this blanket authorization, stating that it is "reasonable to interpret" this blanket authorization to permit a holding company, solely with respect to EWGs, QFs or FUCOs, "to increase its investment in EWGs, FUCOs or QFs whose securities it has already acquired."
Control. Notwithstanding the applicability of a blanket authorization, FERC review and approval is required if the transaction results in a change of control of an EWG that is a public utility owned by the holding company whose securities are being acquired. In the November 5 Orders, FERC showed flexibility in addressing the issue of control—both in approving a transaction despite a concern over control and in approving transactions despite pending proceedings regarding the definition of "control." In one instance, although finding that there may be a transfer of control that raises horizontal market power concerns, FERC nonetheless authorized the proposed transactions and, rather than simply rejecting the transaction, implemented conditions regarding the acquiring entity's future management role in order to avoid an exercise of market power. In two other instances, addressing concern that the proposed transactions may have adverse implications on the market-based rate authorization of a separate entity partially owned by the applicant, FERC elected to relax its rules applicable to market-based rate authorization in order to approve the Section 203 applications under review. In particular, FERC relieved the separate entity of its obligation to make a market-based rate change of status filing pertaining to the proposed transactions pending a separate proceeding for the determination of what constitutes "control" under Section 203 and for market-based rate purposes.