TMCNet:  FERC Issues Order to Viridity Energy, Inc. on Order Authorizing Disposition of Jurisdictional Facilities

[September 06, 2012]

FERC Issues Order to Viridity Energy, Inc. on Order Authorizing Disposition of Jurisdictional Facilities

(Targeted News Service Via Acquire Media NewsEdge) WASHINGTON, Sept. 5 -- The U.S. Department of Energy's Federal Energy Regulatory Commission issued the text of the following delegated order: Viridity Energy, Inc.

Docket No. EC12-130-000 ORDER AUTHORIZING DISPOSITION OF JURISDICTIONAL FACILITIES On August 3, 2012, as supplemented on August 28, 2012, Viridity Energy, Inc. (Viridity Energy, or Applicant) submitted an application pursuant to section 203(a)(1) of the Federal Power Act (FPA), requesting authorization for a disposition of jurisdictional facilities in connection with a transaction in which Viridity Energy will issue approximately 15 percent of its shares to Mitsui & Co., Ltd. (Mitsui) (Transaction). The jurisdictional facilities involved with the Transaction consist of Viridity Energy's market-based rate tariff and associated books and records.


Viridity Energy is a corporation organized under Delaware law with its offices located in Philadelphia, Pennsylvania. Applicant states that three entities own shares of Viridity Energy stock that exceed 10 percent of Viridity Energy's outstanding shares: Intel Capital Corp. (Intel Capital); Braemar Energy Ventures (Braemar Energy); and AltEnergy, LLC (AltEnergy).

Applicant adds that together, Intel Capital, Braemar Energy, and AltEnergy own approximately 80 percent of Viridity Energy's outstanding shares. In addition, several individuals and other shareholders own shares of Viridity Energy, none in excess of 10 percent. Applicant continues that Intel Capital, Braemar Energy, AltEnergy, and those other shareholders own Viridity Energy in its entirety. Applicant states that it is Viridity Energy's understanding that none of Intel Capital, Braemar Energy, or AltEnergy owns five percent or more of any other public utility nor owns or controls generation capacity or transmission facilities.

Applicant states that Viridity Energy is a smart grid company that provides energy optimization, demand management, and other energy services to retail and wholesale customers. Viridity Energy has a market-based rate wholesale power sales tariff on file with the Commission that it can utilize to make wholesale sales of capacity, energy, and ancillary services in support of its business operations. Applicant adds that Viridity Energy does not own or control generation capacity or transmission facilities, is not affiliated with any entity that owns or controls generation capacity or transmission facilities, and has not contracted with any entity to own or control generation capacity or transmission facilities.

Applicant states that Mitsui is a global company with its headquarters located in Tokyo, Japan. Applicant adds that Mitsui is engaged in business in the fields or iron and steel products, mineral and metal resources, infrastructure projects, and financial and new business and transportation logistics, inter alia. Applicant states that Mitsui is not a public utility, although Mitsui indirectly owns 100 percent of Mit Wind Power Inc., which, in turn, owns 50 percent of Brazos Wind Ventures, LLC (Brazos Wind).

Applicant states that Brazos Wind is an exempt wholesale generator, owns and operates a 160 megawatt (MW) wind energy project located near the town of Fluvanna, Texas, in the ERCOT BAA. Applicant states that all energy from the facility is sold under a 17-year agreement with Luminant Energy Company LLC. Applicant adds that Mitsui owns an upstream interest in the Tres Amigas project, a three-way interconnection between the ERCOT, the Eastern Interconnection, and the Western Interconnection designed to facilitate the transfer of electricity between the three systems. Tres Amigas is not yet operational and is thus not a public utility. Applicant states that Mitsui does not own more than 10 percent of any other electric or natural gas company in the United States.

Applicant states that in the Transaction, Mitsui will make an investment in Viridity Energy and receive shares in Viridity Energy pursuant to a Stock Purchase Agreement. Following consummation of the Transaction, Mitsui will own interests in Viridity Energy equal to approximately 15 percent of Viridity Energy's issued and outstanding shares. Applicant continues that Mitsui's ownership interests in Viridity Energy will entitle Mitsui to appoint one member to Viridity Energy's seven-member board of directors.

Applicant adds that Mitsui will not own or control voting shares or maintain voting authority on the board to allow it to control Viridity Energy.

Applicant states that the Transaction is consistent with the public interest and will not have an adverse effect on competition, rates or regulation, and will not raise any cross-subsidization issues. Applicant states that Viridity Energy does not own or control generation capacity, is not affiliated with any entity that owns or controls generation capacity, and has not contracted with any entity to own or control generation capacity.

Applicant adds that other than an indirect interest in Brazos Wind, which sells all of the output of that facility under long-term contract, Mitsui does not own any generating facilities in the United States. Applicant states that because neither party to the Transaction owns or controls generation capacity or is affiliated with any entity that owns or controls generation capacity, other than Mitsui's interest in Brazos Wind, the Transaction will not cause any adverse impact on competition in any region.

Applicant states that the Transaction raises no vertical market power concerns. Applicant adds that Viridity Energy does not own or control transmission facilities, is not affiliated with any entity that owns or controls transmission facilities, and has not contracted with any entity to own or control transmission capacity. Similarly, Applicant states that Mitsui does not own, operate, or control, and is not affiliated with any entity that owns, operates, or controls, any transmission facilities or transmission capacity in the United States. Applicant states that the Transaction therefore will not cause any vertical market power concerns because the Transaction will not cause Viridity Energy to gain the ability or incentive to affect prices or outputs in the downstream electricity markets or to discourage entry by new generators.

Applicant states that the Transaction will have no adverse effect on rates. Applicant adds that Viridity Energy will continue to make sales under its market-based rate authority following the Transaction. Further, Applicant states that the Transaction does not involve transmission facilities, transmission rates, or transmission customers. Accordingly, Applicant maintains that the Transaction will have no adverse effect on wholesale ratepayers or transmission customers.

Applicant states that the Transaction will not affect the manner or extent to which the Commission, any state, or any other regulator may regulate Viridity Energy. Upon completion of the Transaction, Viridity Energy will continue to be subject to the Commission's jurisdiction (and any other regulatory agency or office) to the same extent as before the Transaction.

Accordingly, Applicant states that the Transaction will not impair the effectiveness of state or federal regulation.

Applicant states that neither Viridity Energy or Mitsui, nor any of their affiliates, is a public utility that has captive ratepayers or that owns or provides transmission service over jurisdictional transmission facilities.

Applicant maintains that because neither of the parties to the Transaction is a traditional public utility associate company that has captive ratepayers in the United States, the Transaction is within the scope of the safe harbor for transactions in which no franchised public utility with captive customers is involved in the transaction and does not raise any issue with respect to cross subsidization. Applicant adds that because neither of the parties to the Transaction is a public utility associate company that has captive customers in the United States or that owns or provides transmission service over jurisdictional transmission facilities in the United States, none of the parties to the Transaction has any existing pledges or encumbrances of assets of a traditional public utility associate company.

Nevertheless, Applicant verifies that based on facts and circumstances known to it or that are reasonably foreseeable, that the Transaction will not result in, at the time of the transaction or in the future: (1) any transfers of facilities between a traditional public utility associate company that has captive customers or that owns or provides transmission service over jurisdictional transmission facilities, and an associate company; (2) any new issuances of securities by a traditional public utility associate company that has captive customers or that owns or provides transmission service over jurisdictional transmission facilities, for the benefit of an associate company; (3) any new pledge or encumbrance of assets of a traditional public utility associate company that has captive customers or that owns or provides transmission service over jurisdictional transmission facilities, for the benefit of an associate company; or (4) any new affiliate contracts between a non-utility associate company and a traditional public utility associate company that has captive customers or that owns or provides transmission service over jurisdictional transmission facilities, other than non-power goods and services agreements subject to review under Sections 205 and 206 of the Federal Power Act.

The filings were noticed on August 3, 2012, and August 29, 2012, with comments, protests, or interventions due on or before August 24, 2012, and September 4, 2012, respectively. None was filed. Notices of intervention and unopposed timely filed motions to intervene are granted pursuant to the operation of Rule 214 of the Commission's Rules of Practice and Procedure (18 C.F.R. section 385.214) (2012). Any opposed or untimely filed motion to intervene is governed by the provisions of Rule 214.

When a controlling interest in a public utility is acquired by another company, whether a domestic company or a foreign company, the Commission's ability to adequately protect public utility customers against inappropriate cross-subsidization may be impaired absent access to the parent company's books and records. Section 301(c) of the FPA gives the Commission authority to examine the books and records of any person who controls, directly or indirectly, a jurisdictional public utility insofar as the books and records relate to transactions with or the business of such public utility. The approval of the Transaction is based on such examination ability.

Information and/or systems connected to the bulk power system involved in this transaction may be subject to reliability and cybersecurity standards approved by the Commission pursuant to FPA section 215. Compliance with these standards is mandatory and enforceable regardless of the physical location of the affiliates or investors, information databases, and operating systems. If affiliates, personnel or investors are not authorized for access to such information and/or systems connected to the bulk power system, a public utility is obligated to take the appropriate measures to deny access to this information and/or the equipment/software connected to the bulk power system. The mechanisms that deny access to information, procedures, software, equipment, etc., must comply with all applicable reliability and cybersecurity standards. The Commission, NERC or the relevant regional entity may audit compliance with reliability and cybersecurity standards.

Order No. 652 requires that sellers with market-based rate authority timely report to the Commission any change in status that would reflect a departure from the characteristics the Commission relied upon in granting market-based rate authority. The foregoing authorization may result in a change in status. Accordingly, the Applicant is advised that it must comply with the requirements of Order No. 652. In addition, the Applicant shall make appropriate filings under section 205 of the FPA, to implement the Transaction.

After consideration, it is concluded that the Transaction is consistent with the public interest and is hereby authorized, subject to the following conditions: (1) The Transaction is authorized upon the terms and conditions and for the purposes set forth in the Application; (2) The foregoing authorization is without prejudice to the authority of the Commission or any other regulatory body with respect to rates, service, accounts, valuation, estimates or determinations of cost, or any other matter whatsoever now pending or which may come before the Commission; (3) Nothing in this order shall be construed to imply acquiescence in any estimate or determination of cost or any valuation of property claimed or asserted; (4) The Commission retains authority under sections 203(b) and 309 of the FPA to issue further orders as appropriate; (5) If the Transaction results in changes in the status or the upstream ownership of Applicant's affiliated qualifying facilities, if any, an appropriate filing for recertification pursuant to 18 C.F.R. 292.207(2012) shall be made; (6) Applicant shall make the appropriate filings under section 205 of the FPA, as necessary, to implement the Transaction; (7) Applicant must inform the Commission of any change in circumstances that would reflect a departure from the facts the Commission relied upon in authorizing the Transaction; and (8) Applicant shall notify the Commission within 10 days of the date that the disposition of jurisdictional facilities has been consummated.

This action is taken pursuant to the authority delegated to the Director, Division of Electric Power Regulation - West, under 18 C.F.R. section 375.307(2012). This order constitutes final agency action. Requests for rehearing by the Commission may be filed within 30 days of the date of issuance of this order pursuant to 18 C.F.R. section 385.713(2012).

Steve P. Rodgers, Director Division of Electric Power Regulation - West TNS CT21CT-120906-4016175 61ChengTacorda (c) 2012 Targeted News Service

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