Wednesday, March 20, 2019

FERC Clears Cleco to Buy NRG Generation in South

By Amanda Durish Cook

FERC last week approved Cleco’s $1 billion acquisition of eight NRG Energy generation assets in MISO South, ruling the transaction will not have an adverse impact on rates or create market power concerns (EC18-63).

The deal is pending approval by the Louisiana Public Service Commission (U-34794).

Louisiana-based Cleco announced the acquisition early this year. NRG South Central Generating will hand over eight generating assets totaling 3,555 MW; transmission operations; and wholesale power contracts to nine Louisiana cooperatives, five municipalities in Arkansas, Louisiana and Texas, and one investor-owned utility.

Big Cajun II | NRG Energy

Most of the plants will be operated by Cleco, except the 1,279-MW, natural gas-fired Cottonwood Generating Station in East Texas, which will be leased back to NRG, who will operate it until May 2025. NRG purchased the Cottonwood plant in 2010.

Cleco plans to create a new affiliate, Cleco Energy, to oversee NRG South Central Generating’s assets. Cleco had targeted a year-end close for the sale.

In issuing the decision, FERC considered that Cleco and NRG South Central Generating both own generation in MISO’s West of the Atchafalaya Basin (WOTAB) narrowly constrained area that frequently binds. FERC previously issued a deficiency letter over the transaction, requesting additional transmission constraint and price separation analyses for MISO South and the WOTAB load pocket. However, FERC concluded that the acquisition is “unlikely to have an adverse effect on competition … in any relevant market.”

In addition to the Cottonwood plant, the sale also includes the Big Cajun, Big Cajun II, Bayou Cove and Sterlington power plants in Louisiana.

In related orders issued the same day, FERC approved a change in upstream ownership to NRG plant operating subsidiaries for the Louisiana plants (ER14-2080-001) and the Cottonwood plant (ER14-1619-004). While FERC accepted informational filings on both, it opened an investigation and settlement proceeding into the plants’ reactive power rates, saying the rates may not reflect the degradation of the facilities’ capability. FERC also said Cottonwood’s reactive service schedule uses an outdated federal income tax rate.

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