Dive Brief:

• The Massachusetts attorney general and Public Citizen are warning federal regulators that a proposal by a JERA Americas subsidiary to buy three power plants in Maine and Massachusetts raises market power concerns in the region, including New York.

• The plan by JERA Americas, jointly owned by Japanese utilities and the government of Japan, to buy the power plants from Stonepeak Kestrel Energy Marketing will concentrate market power in the constrained Southeastern New England (SENE) zone where JERA already owns 50% stakes in two power plants, Massachusetts Attorney General Maura Healey said in a Wednesday filing at the Federal Energy Regulatory Commission.

• As a condition of approving the deal, consumer advocacy group Public Citizen asked FERC to require the sale of JERA’s stakes in the power plants in the SENE zone, totaling 431 MW, to reduce the potential for the company to exert market power, according to a protest filed with the commission on Tuesday.

Dive Insight:

JERA and Stonepeak on June 1 asked FERC to approve a deal under which JERA would acquire from the private equity firm the 1,124-MW, gas- and oil-fired Canal Generating plant and the 333-MW, gas- and oil-fired Canal 3 plant, both in Sandwich, Massachusetts. JERA would also buy Stonepeak’s 160-MW, gas- and oil-fired power plant in Bucksport, Maine.

Terms of the deal weren’t disclosed, but Public Citizen said they should be.

“The purchase/sales price of power generation transactions reveal information essential to the public interest about the buyer’s expectation of economic return of the asset,” Tyson Slocum, director of Public Citizen’s energy program, said in the filing.

Slocum and Healey said FERC should carefully review how JERA’s ownership of the 1,177-MW Cricket Valley gas-fired power plant in Dover, New York, could affect the ISO New England markets.

“The proposed transaction would by definition result in some degree of increased concentration of power generation ownership in New England and New York, and significant concentration of power generation capacity ownership in the import-constrained SENE capacity zone of ISO-NE,” Healey said.

Under the deal, JERA would control 18.5% of the capacity in the SENE zone, up from its current 3.7%, according to the application. The companies contend that isn’t enough capacity to spark market power concerns.

However, Slocum said the deal could result in JERA becoming a “pivotal supplier” in capacity auctions within SENE and in ISO-NE’s energy market, potentially threatening competition and rates.

Also, the Cricket Valley power plant, near the Connecticut border, was designed to access the NYISO and ISO-NE markets, but the application and related testimony lack details on how the plant could affect competition and rates in New England, according to Slocum.

Slocum said JERA in October 2020 filed a pending complaint at FERC arguing that NYISO’s capacity market offers inadequate compensation and asked FERC to significantly boost payments for its natural gas facility.

“JERA’s dissatisfaction with financial returns in NYISO could be a motivating factor to invest in expanding its concentration of generation ownership in ISO-NE in order to maximize revenues, potentially at the expense of just and reasonable rates in ISO-NE,” Slocum said.

Slocum and Healey also raised concerns that through the deal JERA could seek “reliability must run” status or other out-of-market payments for the power plants it intends to buy.

FERC should require JERA to disclose how it intends to participate in the New England Power Pool, an ISO-NE stakeholders group that bans the public from its meetings, according to Slocum.

“Will JERA affiliates have voting representation in the Provisional Member, Supplier and Generation sectors post-transaction?” Slocum asked. “Applicants must disclose details of how the transaction will impact the concentration of voting rights in NEPOOL in order to determine its impact on rates.”

When JERA announced the proposed deal in May, the company said it planned to reduce the greenhouse gas emissions at the power plants and use their locations “as a foothold for supporting large-scale renewable energy facilities.”

In part, the company plans to use transmission capacity related to the power plants to provide access for offshore wind to ISO-NE, JERA Americas CEO Steven Winn told CommonWealth Magazine last month.

JERA didn’t return a request for comment.