Dive Brief:
- The PJM Interconnection’s market monitor urged federal regulators to reject Hull Street Energy’s plan to buy two peaking power plants totaling 1,267 MW from Rockland Capital, arguing that the purchase could result in HSE redirecting the plants away from the grid operator’s capacity market to just serve data centers.
- The power plants are the 677-MW Lee County generating station, a simple-cycle gas-fired facility in Dixon, Illinois, and the 590-MW Tait generating station, a gas- and diesel-fired facility near Dayton, Ohio.
- An HSE company — Energy Transition & Environmental Management — is redeveloping the retired Sammis power plant site in Stratton, Ohio, into an energy and data center campus, the market monitor noted. “The transaction raises questions about HSE’s role as both an owner of generation and developer of data centers in the PJM market that have not been answered in the application,” Monitoring Analytics said in a filing on Friday with the Federal Energy Regulatory Commission.
Dive Insight:
The proposed deal between private equity companies comes amid a sharp tightening of supply and demand conditions in PJM, largely driven by data center development.
“The transaction enhances HSE’s ability to exercise market power adverse to competition and adverse to rates, and those adverse impacts on competition and rates are inconsistent with the public interest,” Monitoring Analytics said. “Allowing the removal of capacity to serve data center load shifts the costs and risks of data centers from data centers to all other PJM customers.”
In their April 3 application under section 203 of the Federal Power Act, the companies said their deal meets FERC’s standards for approval: It won’t harm competition, rates or regulation, and it won’t result in the cross-subsidization of a non-utility associate company.
However, FERC’s merger policy doesn’t consider the removal of capacity resources to serve data centers because large data centers have only recently become a market issue, according to Monitoring Analytics.
“The Commission has not addressed the removal of PJM capacity resources from the market to serve data center load,” the market monitor said. “The Commission’s review under Section 203 is the proper venue to evaluate whether the new ownership would result in the ability and incentive to exercise market power, and whether the proposed transaction would be consistent with the public interest.”
HSE owns two power plants in PJM: the 65-MW Forked River gas-fired power plant in Ocean County, New Jersey, and the 600-MW Elwood gas-fired power plant near Joliet, Illinois. The company plans to retire both power plants by June 1, according to the application.
Even so, Monitoring Analytics warned the deal could hurt PJM’s market if HSE uses the Lee County and Tait power plants to serve data centers
Removing the plants from PJM’s market would be a form of withholding that could be used to increase energy and capacity prices, according to Monitoring Analytics.
“The acquisition of generation assets by HSE in the transaction creates a clear potential for this form of withholding and therefore affects competition and rates in PJM,” Monitoring Analytics said.
FERC should require HSE and Rockland Capital to file a new application that includes a commitment to not remove the Tait and Lee County units from the PJM market to serve data centers, the market monitor said.
Last month, Monitoring Analytics asked FERC to reject an application from GenOn to sell a 216-MW power plant in Maryland to TeraWulf over concerns the data center developer would remove the resource from PJM’s market.
HSE and Rockland asked FERC to approve the transaction by June 2. They plan to close on the deal as soon as possible if it is approved.
