FirstEnegy, Blackstone & Brookfield
By Tyson Slocum
Today in Federal Energy Regulatory Commission docket ER24-172, we note that on October 20, an affiliate of FirstEnergy Corp applied for market based rate authority as part of an internal corporate restructuring. The application appears to be deficient, as it relies upon a triennial market power analysis that does not accurately reflect all generation ownership of its affiliates.
The private equity firm Blackstone, Inc.—controlled by Stephen Schwarzman—is a FirstEnergy Corp. investor and Mr. Schwarzman’s employee Sean T. Klimczak is on FirstEnergy’s board of directors. Brian X. Tierney was Mr. Schwarzman’s employee until he left Blackstone to become FirstEnergy’s President and CEO earlier this year. Entities controlled by Carl C. Icahn are investors in FirstEnergy and Mr. Icahn’s employee Andrew Teno serves on FirstEnergy’s board of directors. Per the Commission’s October 20, 2022 Order on Notice of Change In Status re Evergy Kansas Central, Inc. et al investors whose “own officer or director” serves on a utility’s board of directors are deemed to be affiliated with the utility.[1] Therefore, both Blackstone Inc. and entities controlled by Carl C. Icahn are affiliated with FirstEnergy Corp. and FirstEnergy Pennsylvania Electric Company.
The application states that neither FirstEnergy “nor its affiliates owns or controls any physical natural gas transportation, intrastate natural gas storage or distribution facilities”.[2] This is false. BCP Renaissance, a wholly-owned affiliate of Blackstone Inc., owns a 32.435% interest in the 719 mile interstate natural gas Rover Pipeline located in Pennsylvania and PJM.[3] Blackstone controls Tallgrass Energy Partners[4] which owns 7,000 miles of FERC-jurisdictional natural gas pipelines and gas storage facilities, including the 1,700 mile Rockies Express natural gas pipeline running through parts of PJM.[5] Blackstone owns 49% of Elba Island LNG—one of only two LNG export terminals on the east coast. Blackstone also owns and controls Olympus Energy, a major natural gas producer in Pennsylvania’s Marcellus Shale,[6] along with Kinetik, which controls 1,700 miles of natural gas and crude oil pipelines in the Permian Basin.[7]
FirstEnergy’s market power analysis does not appear to include all of Blackstone’s control over generation in PJM. For example, just months ago Blackstone completed a $4 billion equity investment in Invenergy, which is a MBR seller in PJM.[8] Separately, Blackstone owns a controlling interest in IRG Acquisition Holdings which acquired AEP’s power generation holdings this year.[9] Neither Invenergy’s nor IRG’s generation assets appear to be included in FirstEnergy’s market power screens.
The application notes that the Commission approved affiliates of Brookfield Corp to own 49.9% of FirstEnergy Transmission (FET)[10], with Brookfield controlling 2 of its 5 board seats. The application claims that “[e]xcept for FET and its subsidiaries, Brookfield and its affiliates are not affiliated with FirstEnergy and its affiliates, including Applicant. Accordingly, the Brookfield Transactions are not relevant to Applicant’s market power analysis.”[11] But FET is a wholly owned subsidiary of FirstEnergy Corp, and FET has affiliate agreements with various FirstEnergy Corp subsidiaries, possibly to include FirstEnergy Pennsylvania Electric Company.[12] If FET does have affiliate agreements with FirstEnergy Pennsylvania Electric Company, than Brookfield must be deemed affiliated, and therefore Brookfield’s generation assets should be included as part of any market power screen. Furthermore, Brookfield owns extensive natural gas pipelines and gas storage facilities, including:
- 25% of Natural Gas Pipeline Company of America LLC, which runs 9,000 miles, including through PJM;
- Brookfield owns 25% of Horizon, a natural gas pipeline running through Illinois, and Kinder Morgan Illinois Pipeline LLC.
- Brookfield owns 25% of the Cove Point LNG export terminal located within PJM, and 21% of the Sabine Pass LNG export terminal in Louisiana.
- Brookfield owns 100% of Rockpoint Gas Storage, which operates the Wild Goose, Lodi and Kirby Hills gas storage facilities in CAISO.[13]
- Brookfield owns 62% of Oaktree Capital Management, which in turn has a controlling interest in Hartree Natural Gas Storage’s six natural gas storage facilities located in the US Gulf Coast and Sprague Resources.[14]
[1] At 44 and 45, 181 FERC ¶ 61,044, Docket Nos. ER20-67-001, ER20-113-001 and ER20-116-001, https://elibrary.ferc.gov/eLibrary/filelist?accession_num=20221020-3091
[2] Application, at pages 22-23.
[3] https://elibrary.ferc.gov/eLibrary/filedownload?fileid=B512F9B1-3FE1-C59E-9FAF-878142700000
[4] www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/tallgrass-energy-closes-buyout-deal-led-by-blackstone-infrastructure-arm-58083598
[5] Tallgrass, Rockies Express, Trailblazer, Cheyenne Connector and Ruby Form 2 reports all fail to accurately describe what entities have control over the pipeline, which the Commission should probably rectify.
[6] https://olympusenergy.com/
[7] www.kinetik.com
[8] https://invenergy.com/news/invenergy-announces-1-billion-follow-on-investment-from-blackstone-infrastructure-partners
[9] www.aep.com/news/releases/read/9070/AEP-Completes-Sale-of-Unregulated-Renewables-Assets
[10] At page 15.
[11] At page 16.
[12] May 5, 2023 Joint Application, Docket No. EC23-86, at page 19, https://elibrary.ferc.gov/eLibrary/filedownload?fileid=E2EDD0FB-FD37-C626-8141-87FC07B00001
[13] www.rockpointgs.com
[14] www.hartreepartners.com