United States: PJM Adds New Notification Requirements For Certain "Change-In-Ownership Transactions"

Effective June 1, 2018, PJM Interconnection, L.L.C. implemented new notification requirements for certain transfers of interests in generation facilities in PJM (collectively, "Change-in-ownership Transactions").1 PJM also added notification requirements for Generation Owner or Interconnection Customer name or contact information changes and transfers of certain rights and obligations of PJM Members pertaining to generation facilities in PJM.2 This summary focuses on the requirements for direct or indirect changes in ownership of generation facilities in PJM, but owners of interests or investors in such facilities should become familiar with all of the new requirements and consider adding them, as applicable, to their legal/regulatory compliance plans and transaction closing checklists.

In general, the new requirements should not be particularly onerous because most of the required information should be readily accessible. However, compliance could require advanced planning and information-gathering, especially for Change-in-ownership Transactions that do not require Federal Energy Regulatory Commission (FERC) authorization under Section 203 of the Federal Power Act (FPA)3 but are still subject to the new requirements.

New Requirements for Change-in-Ownership Transactions

PJM's new requirements for Change-in-ownership Transactions apply to Generation Owners, which are PJM Members (i.e., signatories to the PJM Operating Agreement) that own or lease generation facilities in PJM.4 New Section 2.2.1 of PJM Manual 14D (Generator Operational Requirements) states that "[e]ach Generation Interconnection Customer (for a new generation facility or an existing generation facility) and Generation Owner (collectively referred to . . . as 'Generation Owner') seeking to, directly or indirectly, transfer all or part of its ownership interests in its generation facility must notify PJM" and comply with the other processes now set forth in Manual 14D.5 Specifically, PJM's new requirements apply to "an asset transfer of a generation facility, the transfer of an entity that owns or controls a generation facility (which shall mean 10% or more of voting interest of the entity), and to upstream transfers of ownership interests (10% or more voting interests) in such an entity."6 The requirements also apply to corporate reorganizations that are not blanket-authorized under Section 203 of the FPA.7

Expanded Service of Section 203 Applications

New Section 2.2.1 of Manual 14D requires that the public Section 203 application for a Change-in-ownership Transaction "be served promptly" on the General Counsel of PJM and the General Counsel of Monitoring Analytics LLC, the Independent Market Monitor for PJM.8 Section 2.2.1 does not define "promptly," but applicants should have little difficulty complying with this requirement on the day that they file with FERC or within a day or two after doing so.

Provision of "Supplemental Information"

Generation Owners must also provide certain "supplemental information" to PJM's Client Management Department, whether or not the transaction requires Section 203 authorization. Specifically, not later than ten days after (i) the filing of a Section 203 application or (ii) if the transaction does not require Section 203 authorization, the date that "binding transaction documents are executed (even if those documents contain conditions or contingencies)," the Generation Owner must "use commercially reasonable efforts" to provide the following to PJM's Client Management Department:9

  • "Any service agreements relating to the generation facility including but not limited to any construction service agreement, cost responsibility agreement, Interconnection Service Agreement (or pre-PJM interconnection agreement), Wholesale [M]arket Participation Agreement, and any other PJM service agreement involving the Generation Owner related to the subject generation facility;"
  • "The facility's name, location, street address, points of interconnection, maximum facility output, name(s) of the facility owner(s) . . . , PJM Market's Gateway Unit ID, [and] PJM-assigned commercial name(s) . . . if applicable;"
  • "A brief description of the transaction including the names of the parties to the transaction;"
  • "The marketing entity that is currently responsible for the generation facility and Declaration of Authority to such marketing entity;" and
  • "If as a result of the transfer, [the] Generation Owner will become affiliated with or controlled by a different PJM Member, the name of such PJM Member and simplified organization chart illustrating the expected relationship between: (1) the Generation Owner; and (2) such PJM Member."10

Identification/Documentation of "New Third-Party Marketers"

Where a Change-in-ownership Transaction involves a "new third-party marketer to interface with PJM," the Generation Owner "shall provide the PJM Client Management Department with an executed PJM-accepted Declaration of Authority for the generation facility authorizing a new third-party marketer to interface with PJM" not later than three business days before the "requested effective date of the transfer within the PJM systems, which can be different than the closing of the Change-in-ownership Transaction."11

Additional Requirements for Direct Transfers

For a direct sale or transfer of a generation facility, the Generation Owner must also provide PJM's Client Management Department with the following not later than five business days before closing:

  • "A letter to the currently-effective President and CEO of PJM . . . on the entity's letterhead identifying the new company name and the anticipated closing date;"
  • "A certificate of good standing from the acquiring entity's state of organization;"
  • "A listing of the current officers of the acquiring entity;" and
  • "An IRS Form W9 for the acquiring entity."12

Implications and Practice Pointers

First, while the new requirements apply directly to only Generation Owners, PJM expects all parties involved to work together as needed to provide the required information.13 Thus, indirect owners of, or investors in, generation facilities in PJM should expect to hear from transaction partners about these requirements and cooperate in providing required information.

Second, the new requirements "are in addition[] to and not in substitution of any contractual or PJM Tariff obligations" that otherwise apply.14 Thus, Generation Owners and Interconnection Customers and their owners should develop—if they do not already exist—and maintain compliance plans or other materials detailing the legal/regulatory requirements applicable to them to reduce the likelihood of inadvertent noncompliance.

Third, entities subject to the new requirements should contact PJM if compliance questions or concerns arise because "PJM may extend or waive any of [the] requirements if it determines that a Generation Owner's compliance is not commercially practical."15

Finally, despite the reference to "PJM's review of a contemplated Change-in-ownership Transaction,"16 the new requirements seem unlikely to affect the timing of transactions. New Section 2.2.1 does not contemplate any PJM approval of, or other action on, information submitted in compliance with the new requirements. Thus, while compliance might require some additional effort and/or increase costs, the new requirements do not appear likely to materially affect transactions or the parties involved.


1 Capitalized terms used herein, unless otherwise defined, have the same meanings assigned to them in PJM Manual 14D, Revision 44, effective June 1, 2018, or the PJM Open Access Transmission Tariff, as applicable.

2 See PJM Manual 14D §§ 2.2, 2.3, and 5.7.

3 16 U.S.C. § 824b (2012).

4 PJM Manual 14D § 2.1.

5 Id. § 2.2.1.

6 Id.

7 Id. (referring to 18 C.F.R. § 33.1(c)(6) (2018)).

8 Id.

9 When Section 203 authorization is required, there is no separate notification requirement in connection with entering into the relevant "binding transaction documents."

10 PJM Manual 14D § 2.2.1.

11 Id.

12 Id.

13 Id.

14 Id.

15 Id.

16 Id.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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