20150107-3022 FERC PDF (Unofficial) 01/07/2015

150 FERC ¶ 62,006 UNITED STATES OF AMERICA FEDERAL ENERGY REGULATORY COMMISSION

Sunshine Gas Producers, LLC Docket No. EC15-42-000 Innovative Energy Systems, LLC Seneca Energy II, LLC

ORDER AUTHORIZING DISPOSITION OF JURISDICTIONAL FACILITIES

(Issued January 7, 2015)

On December 1, 2014, Sunshine Gas Producers, LLC (Sunshine Gas), Innovative Energy Systems, LLC (Innovative), and Seneca Energy II, LLC (Seneca), (collectively, Applicants) filed an application under section 203(a)(1) of the Federal Power Act (FPA)1 requesting Commission authorization for the disposition of jurisdictional facilities resulting from the initial issuance and sale of voting securities in a newly-established indirect partial owner, to be named Aria Energy Corp. (Aria), to dispersed purchasers (Proposed Transaction).2 The jurisdictional facilities associated with the Proposed Transaction are: (1) Applicants’ market-based rate schedules; (2) interconnection agreements; (3) wholesale power sales contracts; and (4) limited interconnection facilities.

Applicants state that the Proposed Transaction is related to a larger sale of generating projects that includes the Applicants’ facilities, all of which are qualifying facilities (QFs) that are qualifying small power production facilities under the Public Utility Regulatory Policies Act of 1978, as amended, and which (but for the Applicants) are exempt from the requirements of FPA section 203(a)(1).3 The specific entities

1 16 U.S.C. § 824b (2006).

2 While Applicants believe that no FPA section 203 authorization should be required in connection with the transactions proposed herein, given that there will be no actual change in control over the Applicants solely as a result of the Proposed Transaction, the Applicants note the Commission’s numerous recent FPA section 203 orders relating to other issuances and sales of securities where there was no apparent change in control, and therefore out of an abundance of caution are consenting to the Commission’s jurisdiction in order to obtain authorization under FPA section 203.

3 According to Applicants, the transfer of interests in QFs is exempt from the filing requirements of FPA section 203(a)(1) and, therefore, they did not include the QFs 20150107-3022 FERC PDF (Unofficial) 01/07/2015

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involved in the larger transaction include the Applicants and interests in the QFs in the sale portfolio.

Applicants are indirect of funds managed and controlled by EIF Management, LLC (with its funds, collectively EIF), the sole manager of certain private funds that invest in power projects in the United States. According to Applicants, investors in the EIF funds hold limited partnership interests that are passive and involve no control by any such unaffiliated investor over EIF, any of the EIF funds, or any public utility in which the EIF funds hold an interest. Applicants state that EIF is not itself a public utility; instead, the EIF funds invest in various energy-related business entities, a number of which entities are themselves public utilities. EIF is privately owned and controlled by a group of natural persons (or trusts or similar vehicles for the benefit of one or more individual persons), none of whom, according to Applicants, directly or indirectly control or is affiliated with any electric generator or public utility other than through the EIF funds. Applicants further state that none of EIF, or any of the EIF funds, own or control any essential inputs to electric generation in the United States.

Applicants state that EIF currently holds its interests in the Applicants through EIF Renewables Energy Holdings LLC (EIF Renewables). EIF Renewables is a Delaware limited liability company. EIF Renewables is majority-owned by funds managed by EIF. EIF Renewables indirectly owns all of the outstanding interests in Innovative and Seneca, and indirectly owns the Innovative and Seneca-affiliated projects described herein and indirectly assumed operational control over the Innovative O&M Projects.4 Zeliff Holdings holds shares of EIF Renewables representing interests of less than five percent.

Applicants state that Sunshine Gas owns the Sunshine Gas QF, an approximately 23.63 MW QF landfill gas facility located in the California Independent System Operator

as a subject of this filing. See 18 C.F.R. § 292.601(c). However, pursuant to the Commission’s precedents determining QFs that make sales of wholesale electricity are public utilities (see, e.g., FERC Stats. & Regs. [Reg. Preambles] ¶ 31,197, P 113 (2005), and Sagebrush, a California Partnership, 130 FERC ¶ 61,093, P 25 (2010)), and the requirements set forth in the Commission’s regulations implementing FPA section 203 (18 C.F.R. § 33.2), the Application describes all public utilities and jurisdictional facilities relevant to the Proposed Transaction. . 4 IES provides O&M and related services to three non-affiliated electric facilities: (1) Hyland, a 4.8 megawatt (MW) landfill gas electric generating facility in the Town of Angelica, NY; (2) Clinton County, a 6.4 MW landfill gas electric generating facility in the Town of Schuyler Falls, NY; and (3) Chautauqua, a 6.4 MW landfill gas electric facility in the Town of Ellery, NY (collectively, Innovative O&M Projects). 20150107-3022 FERC PDF (Unofficial) 01/07/2015

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Corporation market. All output from the facility will be sold to Pacific Gas & Electric Company pursuant to a long-term power sales agreement. The Commission has granted Sunshine Gas market-based rate authorization.

Applicants state that Sunshine Gas is jointly owned by DTE Biomass Energy, Inc. (DTE Biomass) and by EIF. DTE Biomass is the managing partner of Sunshine Gas, and is an indirect, wholly-owned of DTE Energy Company (DTE Energy), a public utility holding company. DTE Biomass is a wholly-owned subsidiary of DTE Energy Resources, LLC, which is wholly owned by DTE Energy.

According to Applicants, Innovative does not directly own electric generation or transmission or facilities or any input to the production of electricity. Innovative is primarily engaged in the business of scheduling the energy of indirectly owned and affiliated QFs into the energy markets administered by the New York Independent System Operator, Inc. (NYISO) and facilitating the sale of certain unforced electric power production capacity of a subset of the same QFs. In addition, Innovative purchases and resells the energy associated with the Innovative O&M Projects to Seneca. The Commission has granted Innovative authorization for the sale of capacity and energy at market-based rates. Innovative owns all of the outstanding equity interests in entities whose total generating capacity amounts to 55.2 MW in the NYISO market. Each of these entities owns a QF electric generating facility.

Applicants state that the Proposed Transaction entails an initial of approximately 35 percent of EIF’s current voting equity interests in Aria, in the form of the share capital of Aria, to the general public, with anticipated sales to the general public of voting interests in Aria anticipated to reflect roughly half, of the indirect voting interests in the Applicants.

EIF currently owns (through intermediate entities) approximately 94 percent of the interests in the Applicants through EIF’s ownership of Class A units in EIF Renewables. The holders of the Class B units in EIF Renewables (Class B Members) control less than 6 percent of the voting interests of EIF Renewables. There are four Class B Members that currently own those interests.

Aria, a newly formed Delaware corporation, will raise proceeds in connection with an of securities and, upon consummation of the Proposed Transaction, is expected to control approximately 35 percent (and may control approximately 50 percent) of EIF Renewables. As such, Aria will indirectly hold up to approximately 50 percent of the interests in Applicants and will exercise day-to-day control.

Applicants state that, as a result of the Proposed Transaction, EIF will retain at least approximately 50 percent of its indirect interests in Applicants, and its current 20150107-3022 FERC PDF (Unofficial) 01/07/2015

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exercise of day-to-day control (via EIF’s control of Aria) over the Applicants and their affiliated QFs.

Applicants request authorization under FPA Section 203(a)(1) for all dispositions involving any party acquiring, either individually or together with its affiliates, less than a ten percent indirect interest in the Applicants through ownership of shares in Aria. The purchasers of any shares in Aria will be members of the general public and although the ultimate buyers of Aria’s common shares are unknown, Applicants expect the ownership of such shares to be widely distributed. Applicants state that if an entity is to acquire a 10 percent or greater interest in Aria, or if the entity is a holding company that does not qualify for the applicable blanket authorization in 18 C.F.R. § 33.1(c), then any separately-required FPA Section 203 application will be filed by such entity, if and to the extent that Commission authorization for such an acquisition is required, and no such authorization is requested in this filing.

Applicants state that the Proposed Transaction is consistent with the public interest and will have no adverse effect on competition, rates, or regulation. Applicants state that the Proposed Transaction raises no concerns with respect to horizontal market power because EIF will retain control of Applicants following consummation of the Proposed Transaction. Further, no purchaser of Aria’s securities will acquire 10 percent or more of the ultimate voting rights in any of the Applicants or their affiliates, resulting in there being no new affiliation with any generating facilities. Applicants state that the Proposed Transaction raises no concerns with respect to vertical market power because the Proposed Transaction does not involve a physical merger or of the Applicants with any transmission facilities or other inputs to generation.

Applicants state that the Proposed Transaction will not have an adverse effect with respect to rates. Applicants state that the Proposed Transaction will not affect the rates that they are authorized to charge under their market-based rate authority, and that the Commission has concluded that market-based rate sales do not raise any concerns about a transaction’s possible adverse impact on rates. Moreover, Applicants do not have any transmission rates or transmission customers. Accordingly, Applicants state that the Proposed Transaction will not have an adverse effect on wholesale ratepayers or transmission customers.

Applicants state that the Proposed Transaction will not have an adverse effect with regard to regulation because it will not affect the manner or extent to which the Commission, any state, or any other federal agency may regulate them.

Applicants state that they currently are not affiliated with, and, by virtue of the Proposed Transaction, will not become affiliated with a traditional public utility company that has captive ratepayers in the United States or that owns or provides transmission service over jurisdictional transmission facilities in the United States. Applicants thus 20150107-3022 FERC PDF (Unofficial) 01/07/2015

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submit that the Proposed Transaction is within the scope of the “safe harbor” for transactions in which “no franchised public utility with captive customers is involved” and which does not raise any issue with respect to cross-subsidization.

Nevertheless, Applicants state that, based on facts and circumstances known to them or that are reasonably foreseeable, the Proposed Transaction will not result in, at the time of the closing or in the future, cross-subsidization of a non-utility associate company or the pledge or encumbrance of assets of a traditional public utility that has captive customers or that owns or provides transmission service over jurisdictional facilities for the benefit of an associate company. Specifically, Applicants state that the Proposed Transaction does not involve a franchised utility with captive customers and will not result in: (1) any transfer of facilities between a traditional public utility associate company that has captive customers or that owns or provides transmission service over jurisdictional transm8ission facilities, and an associate company; (2) any new issuance of securities by a traditional public utility associate company that has captive customers or that owns or provides transmission service over jurisdictional transmission facilities, for the benefit of an associate company; (3) any new pledge or encumbrance of assets of a traditional public utility associate company that has captive customers or that owns or provides transmission service over jurisdictional transmission facilities, for the benefit of an associate company; or (4) any new affiliate contract between a non-utility associate company and a traditional public utility associate company that has captive customers or that owns or provides transmission service over jurisdictional transmission facilities, other than non-power goods and service agreements subject to review under sections 205 and 206 of the FPA.

The filing was noticed on December 1, 2014, with comments, protests, or interventions due on or before December 22, 2014. None were received. Notices of intervention and unopposed timely filed motions to intervene are granted pursuant to the operation of Rule 214 of the Commission's Rules of Practice and Procedure (18 C.F.R. § 385.214) (2014). Any opposed or untimely filed motion to intervene is governed by the provisions of Rule 214.

Information and/or systems connected to the bulk system involved in this transaction may be subject to reliability and cybersecurity standards approved by the Commission pursuant to FPA section 215. Compliance with these standards is mandatory and enforceable regardless of the physical location of the affiliates or investors, information database, and operating systems. If affiliates, personnel or investors are not authorized for access to such information and/or systems connected to the bulk power system, a public utility is obligated to take the appropriate measures to deny access to this information and/or the equipment/software connected to the bulk power system. The mechanisms that deny access to information, procedures, software, equipment, etc., must comply with all applicable reliability and cybersecurity standards. 20150107-3022 FERC PDF (Unofficial) 01/07/2015

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The Commission, North America Electric Reliability Corporation or the relevant regional entity may compliance with reliability and cybersecurity standards.

Order No. 652 requires that sellers with market-based rate authority timely report to the Commission any change in status that would reflect a departure from the characteristics the Commission relied upon in granting market-based rate authority.5 The foregoing authorization may result in a change in status. Accordingly, the Applicants are advised that they must comply with the requirements of Order No. 652. In addition, the Applicants shall make any necessary filings under section 205 of the FPA to implement the Proposed Transaction.

After consideration, it is concluded that the Proposed Transaction is consistent with the public interest and is authorized, subject to the following conditions:

(1) The Proposed Transaction is authorized upon the terms and conditions and for the purposes set forth in the application;

(2) The foregoing authorization is without prejudice to the authority of the Commission or any other regulatory body with respect to rates, service, accounts, , estimates or determinations of costs, or any other matter whatsoever now pending or which may come before the Commission;

(3) Nothing in this order shall be construed to imply acquiescence in any estimate or determination of cost or any valuation of property claimed or asserted;

(4) The Commission retains authority under sections 203(b) and 309 of the FPA to issue supplemental orders as appropriate;

(5) If the Proposed Transaction results in changes in the status or upstream ownership of the Applicants’ affiliated qualifying facilities, an appropriate filing for recertification pursuant to 18 C.F.R. § 292.207 (2014) shall be made;

(6) Applicants must inform the Commission of any change in circumstances that would reflect a departure from the facts the Commission relied upon in authorizing the Proposed Transaction;

5 Reporting Requirement for Changes in Status for Public Utilities with Market- Based Rate Authority, Order No. 652, 70 Fed. Reg. 8,253 (Feb. 18, 2005), FERC Stats. & Regs. ¶ 31,175, order on reh’g, 111 FERC ¶ 61,413 (2005). 20150107-3022 FERC PDF (Unofficial) 01/07/2015

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(7) Applicants shall make appropriate filings under section 205 of the FPA, as necessary, to implement the Proposed Transaction; and

(8) Applicants shall notify the Commission within 10 days of the date that the disposition of jurisdictional facilities has been consummated.

This action is taken pursuant to the authority delegated to the Director, Division of Electric Power Regulation - West, under 18 C.F.R. § 375.307 (2014). This order constitutes final agency action. Requests for rehearing by the Commission may be filed within 30 days of the date of issuance of this order, pursuant to 18 C.F.R. § 385.713 (2014).

Steve P. Rodgers Director Division of Electric Power Regulation - West 20150107-3022 FERC PDF (Unofficial) 01/07/2015 Document Content(s) EC15-42-000.DOC...... 1-7