FERC Finds Affiliation Between J.P. Morgan Investment and Mankato Companies
In a recent decision, the Federal Energy Regulatory Commission (FERC) found that J.P. Morgan Investment Management Inc. (“J.P. Morgan Investment”) is affiliated with Mankato Energy Center, LLC and Mankato Energy Center II, LLC (“Mankato Companies”) due to their common upstream owner, IIF US Holding 2 LP (“IIF US Holding 2”). The decision was made because FERC determined that there is likely an absence of arm’s-length bargaining in transactions between the Mankato Companies and J.P. Morgan Investment.
FERC’s decision took into account the power delegated by IIF US Holding 2 to J.P. Morgan Investment, which serves as the investment advisor for IIF US Holding 2. The Commission found that this connection between J.P. Morgan Investment and the Mankato Companies suggests a close relationship and raises concerns about the fairness of transactions between the two entities.
Commissioner Danly concurred with the result of the decision but issued a separate statement expressing his disagreement with the reasoning provided in the Commission order. Meanwhile, Chairman Willie Phillips also concurred in a separate statement.
This decision builds on a previous order issued by FERC on January 11, 2021, where the Commission conditionally accepted the notice of change in status and revised market-based rate tariffs filed by Mankato Companies. At that time, FERC initiated a proceeding to determine whether there was an affiliation between J.P. Morgan Investment and the Mankato Companies through their common upstream owner, IIF US Holding 2. The Commission specifically sought to determine if this affiliation would lead to an absence of arm’s-length bargaining in transactions between the two entities.
In response to FERC’s inquiry, Mankato Companies asserted that J.P. Morgan Investment operates under the authority and oversight of IIF 2 GP and its owners. They claimed that despite J.P. Morgan Investment’s advisory role, the ultimate decision-making power lies with IIF US Holding 2 and that no responsibilities related to the sale or production of electric energy are delegated to J.P. Morgan Investment or its affiliates.
However, FERC ultimately found that the relationship between the Mankato Companies and J.P. Morgan Investment, as demonstrated by the Investment Advisory Agreement and the Partnership Agreement, indicates a close affiliation. Additionally, FERC noted that an employee from J.P. Morgan Investment sits on the board of directors of Onward Energy Holdings, LLC, which is an intermediate holding company between IIF US Holding 2 and the Mankato Companies.
As a result of this finding, FERC directed Mankato Companies to file a notice of change in status to reflect their affiliation with J.P. Morgan and its affiliates. FERC also terminated the section 206 proceeding and accepted the January 2021 Change in Status, instructing Mankato Companies to make a tariff filing.
Chairman Phillips responded to Commissioner Danly’s concurrence in a separate statement, stating that Commissioner Danly did not provide sufficient precedent to support his view that concurring in the result should be regarded as a dissent.
For more details on FERC’s order, readers can find the full document on FERC’s website.
Overall, this decision by FERC highlights the Commission’s commitment to ensuring fair and transparent transactions in the energy sector. By identifying the affiliation between J.P. Morgan Investment and the Mankato Companies, FERC aims to protect the interests of investors and consumers and maintain the integrity of the energy market.