ML19351C934

Public Citizen'S Response to Answer of El Paso Electric

ML19351C934
Person / Time
Site:	Palo Verde
Issue date:	12/17/2019
From:	Slocum T Public Citizen
To:	NRC/OCM
SECY RAS
References
50-528-LT, 50-529-LT, 50-530-LT, 72-044-LT, License Transfer, RAS 55478
Download: ML19351C934 (15)

Text

UNITED STATES OF AMERICA BEFORE THE NUCLEAR REGULATORY COMMISSION In the Matter of:

License Nos. NPF-41, 51, and 74 El Paso Electric Company Docket Nos. 50-528, 529, and 530 Indirect License Transfer Docket No. 72-44 Answer of Public Citizen, Inc.

Public Citizen provides this Answer to El Paso Electrics opposition to both our intervention and hearing request. The Commission should accept our intervention and proceed with a hearing.

The issue before the NRC should be simple but has become complicated only because of El Paso Electrics insistence on obfuscation: El Paso Electric and its new proposed owner, IIF US Holdings 2 GP LLC, submitted an Indirect License Transfer application on August 13 that actively concealed its affiliations with JP Morgan Chase &

Co. These substantive misrepresentations render the application to be deficient, and only a hearing can adequately correct the record as to the true ownership and control over IIF US Holdings 2 GP LLC.

Indeed, in the parallel Federal Power Act review of the transaction, the Federal Energy Regulatory Commission issued an Order on December 5 ruling the application to be deficient, and demanding significant new disclosures concerning the complex relationships between IIF US Holdings 2 GP LLC and JP Morgan Chase & Co.1 The FERC Order suggests that the Commission is considering labeling JP Morgan Chase &

Co. as an affiliate of IIF US Holdings 2 GP LLC. It is unsurprising that El Paso Electric failed to mention this FERC Order in its December 13 Answer to the NRC. We have attached a copy of the Order as Exhibit A.

When JP Morgan Chase & Co created Infrastructure Investments Fund in 2006, it designed a complex legal entity with a cursory appearance of independence when in actuality JP Morgan controls and manages IIF, often in ways that prioritize JP Morgan's 1

FERC Docket No. EC19-120, https://elibrary.ferc.gov/.

Answer of Public Citizen

• December 17, 2019 business plans and strategic initiatives. Clarifying these facts for the record in El Paso Electrics application for an indirect license transfer is essential.

The Commission should accept Public Citizens intervention. One of our dues-paying members, who is also a customer of El Paso Electric, has volunteered to go on the record for the purposes of this proceeding:

Joseph Valenzuela 5624 Valley Elder Ln El Paso, TX 79932 El Paso Electric filed an application for an indirect license transfer containing misleading and inaccurate information about the upstream affiliations of the buyer of El Paso Electric, IIF US Holdings 2 GP LLC. Public Citizen members who are also utility customers of El Paso Electric are directly impacted by the proposed change in ownership, and are affected if the ownership information contained in the application for an indirect license transfer is inaccurate.

Furthermore, two elected officials representing hundreds of thousands of businesses and households in El Paso have endorsed Public Citizens intervention and hearing request.

On November 18, Texas State Senator José Rodríguez wrote a letter to the NRC in full support of Public Citizens intervention and hearing request. Senator Rodríguez represents Senate District 29, which includes the city of El Paso. That letter is included as Exhibit B.

On November 22, U.S. Representative Veronica Escobar submitted a letter to the NRC, encouraging the NRC to consider granting an evidentiary hearing on this matter.

Representative Escobar represents the 16th Congressional district in Texas, encompassing the city of El Paso. Her letter is included as Exhibit C.

Public Citizen has a dues-paying member who is an El Paso Electric customer willing to publicly go on the record. And Public Citizen has letters of endorsement from two elected officials that represent El Paso Electrics service territory asking the NRC to hold a hearing. We therefore ask that the NRC grant us standing.

2lP a ge

Answer of Public Citizen

• December 17, 2019 In preparation for a hearing, it would be important for the NRC to obtain the articles of incorporation, articles of organization, corporate bylaws, operating agreements, certificate of formation, corporate charter and shareholder agreements for IIF US Holdings 2 GP LLC.

In addition, it would be valuable for the three owners of IIF US Holdings 2 GP LLCRita J. Sallis, Christopher Ward and Dennis L. Clarketo testify under oath in order to clarify the intersection of their duties with those of JP Morgan Chase & Co.

Thank you for your consideration.

Best, Tyson Slocum, Energy Program Director Public Citizen, Inc.

215 Pennsylvania Ave SE Washington, DC 20003 (202) 454-5191 tslocum@citizen.org 3lP a ge

EXHIBIT A 20191205-3095 FERC PDF (Unofficial) 12/05/2019 FEDERAL ENERGY REGULATORY COMMISSION Washington, D.C. 20426 OFFICE OF ENERGY MARKET REGULATION In Reply Refer To:

El Paso Electric Company Sun Jupiter Holdings LLC Docket No. EC19-120-000 December 5, 2019 Cynthia Henry El Paso Electric Company P.O. Box 982 El Paso, Texas 79960 Robin M. Nuschler P.O. Box 3895 Fairfax, Virginia 22038 Jessica C. Friedman Julia S. Wood Vincenzo Franco Van Ness Feldman, LLP 1050 Thomas Jefferson Street, N.W.

Washington, D.C. 20007 Mike Naeve Niqui Kohli Skadden, Arps, Slate, Meagher & Flom LLP 1440 New York Avenue, N.W.

Washington, D.C. 20005

Reference:

Deficiency Letter

Dear Counsel:

On August 13, 2019, you filed an application (Application) on behalf of El Paso Electric Company (El Paso) and Sun Jupiter Holdings, LLC (Sun Jupiter) (together,

20191205-3095 FERC PDF (Unofficial) 12/05/2019 Docket No. EC19-120-000 Applicants) pursuant to section 203 of the Federal Power Act (FPA)1 requesting Commission authorization for a transaction that will result in the merger of a subsidiary of Sun Jupiter with and into El Paso, which will be the surviving entity (Proposed Transaction).

Please be advised that the Application is deficient and the Commission requires additional information in order to process it. Accordingly, please respond to the information requested below.

1. Please provide the following information regarding the nature of the relationship between (1) Sun Jupiter and its affiliates; and (2) J.P. Morgan Investment Management, Inc. (J.P. Morgan Investment) and its affiliates:

a. You explain that J.P. Morgan Investment acts as investment advisor to IIF US Holding 2 LP (IIF US Holding 2), Sun Jupiters parent company.

i. Please explain what rights and responsibilities are delegated to J.P. Morgan Investment, or any affiliate of J.P. Morgan Investment, with respect to the day-to-day operations of:

1. IIF US Holding 2 GP, LLC (IIF 2 GP).

2. IIF US Holding 2.

3. Sun Jupiter (including the rights and responsibilities currently or anticipated to be delegated to J.P. Morgan Investment, or any affiliate of J.P. Morgan Investment, after the Proposed Transaction is consummated).

4. Any other direct or indirect subsidiaries of IIF 2 GP that own electric generation facilities or that otherwise are public utilities.

5. IIF US Holding LP (IIF US Holding).

6. Any direct or indirect subsidiaries of IIF US Holding that own electric generation facilities or that otherwise are public utilities.

ii. Please explain how J.P. Morgan Investment is compensated with respect to the work it performs for the following companies:

1. IIF 2 GP.

2. IIF US Holding 2.

1 16 U.S.C. § 824b(a)(1) (2018).

20191205-3095 FERC PDF (Unofficial) 12/05/2019 Docket No. EC19-120-000 3. Sun Jupiter (including the compensation currently or anticipated to be paid to J.P. Morgan Investment after the Proposed Transaction is consummated).

4. Any other direct or indirect subsidiaries of IIF 2 GP that own electric generation facilities or that otherwise are public utilities.

5. IIF US Holding.

6. Any direct or indirect subsidiaries of IIF US Holding that own electric generation facilities or that otherwise are public utilities.

b. You identify three individuals as the private individuals that own IIF 2 GP (IIF 2 GP Owners). Please respond to the following regarding the nature of the ownership of Sun Jupiter:

i. Did IIF 2 GP Owners make capital contributions to secure their ownership shares? In what amount?

ii. Did IIF 2 GP Owners assume any obligations or fiduciary responsibilities to any person, including IIF US Holding 2 and Sun Jupiter?

iii. Are IIF 2 GP Owners term limited?

iv. Do any of the IIF 2 GP Owners have an existing or past relationship, including but not limited to as employees, with J.P.

Morgan Investment or any of its affiliates? If so,

1. What is that nature of each such relationship?

2. Are there any residual compensation arrangements between J.P. Morgan Investment, or any of its affiliates, and any of the IIF 2 GP Owners?

c. Please describe, in detail, how the following entities are staffed. In your response, please explain how the day-to-day operations of these entities are carried out, and who carries out such operations.

i. In particular, please explain whether each company has its own employees, or whether they are shared with or contracted from other businesses, whether affiliated or unaffiliated. Please also state how any such staff is compensated, and who provides such compensation:

20191205-3095 FERC PDF (Unofficial) 12/05/2019 Docket No. EC19-120-000 1. IIF 2 GP.

2. IIF US Holding 2.

3. Sun Jupiter (including the current and anticipated staffing of Sun Jupiter after the Proposed Transaction is consummated).

4. Any other direct or indirect subsidiaries of IIF 2 GP that own electric generation facilities or that otherwise are public utilities.

5. IIF US Holding.

6. Any direct or indirect subsidiaries of IIF US Holding that own electric generation facilities or that otherwise are public utilities.

d. In the Application, the principal business address provided for Sun Jupiter is:

Sun Jupiter Holdings LLC c/o IIF US Holding 2 LP 277 Park Avenue, 35th Floor New York, NY 10172 Section 9.02 of the Agreement and Plan of Merger provides the address for notices and communications to Sun Jupiter as:

Sun Jupiter Holdings LLC c/o J.P. Morgan Asset Management 277 Park Avenue, 35th Floor New York, NY 10172 In addition, the email address for Sun Jupiter provided for notices and communications in section 9.02 of the Agreement and Plan of Merger uses the @jpmorgan.com domain.

i. Please explain why and how Sun Jupiter and J.P. Morgan Asset Management share the same principal business office; please also explain why and how Sun Jupiter uses the @jpmorgan.com domain.

ii. Please detail the relationship between J.P. Morgan Asset Management and J.P. Morgan Investment, as well as any relationship between Sun Jupiter and J.P. Morgan Asset Management.

20191205-3095 FERC PDF (Unofficial) 12/05/2019 Docket No. EC19-120-000 iii. Is the principal business address of IIF 2 GP the same as Sun Jupiter? If so, please explain why IIF 2 GPs principal business office is the same J.P. Morgan Asset Management. In your response, please detail the relationship between IIF 2 GP and J.P.

Morgan Asset Management.

iv. If the principal business address of IIF 2 GP is the same as Sun Jupiter, do the owners of IIF 2 GP conduct business at the address provided by Sun Jupiter in the Application?

e. Please explain, in detail, how the owners of IIF 2 GP are selected. In your response, please state whether there is a formalized process for identifying and selecting candidates. If such a process exists, please describe that process in detail. In addition, please: (1) explain whether that process includes consulting with, or otherwise the involvement of, outside parties (i.e. parties outside of IIF 2 GP, including J.P. Morgan Asset Management or any of its affiliates); (2) identify such parties; and (3) describe IIF 2 GPs relationship with them.

f. Please explain who controls the day-to-day decision making over the public utilities owned by IIF US Holding 2 and IIF US Holding, including the decisions over dispatch, output, maintenance, and outages of any electric generation facilities, and marketing of electric energy for sale. Please explain what oversight any direct or indirect parent company or advisor may have over those decisions.

2. If the Commission were to deem J.P. Morgan Investment an affiliate of Sun Jupiter, please detail the impact of doing so on Applicants analysis of the Proposed Transaction. In particular, please discuss:

a. Whether the representations Applicants have made pursuant to 18 C.F.R. § 33.2(g) (2019) would differ from what is in the Application.

b. Whether other exhibits submitted with the Application, including the Competitive Analysis Screen performed pursuant to 18 C.F.R. § 33.3 (2019), would require revisions. Please submit such revised exhibits with your response, including, if necessary, a revised competitive analysis that reflects the impact of deeming J.P. Morgan Investment to be an affiliate of Sun Jupiter.

The information requested in this letter will constitute an amendment to the Application. The Application will not be a completed application for purposes of section 33.11(a) of the Commissions regulations, 18 C.F.R. § 33.11(a) (2019), until the

20191205-3095 FERC PDF (Unofficial) 12/05/2019 Docket No. EC19-120-000 information requested in this letter is submitted. A notice of amendment will be issued upon receipt of your response.

This letter is issued pursuant to the authority delegated to the Director, Division of Electric Power Regulation - West, under 18 C.F.R. § 375.307(a)(1)(v) (2019) and is interlocutory. This order is not subject to rehearing pursuant to 18 C.F.R. § 385.713 (2019). Please file the requested information within 30 days of the date of this letter.

Please submit your response electronically.

In addition, please provide a copy of the response to all parties that have either requested or been granted intervention in this proceeding. Failure to respond to this letter within the time period specified may result in an order rejecting the filing.

Sincerely, Steven T. Wellner, Director Division of Electric Power Regulation - West

Exhibit B

Exhibit C