On May 11, 2023, FERC notified Mankato Energy Center, LLC and Mankato Energy Center II, LLC (“Mankato Companies”) that it will release certain privileged information included in the initial brief that Mankato Companies submitted in an ongoing proceeding section 206 of the Federal Power Act (“FPA”) to determine whether Mankato companies and J.P. Morgan Investment Management, Inc. (“J.P. Morgan Investment”) are affiliated for purposes of the FPA. FERC reasoned that disclosing certain privileged information is necessary to carry out the Commission’s jurisdictional responsibilities in evaluating whether the Mankato Companies’ upstream ownership raises market power concerns. Commissioner Danly dissented in a separate statement, arguing that FERC could instead release a redacted order.
On January 11, 2021, FERC instituted an FPA section 206 proceeding to determine whether Mankato Companies are affiliated with J.P. Morgan Investment through J.P. Morgan Investment’s relationship with Mankato Companies’ upstream owner, IIF US Holding 2 LP (IIF US Holding 2). FERC noted that it specifically sought to determine whether J.P. Morgan Investment’s connection to Mankato Companies makes it likely that there is an absence of arm’s-length bargaining in transactions between the two entities. On February 22, 2021, Mankato Companies filed an Initial Brief, which sought privileged treatment for two exhibits: an Investment Advisory Agreement and a Partnership Agreement (“Agreements”).
On March 15, 2021, Public Citizen, Inc. (“Public Citizen”) filed a reply brief (“Reply Brief”), which included privileged information from the Initial Brief. On December 5, 2022, the FERC notified Mankato Companies that it was considering whether to make public certain privileged information filed in the Initial Brief (“Notice Order”). Similarly, FERC notified Public Citizen regarding releasing privileged information in its Reply Brief. FERC noted that it would only make the Reply Brief public if it first determined that the Initial Brief should be made public. On December 14, 2022, Mankato Companies and J.P. Morgan Investment filed responses to the Notice Order, opposing the release of the privileged information. Mankato Companies and J.P. Morgan Investment expressed concerns about potential harm to their competitive positions and the discouragement of future submissions of confidential information.
FERC stated in its May 11, 2023, order that it would release certain portions of the privileged information submitted in the Initial Brief. In so doing, FERC weighed the need to carry out its jurisdictional responsibilities under the FPA and Administrative Procedure Act (“APA”) against the benefits of protecting privileged information. FERC found that disclosing the privileged information is in the public interest because the information forms the basis of a potential finding of affiliation between Mankato Companies and J.P. Morgan Investment, and disclosure will enable members of the public to understand the reasoning behind the Commission’s decision. FERC explained that disclosure of a market-based rate seller’s affiliates is required to determine whether the seller can exercise market power. Finally, FERC noted that it would only disclose the portions of the privileged information it relies on to determine affiliation to mitigate the potential effects of disclosure.
Commissioner Danly filed a dissenting statement arguing that FERC could have issued a partially redacted order because the U.S. Court of Appeals for the District of Columbia Circuit has explicitly stated that a redacted order is an option when FERC needs to rely on privileged information to satisfy its obligation to engage in reasoned decision making under the APA. Commissioner Danly also emphasized the importance of reassuring litigants that their information will be protected when filed as privileged. Commissioner Danly expressed concerns that the order will cause litigants to rethink filing privileged information with FERC.
FERC’s order, issued in Docket No. EL21-36, can be found here.
