a holding company to own the stock of a public utility was not regarded as a jurisdictional activity requiring FERC approval. After all, common stock is not a jurisdictional asset per se. Then, the FERC issued a series of three key rulings under section 203.
First, in 1987, it ruled that the transfer of a utility's stock (as when a utility creates a holding company) represents a transfer of ownership and control of its wires and other assets, necessitating approval under section 203. %n4%n Three years later, it carved out an exemption: The merger of two public utility holding companies would not invoke jurisdiction under section 203. %n5%n That exemption proved short-lived, however. In 1994, the FERC found a reason to review mergers between holding companies. It adopted a rebuttable presumption that "when public utility holding companies merge, their public utility subsidiaries likely retain no real corporate independence." Consequently, the FERC declared, "mergers between public utility holding companies also accomplish an indirect merger of their public utility subsidiaries," which requires approval under section 203. %n6%n
These cases all involved "traditional" public utility restructurings. However, as the industry entered the open-access and post-Order No. 888 worlds, non-traditional utility mergers became more prevalent. This trend prompted the Commission's decision to revisit section 203.
Enova's Novel Deal
As noted, a utility can trigger section 203 review when it transfers its own stock to a new holding company. A merger of two public utility holding companies can do the same. What happens, then, when two holding companies transfer their stock to a new common parent? The FERC answered that question in its lead case of April 30 in its Enova ruling.
The case involved Enova Corp. and Pacific Enterprises, both holding companies. They had filed a joint application seeking a disclaimer of jurisdiction over their merger. Enova is the parent of traditional electric utility, San Diego Gas & Electric Co. and a power marketer, Enova Energy. The latter has received authority to sell power wholesale at market-based rates. On the other side, Pacific Enterprises owned no public utility assets at all. It is the parent of Southern California Gas Co., an intrastate natural gas pipeline. As planned, the merger would not include any disposition of the stock of either San Diego Gas & Electric Co., the traditional utility, nor Enova Energy, the power marketer. The reorganization was to take place solely at the holding company level, two tiers above the operating energy companies.
Nevertheless, the Commission required approval of the deal under section 203. According to FERC, the transaction involved the transfer of control of utility assets. "The merger of the Enova and Pacific holding companies," the FERC explained, "will result in a disposition (a transfer of control) of the jurisdictional facilities of SDG&E and Enova Energy, and that, for purposes of section 203, the public utilities SDG&E and Enova Energy will have effectively disposed of their jurisdictional facilities."
As the Commission observed, section 203 was broad in scope, speaking to dispositions "by any means whatsoever." Reviewing section 203's legislative history, FERC concluded that it focused