PJM Independent Market Monitor Opposes AEP–Longview Section 203 Acquisition Absent Behavioral Market Power Mitigation

On October 16, 2026, the PJM Independent Market Monitor (Monitoring Analytics) filed comments in FERC Docket No. EC26-153 opposing AEP's proposed acquisition of the 710 MW coal-fired Longview facility from Mountain State Energy Holdings unless FERC conditions approval on seven specific behavioral market-power-mitigation commitments. The IMM's analysis, using HHI and three-pivotal-supplier (TPS) testing, found the transaction would increase AEP's structural market power in the PJM aggregate energy market, local energy markets (constraints binding >5% of hours), and the PJM Capacity Market, even though Applicants' Delivered Price Test (DPT) screen showed no violation. The IMM also flagged the transaction as part of a pattern of AEP acquisitions (Wolf Hills, Big Sandy, Oregon Clean Energy Center) and raised concerns about capacity being removed from the PJM Capacity Market to serve data center load.

This filing crystallizes a live methodological conflict at FERC between the Commission's standard Delivered Price Test (HHI-based) screen and the PJM Market Monitor's alternative pivotal-supplier-based structural market power analysis for Section 203 merger reviews in nodal LMP markets. The outcome will influence whether FERC requires granular, submarket-specific behavioral mitigation conditions (cost-based offer caps, no markup-switching, physical operating parameters, retirement economics tests, ICAP must-offer requirements, and a data-center-load capacity retention commitment) as a template for future PJM M&A approvals amid an ongoing generation ownership consolidation trend and a persistently short, tight PJM Capacity Market.

This is a market-design-relevant regulatory review because it tests whether FERC will formally recognize an alternative-to-DPT market power methodology (pivotal supplier/TPS testing) as grounds for conditioning or denying Section 203 approvals, rather than relying solely on the applicant-furnished DPT/HHI screen. The IMM explicitly asks FERC to weigh cumulative/sequential consolidation effects (DOJ Merger Guidelines #7 and #8) across a series of transactions rather than reviewing each in isolation — a potential precedent-setting shift in merger review scope. Separately, the proposed commitment to not remove capacity from the PJM Capacity Market to serve data center load represents an attempt to use Section 203 conditioning authority to address a structural gap in PJM's deactivation/market rules regarding co-located or data-center-dedicated generation, an issue PJM staff have stated falls outside existing deactivation rules. If FERC adopts any of the seven behavioral conditions, it would create a template potentially applied to future PJM-area M&A transactions, effectively using case-by-case merger conditioning to patch systemic market power mitigation and reliability gaps that the broader PJM stakeholder process has not yet resolved.

Federal Power Act Section 203 (16 U.S.C. § 824b); FERC Merger Policy Statement (Order No. 592/592-A); Order No. 642 (Part 33 filing requirements); Order No. 669 series; PJM Open Access Transmission Tariff, Operating Agreement, and Reliability Assurance Agreement market power mitigation provisions

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