The Federal Energy Regulatory Commission approved Dynegy Inc.'s (DYN) agreement to sell nine U.S. power plants to one-time development partner LS Power Associates LP on Wednesday.

The approval was the final regulatory hurdle for the deal under which LS Power will buy eight plants and a ninth under construction for $1.03 billion and 245 million Class B common shares. Dynegy already had received approval from the Federal Trade Commission under the Hart-Scott-Rodino Antitrust Improvements Act.

The commission in its ruling found the transaction won't have an adverse affect on rates or market power. Dynegy had requested approval by Wednesday in order for the proposed transaction to close on a timely basis.

A spokesman for the company said what remains is customary closing conditions. The deal is expected to close before year-end.

Under the deal, Dynegy will sell to LS Power five so-called peaking plants in Kentucky, Illinois and Michigan, and three combined-cycle plants in Arizona and Connecticut. Peaking plants and combined-cycle plants don't run all of the time and are used during periods of higher energy demand. Dynegy also will give up its interest in an uncompleted plant in Texas.

Dynegy will be left with about 20 plants, mostly powered by coal or gas mainly located in the Northeast, Midwest and California.

-By Mark Peters, Dow Jones Newswires; 212-416-2457; mark.peters@dowjones.com