Written on: October 13, 2016
A key regulatory stumbling block that could have stymied a multi-billion-dollar deal for the state’s largest electric utility appears to have been overcome.
However, other challenges remain.
At issue it a bid by Florida-based NextEra to purchase Oncor, which serves more than 10 million customers in Texas and operates approximately 119,000 miles in transmission and distribution lines. Oncor is owned by Energy Future Holdings, which declared bankruptcy in 2014.
Members of the Texas Public Utility Commission have raised objections to a detail in that proposed transaction that would require a $275 million payout to NextEra should the deal collapse because certain technical conditions were not met. PUC Commissioner Ken Anderson said that termination fee provision could have tied the hands of the PUC, which has the authority to reject or approve Oncor’s change of ownership.
But Anderson now appears to be satisfied with assurances provided by Christopher Sontchi, the federal Judge in Delaware overseeing the EFH bankruptcy case. “I wish to express my personal appreciation to Judge Sontchi for taking time out of his crowded schedule … to put on the record that Oncor and its ratepayers will be insulated from any financial effect arising out of the payment of the termination fee,” Anderson wrote in an Oct. 6 memo.
NextEra’s bid to acquire Oncor comes after the collapse earlier this year of a separate offer by a rival consortium. Regulatory staff and consumer groups objected to complicated tax provisions in that previous deal, and those objections contributed to its eventual failure.
The proposed NextEra deal is more straight-forward, albeit still not without controversy. Commissioner Anderson has raised separate conflict-of-interest concerns. PUC chair Donna Nelson also said NextEra may have to address additional tax questions.
“So stay tuned, I guess, is what we’re saying,” she said recently.
NextEra anticipates making a change-of-control filing with the PUC on Nov. 1. The company also has said it wants to close the deal by early 2017. If successful, Oncor’s extensive transmission and distribution network would be added to NextEra’s existing fleet of Texas power plants.
In all, the transaction be valued at more than $18 billion and require about $9.5 billion in financing, according to reports.
R.A. Dyer is a policy analyst for TCAP, a coalition of more than 170 cities and other political subdivisions that purchase electricity in the deregulated market for their own governmental use. Because high energy costs can impact municipal budgets and the ability to fund essential services, TCAP, as part of its mission, actively promotes affordable energy policies. High energy prices also place a burden on local businesses and home consumers.