After several failed bids by unsuccessful suitors, it finally appears that Oncor Electric, the state’s largest transmission and distribution utility, may be close to changing owners.
An offer by California-based Sempra Energy to acquire the utility for $9.45 billion has received satisfactory marks — albeit preliminary ones — from consumer groups. It also has been given the green light by a bankruptcy court in Delaware and important creditors.
And while still lacking regulatory approval from the Texas Public Utility Commission, the Sempra offer clearly has more momentum than any to date.
“The third time out might be the charm,” said Geoffrey Gay, general counsel for the Steering Committee of Cities Served by Oncor, a group monitoring the transaction on behalf of north Texas cities and their citizens. “My expectation is that this will result in approval,” said Gay, speaking to The Dallas Morning News.
The state’s largest transmission and distribution utility went on the action block in 2014 after the bankruptcy of its erstwhile parent company, Energy Future Holdings. Public advocates deemed two previous offers — one by a consortium that included Dallas Billionaire Ray L. Hunt and another from Florida-based conglomerate NextEra — as raw deals for ratepayers. Another offer by Warren Buffet’s Berkshire-Hathaway received better reviews, but never officially made it to the Public Utility Commission.
And so that leaves the recent offer from California’s Sempra Energy. Responding directly to concerns expressed by Gay’s city coalition and other interested parties, the Fortune-500 company has agreed to 47 regulatory commitments intended to financially protect Oncor and its captive ratepayers.
Among those commitments:
• Sempra will deliver 90 percent of savings from lower interest rates associated with the deal back to Oncor customers.
• Sempra agreed to finance the acquisition with 100% equity and become the sole owner of EFH’s interest in Oncor. In the process, Sempra is dropping its prior proposal to seek $3 billion in debt financing and to seek co-owners of equity.
• Sempra will maintain financial and managerial firewalls between itself and the utility.
Because Oncor is a regulated monopoly, any change of ownership must receive regulatory approval from the Texas PUC. But unlike the federal bankruptcy court that also reviewed the deal, the Texas agency isn’t charged with looking out for investors but rather looking out for the public. Under Texas law, the PUC has until April 4th to accept, amend or reject Sempra’s proposal.
Oncor serves about 3.4 million homes and businesses, mostly in Central and North Texas. Sempra serves 7.3 million homes and businesses through San Diego Gas & Electric and Southern California Gas. It also owns utility companies in Chile and Peru and is developing a natural gas export facility in Port Arthur, according to The Dallas Morning News.
In a separate development, the PUC on Oct. 11 granted approval to Oncor to hike its rates systemwide. Gay, who also serves as general counsel for the Texas Coalition for Affordable Power, said he wants a commitment as part of the Sempra transaction that Oncor won’t come back soon seeking even more money.