If Oncor raises rates, more than 3 million Texas customers feel it. If Oncor can’t serve those homes and businesses, there’s nowhere else for them to turn.
That’s why North Texas electric ratepayers have a giant stake on Oncor’s potential sale. Even though the Dallas-based company serves an area with retail electric choice, Oncor is a regulated monopoly. Its customers have no choice but to use its services.
A consortium led by billionaire Ray L. Hunt has made a bid to acquire the transmission and distribution utility, the state’s largest. The proposed deal is part of the ongoing Energy Future Holdings bankruptcy (the company filed for Chapter 11 protections last year) and not surprisingly, it’s stunningly complicated.
But here are two issues you should care about.
First, Hunt and EFH want to continue using a lot of debt in this transaction. This has drawn the attention of at least one key regulator. In a recent memo, Texas Public Utility Commissioner Kenneth Anderson stated that about $5.5 billion in borrowed money will remain with the restructured EFH. As a result, he said, certain protections must remain firmly in place to protect Oncor ratepayers.
Second, Hunt proposes to employ a complicated “real estate investment trust” structure in the transaction. The problem here also is risk. A REIT is a gimmicky corporate device intended to create tax savings for the business owner. However, a REIT has NEVER been used on such a massive utility scale.
The REIT proposal also has been cited in a recent Moody’s report as a potential source of continued regulatory haranguing at the PUC and a potential drag on Oncor’s credit ratings.
For these reasons, the REIT proposal is setting off alarm bells for consumer groups. Anderson says he wants to take a closer look.
“Oncor’s ratepayers ought not to bear any real risk associated either with the pre-existing EFH debt or the proposed REIT structure unless they receive at least commensurate benefits over the long-run,” he stated in an Aug. 20 memo.
The PUC is required by state law to ensure that Oncor’s change-of-ownership does not violate the public interest. Consumer and municipal groups — such as the Texas Coalition for Affordable Power and the Steering Committee of Cities Served by Oncor — have encouraged the PUC to take a hard look.
Geoffrey Gay, general counsel for the Steering Committee of Cities Served by Oncor, said the REIT proposal is particularly troubling. “The acquisition of Oncor merits a thorough regulatory review, and the interests of ratepayers must be a top priority,” he said.