Texas regulators still uncertain on Hunt deal for Oncor

With a deadline looming, Texas regulators are struggling to make up their minds about the finer points of the Ray L. Hunt family’s $18 billion proposal to buy and reshape Oncor, the state’s biggest electric utility.

The biggest remaining sticking point is this question: Should the Dallas-based oil family allow Oncor, under a new corporate structure, to collect hundreds of millions of ratepayer dollars — normally earmarked for federal taxes — that the company wouldn’t actually have to pay?

On Thursday, Public Utility Commissioner Brandy Marty Marquez said she was uncomfortable with the idea.

“There’s something very lucrative and attractive about this particular structure, and I cannot be okay with a windfall on the back of those ratepayers,” she said at an open meeting of the three-member commission that must decide whether the deal fits the public interest. “In my opinion, they’re not entitled to any of it.”

But, Marty Marquez added, she would be open to a plan for shareholders and ratepayers to share that wealth — if the deal “heavily favored” the ratepayer.

Her two colleagues were less committal.

Chairman Donna Nelson said that she did not consider the arrangement a “windfall” for investors, but said she would consider such a sharing plan. She also suggested that eliminating other risks in the deal might make allowing investors to pocket the tax savings more palatable.

Commissioner Ken Anderson said he’s “still mulling that over,” but called sharing a “real benefit that could compensate for the risk” involved in other parts of the deal.

The commission has been mulling the deal for months, but its time is running short. Commissioners must make a decision on the deal, part of the bankruptcy reorganization of Energy Future Holdings, by sometime in March.

The stakes are even higher than ownership of Oncor, whose 119,000 miles of transmission and distribution lines deliver power to more than three million homes and businesses in North and West Texas. Hunt’s plan is the lynchpin of efforts by Oncor’s parent, Energy Future Holdings, to emerge from one of the largest bankruptcies in American history.

To save on taxes, Hunt wants to divide Oncor into a real estate investment trust, which would divide the utility into two companies. One would own the assets (power lines, trucks and transformers, for instance), while the other, much smaller “operating” company would rent the equipment. In Oncor’s case, the “asset” company would hold about 97 percent of the income — largely untaxed.

Federal law requires these trusts to pay out at least 90 percent of their income to shareholders thorough dividends.

The idea has drawn fierce pushback from a host of groups, including consumer advocates, big industrial power users, staff experts at the utility commission and .

This story was originally published February 11, 2016 at 4:28 PM with the headline "Texas regulators still uncertain on Hunt deal for Oncor."