The Texas Public Utility Commission has a new opportunity — and maybe even a moral obligation — to protect the state’s utility customers from a very dangerous deal.
On Sept. 29, a group of investors filed with the PUC to take over Oncor, the largest electricity delivery company in the state.
For residential and business ratepayers, it’s imperative that the PUC reject the proposed sale unless it meets two specific qualifications: The sale must be proven to offer a real benefit for ratepayers, and it must maintain the current “ring fence” that financially protects Oncor for future generations.
A “ring fence,” in financial parlance, is a way to isolate Oncor’s continuing operations from the gains or losses of investors who buy shares of the utility.
The proposed change of ownership might seem enticing at first blush.
The scheme, which the PUC will have six months to consider, would allow new owners to operate Oncor under a real estate investment trust.
That’s a mechanism never before tried at this scale and would allow a diversion of tax liability from the corporation to its shareholders.
Although Wall Street speculators may fuss, the plan deserves a hard look by state regulators. It imposes tremendous risks to ratepayers with no guarantee that they — and not just the investors — will ever directly reap the rewards of the deal.
PUC Commissioners Ken Anderson and Marty Martinez have been asking tough questions about the proposed sale.
I applaud their persistence in trying to get answers to questions about how this transaction will benefit ratepayers, and I encourage all the PUC commissioners to be vigilant for consumers.
With so much at stake, I hope that ratepayers can count on the commission to not kowtow to powerful industry interests. Too often in recent memory, the commission has done just that.
Of course, it’s no real surprise that Oncor is being considered for sale. It has more 3 million customers and is presently owned by Energy Future Holdings.
The Dallas-based conglomerate, which also includes TXU Energy and Luminant, is in bankruptcy.
But the financial straits of Energy Future Holdings aren’t sufficient reason for the PUC to throw an undeserved life jacket to the energy conglomerate by way of authorizing such a risky deal.
There’s good reason for the PUC to be cautious and the public to be wary.
Eight years ago, the PUC allowed Energy Future Holdings to assume control of power plants, transmission systems and retail operations that had belonged to TXU.
The PUC allowed the buildup by Energy Future Holdings even though it created more than $20 billion in new debt and involved new owners that lacked significant experience at running power plants and related operations.
The 2007 deal came together under the PUC’s watch and allowed Energy Future Holdings to pay $45 billion for the newly acquired assets. It also allowed a TXU executive to walk away with a $277 million golden parachute.
The acquisition wasn’t so lucrative for consumers. AARP objected to it.
And just as the 2007 deal didn’t make sense, the newly proposed sale of Oncor may not make any more sense for consumers now.
So, here we go again! Will the PUC do the right thing and require clear ratepayer benefits under a sale of Oncor?
And will it maintain the “ring fence” that now financially protects Oncor customers?
Three million Texans are counting on it.
If the deal isn’t good for consumers, it must be rejected.
Bob Jackson is director of AARP Texas. AARP has more than 2.2 million members in Texas.