Top officials at Oncor Electric Delivery, Texas’ largest electric utility, aired concerns on Monday with Dallas billionaire Ray L. Hunt’s $18 billion proposal to take over and reshape their company.
The testimony came as the Texas Public Utility Commission kicked off hearings on Hunt’s effort to transform Oncor into a “real estate investment trust,” which is the lynchpin of efforts by Oncor’s parent, Energy Future Holdings, to emerge from one of the largest bankruptcies in American history.
In hearings that could stretch into next week, the commission’s three members are charged with weighing the interests of the Hunts — who have deep roots in the Texas energy world — with those of Texas ratepayers and the electric grid.
Testifying in front of state regulators, Oncor CEO Bob Shapard suggested that Hunt’s plan could leave the hulking utility without the flexibility to smoothly handle unplanned events, such as a drop in revenue or major storms.
“You’re operating a major utility on a fraction of the economics we have today,” he said of Hunt’s bid for Oncor, whose transmission and distribution lines deliver power to more than 3 million Texas homes and businesses in North and West Texas.
Shapard also expressed concerns that the deal as written could jeopardize the utility’s credit rating. If Hunt does not address those misgivings, the CEO said he would not recommend that state regulators approve the sale.
A Delaware bankruptcy court has already approved Energy Future Holdings’ plan to shed $42 billion in debt. But Texas regulators still need to sign off on the sale of Oncor, the company’s regulated unit.
With thick binders on hand for reference in the crowded hearing room, the regulators heard the intricate details of a complicated plan that the Hunts say fits the public interest — even though the business structure they are proposing has never been tried for a utility this big.
Consumer advocates call the plan risky. Other critics include big electricity users, staff experts at the Public Utility Commission and, in a surprise twist last week, former Gov. Rick Perry.
The Hunts have pushed back, calling the concerns “alarmist and misguided.” The family — with its respected name and business acumen — is well-positioned to run Oncor and help deliver Energy Future Holdings from its messy bankruptcy, it argues.
The plan “resolves one of the most complex bankruptcies in history,” James Bushee, an attorney for Hunt’s acquisition company, said. “The transaction would retain local control over Oncor… This is not just a financial transaction.”
Sam Chang, an attorney for the Public Utility Commission, said the proposed sale should be denied because it may raise costs for consumers and weaken the company financially.
The transaction would result in “unjust and unreasonable rates” and raise the risk the new owners may run short of cash during tough times, Chang testified.