Texas regulators are moving closer to allowing the Ray L. Hunt family to purchase and reshape Oncor, the state’s largest utility. But the Dallas oil family’s high-stakes deal remains far from forged.
The three-member Texas Public Utility Commission on Thursday did not vote, as many had expected. But it told staff to draw up a proposal for the Hunts to transform Oncor into a real estate investment trust, a contentious part of a deal valued at $18 billion.
The commission is scheduled to review that proposal March 21, just days before its six-month deadline to vote up or down on a case with statewide implications.
That draft will offer several restrictions thought to minimize risks for Oncor and its roughly 3 million power line customers in North and West Texas. It also will call for investors to share with ratepayers a portion of the estimated $250 million each year in federal tax savings under the new corporate structure.
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But it will leave a key question unanswered: How exactly would the new Oncor share, if the deal goes through?
Over the objections of Chairman Donna Nelson, Commissioners Brandy Marty Marquez and Ken Anderson Jr. proposed to kick that issue to a separate proceeding, leaving parties in the case — including the Hunts and the consumer groups that have bitterly fought their efforts — unsure of the ultimate outcome or whether investors will stay interested.
“This is an incredibly difficult, complex situation, and we haven’t made it any less complex in our discussion,” Geoffrey Gay, general counsel for the Steering Committee of Cities Served by Oncor, a consumer group that opposes the deal, told the commissioners.
But in an interview, Gay said he was pleased that some sharing of those tax savings appeared likely.
Richard Noland, an attorney representing the purchasing group, said he would take the commission’s guidance back to the investors and that he wasn’t too surprised that the tax question remained in flux.
“We understand what you want, and we’ll try to sell it to our investors,” he told the commission.
Transforming the utility into a real estate investment trust would allow Hunt to save on federal taxes, and it would likely spur other major utilities to follow suit. Houston-based CenterPoint Energy has already said it’s exploring the idea, worrying consumer advocates.
The plan would divide Oncor 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.