A state official is raising concerns about the risks that 3 million ratepayers may face under Hunt Consolidated’s bid to take over Oncor, the largest power distributor in Texas, as part of the $40 billion Energy Future Holdings bankruptcy.
Public Utility Commissioner Ken Anderson filed a memo with the commission Thursday saying that the agency must determine if the “proposed transaction results in a tangible and quantifiable benefits to ratepayers that exceeds the costs and risk to those same ratepayers.”
Dallas-based Hunt earlier this month filed a proposal in federal court to split Energy Future two companies. Hunt Consolidated, along with a group of creditors, would raise $12 billion to take over Oncor, which has more than 119,000 miles of power lines.
Energy Future’s power-generating division, Luminant, which owns coal-fired power plants, and its retail electricity unit, TXU Energy, would be owned by a different set of creditors. The energy-generating division loses money.
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At the heart of Anderson’s concerns, and shared by a coalition of cities, is that Oncor would become part of a real estate investment trust largely to avoid being hit with a big tax bill. Observers say such a transaction has never been attempted at this level, or on this scale.
Anderson reminds his fellow commissioners — and representatives of the Hunt investor group — that the agency raised similar concerns in 2008 about the $45 billion leveraged buyout of TXU Corp. by investment giants KKR and TPG Capital, which created Energy Future Holdings. At the time, it said it wanted to protect Oncor and its “captive ratepayers” from an “enormous debt obligation.”
Under the current proposal, Anderson continues to press the point that “Oncor’s ratepayers ought not to bear any real risks associated with either the pre-existing EFH debt or the proposed REIT structure unless they receive at least commensurate benefits over the long run for that risk.”
“That premise will be at the heart of my public interest analysis,” Anderson wrote.
Under the Public Utility Regulation Act, he wrote, the practical effect of those provisions “is to force the Commission to reject an application if the applicants fail to meet their burden of proof.” He advised Hunt to not hold back benefits to “sweeten the deal” if they run into opposition later.
Anderson is also worried about the new company being organized in Delaware, meaning it would be governed by the laws of that state. He said it would be incumbent on the new ownership to demonstrate that it would “not create risks that would negatively affect Oncor’s service to ratepayers.”
Geoffrey Gay, general counsel to the Steering Committee of Cities Served by Oncor, has similar concerns. The committee represents about 2 million ratepayers in several large cities, including Fort Worth, Dallas and many other communities in North Texas.
He said the proposal is an “unnecessarily complicated and unique structure for a monopoly.”
“This structure may be good for Wall Street and creditors. I see no reason to believe it is good for ratepayers. The only reason to create the REIT is to avoid paying federal income tax,” Gay said. In this instance, he estimated it would be several hundred million dollars worth.
“I think there is going to be a heavy burden to convince a state agency that this is beneficial to ratepayers,” he said.
— Max B. Baker
Fort Worth rated friendly to small business
Small business owners in Fort Worth give the city high marks for being small business friendly, but just average scores when it comes to training and networking programs.
Thumbtack, a San Francisco-based technology-based marketplace that connects people with experienced local professionals, said 246 small business owners in Fort Worth participated in a recent study that asked respondents to rate their city and state governments on a range of policy factors.
Statewide, 1,510 small business owners responded, and 18,000 participated nationwide.
“Small business owners on Thumbtack have consistently told us that they welcome support from their governments but are frequently frustrated by unnecessary bureaucratic obstacles,” Jon Lieber, Thumbtack’s chief economist, said in a statement. “Fort Worth is just behind neighboring Dallas in its support for small business owners, with a very strong showing everywhere except the presence of high-quality business training programs.”
Fort Worth earned a A- overall for small business friendliness, ranking it No. 12 out of 95 cities.
The city received an A rating for licensing and tax regulations, and A- when asked how difficult or easy it is to start a business in the city. The city received six Bs in other categories, but received a lone C grade in training and networking programs, Thumbtack said.
Classic Chevrolet expands to Oklahoma
Classic Chevrolet, the Grapevine dealership that has been a top seller for General Motors for more than a decade, is expanding into Oklahoma.
Owner Tom Durant has partnered with Erv Randle, one of his managers at Classic for 11 years, to buy the former Jim Glover Chevrolet in Lawton, Okla. It will operate as Classic Chevrolet Lawton.
A Texas native and graduate of Baylor University, Randle has already relocated to Lawton with his wife, Bridget. He plans to be actively involved in the community.
“There is no secret to the success of Classic Chevrolet,” Randle said in a prepared statement. “It’s all about teamwork and determination.”
Customers in Lawton should expect Classic to take care of blocking and tackling. Before entering the auto business, Randle played eight years in the NFL as a middle linebacker for the Tampa Bay Buccaneers from 1985 to 1990 and with the Kansas City Chiefs in 1991 and 1992.
Fewer buying homes with cash
The number of home buyers plunking down cash to buy a new home is dropping locally and nationwide, according to CoreLogic.
In May, the share of cash sales for homes in Fort Worth-Arlington fell to 29.4 percent of all sales, down from 31.9 percent the same month a year ago.
Nationwide, cash sales made up 31.9 percent of the May home sales, down from 35.1 percent.
In Texas, cash sales made up 28 percent of the share, CoreLogic said.