Texas Regulator Urged to Reject Oncor Sale on Ratepayer Concernsby
PUC Attorney warns of `unjust and unreasonable rates'
Buyers say sale in public interest, helps end EFH bankruptcy
Energy regulators in Texas were urged Monday to oppose the sale of the biggest power transmission company in the state, the cornerstone of a plan to allow Energy Future Holdings Corp. to emerge from bankruptcy.
Oncor Electric Delivery Co.’s proposed sale to Hunt Consolidated Inc. and a group of bondholders should be denied because it may raise costs for consumers and weaken the company financially, according to Sam Chang, an attorney for the Public Utility Commission of Texas.
The questions reflect the difficulty a power company in bankruptcy has in offloading a valuable asset in a state like Texas, which consumes more electricity than any other state and wants to maintain cheap prices. While parent Energy Future Holdings has been working to restructure its debts in Chapter 11, Oncor is in good financial health and not directly involved in those proceedings.
The transaction would result in “unjust and unreasonable rates” and raise the risk the new owners may run short of liquidity during tough times, Chang told a public hearing that’s expected to last for several days.
The bankruptcy plan would create a power distribution unit, including Oncor, and a power generating unit. Each half would be owned by separate groups of creditors including big name hedge funds specializing in distressed debt. The factions fought over terms for more than a year before reaching a deal with help from Hunt, a Dallas-based oil and gas, real estate and power company.
In asking the PUC to reject the sale, Chang said that one of the entities to be created by the complex structure of the deal wouldn’t have an investment-grade credit rating. "That is not acceptable," he said.
The PUC will vote on the deal after taking recommendations from its staff and other parties in the case.
A bankruptcy judge in Delaware already gave Energy Future approval to sign an agreement that would allow the Oncor sale. Texas regulators must also clear it. The company also needs approval from federal energy regulators and the IRS. In bankruptcy court in November, Chief Financial Officer Paul Keglevic said the company expected to win all the regulatory approvals it needed in 2016.
The transaction is in the public interest and would help resolve "one of the most complex bankruptcies in history," said James Bushee, a lawyer for the buyers.
Oncor’s debt would be reduced within the first 12 months after the sale, he said. "There’s no evidence that the amount of liquidity is insufficient other than generalized fears," Bushee said at the hearing.