The Public Utility Commission of Texas today rejected NextEra Energy’s proposed acquisition of Oncor Electric Delivery for $18.4 billion. Oncor is Texas’s largest transmission and distribution electric utility and serves more than 10 million customers in Texas.
The Commission voted against the transaction at its open meeting on Thursday. Click here to view or download the order. Based on the evidence and testimony presented during a hearing, the Commission found the transactions described in the application are not in the public interest.
Commission order describes, rejects acquisition
The order described the proposed transactions, discussed increased risk to Oncor ratepayers, a lack of tangible and quantifiable benefits to Texas ratepayers, and concerns about the elimination of Oncor’s ring-fencing protections. Oncor currently has ring-fencing protections for Texas ratepayers. NextEra Energy requested the Commission grant NextEra the ability to eliminate two protections from Oncor’s existing ring fence: (1) restrictions on NextEra’s ability to appoint, remove, and replace members of the Oncor and Oncor Holdings boards of directors, with the exception of three disinterested directors on the Oncor board of directors, and (2) the ability of the Texas Transmission Investment shareholders to veto dividends declared by the Oncor board of directors and, in certain circumstances, capital and operating budgets.
The order states NextEra’s ownership of Oncor would subject Oncor and its ratepayers to significant new risks. The benefits to Texas ratepayers are minimal. Those benefits would do little to compensate ratepayers for any of the additional risks. When the Commission weighed the additional risks and the lack of benefits, combined with NextEra’s insistence on eliminating two critical ring-fencing protections, the Commission found the proposed transactions are not in the public interest. It denied the application.
The parent company of Oncor is Dallas-based Energy Future Holdings (EFH). EFH was created by the leveraged buyout of the former TXU Corp. EFH sought bankruptcy court protection in 2014 to restructure almost $50 billion in debt. While EFH is cash-strapped, Oncor is a profitable part of its operations.
Dallas-based Hunt Consolidated failed last year in a previous Oncor takeover attempt. The Texas Commission imposed conditions on that transaction the would-be buyer found too onerous.
EFH and Oncor are left to search for another buyer.