Tuesday, January 22, 2019

Texas PUC Sets Questions in NextEra-Oncor Merger

By Tom Kleckner

The Public Utility Commission of Texas on Thursday approved a preliminary order outlining numerous issues NextEra Energy and Oncor must address to win approval of NextEra’s acquisition of Texas’ largest distribution utility.

Two of the PUC’s three commissioners, Chair Donna Nelson and Ken Anderson, also filed memos with additional questions for the docket (No. 46238).

PUCT Commissioners left to right: Ken Anderson, Donna Nelson and Marty Marquez | © RTO Insider

PUCT Commissioners left to right: Ken Anderson, Donna Nelson and Marty Marquez | © RTO Insider

“I want to be sure we cast a wide net,” said Nelson, who included a set of questions from the Texas Industrial Energy Consumers, during the commission’s open meeting.

She focused her questions on whether NextEra should be able to expense federal taxes for ratemaking purposes and if so, whether those savings should be shared with ratepayers. Similar directives from the PUC scuttled Hunt Consolidated’s attempted takeover of Oncor earlier this year. (See Texas PUC Denies Rehearing on Oncor Sale, Ends Hunt Bid.)

Nelson also asked whether NextEra’s commitment to preserve Oncor’s staffing levels for two years after the transaction’s close was enough time, and what would constitute a “material involuntary workforce reduction,” quoting from the company’s promise of no layoffs.

Anderson directed the companies to answer whether the recent appellate court decision regarding Energy Future Intermediate Holdings’ make-whole claims to lien holders would affect the transaction and require an amended application. (See Appeals Court Ruling for Bondholders Clouds EFH Reorganization.)

He noted the commission faces a hard deadline of April 29 to issue a decision on the transaction. Because the PUC is hearing the case rather than an administrative law judge, the commissioners will have some flexibility when they conduct a hearing on the merits Feb. 21-24, Anderson said.

“Everyone needs to be mindful that in the absence of a unanimous settlement, once the record closes, that’s it,” Anderson said. “There’s no sweeteners … there’s no ability to change the deal” without an amended application.

NextEra announced in late July it had reached an agreement to acquire Energy Future Holdings’ 80.03% indirect interest in Oncor for $18.6 billion. On Oct. 31, it announced an affiliate would acquire an additional 19.75% from a pair of private venture funds, for an additional $2.4 billion. NextEra also plans to acquire the remaining 0.22% interest owned by Oncor Management Investment, giving the Florida-based company complete control of the company.

PUCT, NextEra, Oncor

| NextEra

Intervenors in the case include the Steering Committee of Cities Served by Oncor, the Office of Public Utility Counsel, the Texas Industrial Energy Consumers, IBEW Local 16 and NRG Energy.

The U.S. Bankruptcy Court in Delaware was to begin confirmation hearings for the exit of EFH (rebranded as Vistra Energy) from Chapter 11 bankruptcy Thursday, but those proceedings have been postponed until February. EFH filed a modified reorganization plan Thursday to compensate for the appeals court’s ruling that gives first- and second-lien noteholders an additional $800 million payout.

AEP Units’ Merger OK’d

Also Thursday, the PUC approved a State Office of Administrative Hearings’ proposal for decision in American Electric Power’s merger of its AEP Texas Central, AEP Texas North and AEP Utilities subsidiaries (No. 46050) into AEP Texas. An ALJ found the merger “consistent with the public interest if certain conditions are imposed.”

Those conditions include AEP maintaining separate divisions until the commission can approve consolidated rates and tariffs, AEP Texas providing rate credits to its customers and combining current reliability benchmarks into a single metric.

Anderson suggested modifying the proposed decision to direct AEP to prepare a study on consolidating the companies’ rates and share it with stakeholders.

“That will inform stakeholders, including [PUC] staff, whether to call AEP in for a rate case,” he said.

The commissioners and AEP representatives debated whether to set a June 2017 or June 2018 deadline for the study’s completion. They eventually settled on finishing the study “four months in advance of a rate case.”

“Our position is the rates are different in the two different areas,” said the industrial consumers’ Katie Coleman. “There will be winners and losers. We’re not sure if we want the rates combined.”

Actions Delayed

The commissioners delayed until its Dec. 16 open meeting a final rulemaking on distributed generation interconnection agreements (No. 45078) and final reports to the Texas Legislature on alternative ratemaking mechanisms (No. 46046) and competitive electric markets (No. 45635).

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