Dive Brief:
- Hunt Consolidated's proposed deal to buy prized utility asset Oncor from parent Energy Future Holdings (EFH) is facing scrutiny from the Texas Public Utilities Commission (PUC) and the U.S. Department of Justice (DOJ).
- Commissioner Ken Anderson has filed a memo with the Texas PUC, citing numerous concerns over the proposed acquisition, which would help EFH out of bankruptcy, the Dallas Business Journal reports. Anderson noted the PUC must consider whether the "tangible and quantifiable benefits to ratepayers ... exceed the costs and risks to those same ratepayers.”
- Separately, the DOJ has filed an objection in court to the proposed deal, citing communications between the DOJ and EFH in which the company suggested Hunt Co. would not be liable for any environmental damage that occured prior to the deal. The filing did not elaborate on specific liability issues, the Dallas Morning News reports, but said any such release from liability "would be plainly contrary to law."
Dive Insight:
Oncor has long been viewed as a prized regulated T&D asset in utilityland, but any attempt to acquire the company from EFH in bankruptcy proceedings is sure to face scrutiny. Hunt Co., and oil billionaire owner Ray L. Hunt, are no strangers to scrunity, but it remains unclear whether this deal can overcome the obstacles presented by the DOJ and Texas PUC. EFH, for its part, said it is in talks with the DOJ over the issue of the liability release.
The proposed deal requires approval in bankruptcy court before it goes before the Texas PUC, but Anderson's memo raises concerns that the deal would face significant questions.
Anderson argues that, under the deal, Oncor ratepayers should not "bear any real risk" from lingering EFH debt or the real estate investment trust (REIT) ownership structure that is currently being proposed. "That premise will be at the heart of my public interest analysis," Anderson said.
From a wider lens, mergers and acquisitions in the utility industry have seemingly faced significant opposition in the last year, with many consumers becoming more involved in energy issues. One has only to look to Hawaii, where NextEra's proposed acquisition of Hawaiian Electric is becoming an increasingly contentious and controversial public proceeding, or even Washington, D.C., where Exelon's proposed Pepco deal is still struggling through the approval process.