Texas regulators unlikely to reverse rejection of NextEra-Oncor deal

Dive Brief:

  • Texas utility regulators said this week that rejecting NextEra Energy's $18 billion bid to purchase Oncor Electric was likely the correct decision, but a final call on whether to hold a rehearing will not come until next month. 
  • In April, the Public Utilities Commission of Texas determined the deal was not in the best interest of the state's customers, citing concerns about the independence of the utility's board and increased financial risk to ratepayers.
  • The company asked the PUC to reconsider, though NextEra refuses to budge on key changes sought by regulators, such as an independent board of directors for Oncor. The company has signaled it may go to court if regulators do not approve a rehearing. 

Dive Insight:

Earlier this month, NextEra filed a pointed appeal to the PUCT's decision, calling the rejection "arbitrary and capricious" and threatening legal action if it is not reconsidered. 

On Wednesday, Texas commissioners said their opinions of the case was similarly unchanged. 

"I haven’t changed my decision upon reading their motion for rehearing," said Commissioner Brandy Marty Marquez. "I’m going to keep an open mind until we can get reply briefs."

"I, too, remain unpersuaded," said Commissioner Kenneth Anderson. "I'm inclined to believe our original decision was the correct one."

Anderson rejected NextEra's arguments that the PUC has overstepped its jurisdiction and that it devised a "new, more stringent public interest standard" that required showing "unique" benefits "exclusive" to the deal.

Those arguments are "wholly without base," the regulator said, but the PUC will review stakeholder comments filed on May 23 before making a decision on rehearing at the June 7 meeting.

Anderson and Marquez, both appointed by former Gov. Rick Perry (R), are the only commissioners currently on the PUC, meaning they would have to both agree to issue a rehearing order. 

NextEra's bid for Oncor is the second rejected attempt to purchase the utility out of the bankruptcy proceeding of its parent, Energy Future Holdings. Regulators declined an acquisition proposal from real estate firm Hunt Consolidated last year.

In rejecting the NextEra offer, Texas regulators said they wanted to ensure Oncor's independence and financial security relative to a new parent company. Last month NextEra CEO Jim Robo announced the company would ask the commission to reconsider, but held firm on both of those points.

"Obviously we can't pay $18.7 billion for utility that we can't run, and we can't control the board and we can't have access to dividends," he said in an earnings call. 

The rejection was also NextEra's second failed merger attempt in as many years. Last July, Hawaii regulators rejected the company's proposal to buy Hawaiian Electric Industries, the parent company of the state's investor-owned utilities.

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Top image credit: Oncor