UPDATE 1-TXU's Oncor seek to end regulatory review

(Adds regulator comment)

NEW YORK, Oct 5 (Reuters) - Texas utility TXU Corp TXU.N on Friday said its Oncor electric distribution unit reached an agreement to resolve an outstanding Texas regulatory review of its $32 billion buyout by private equity firms.

Oncor said the settlement offer, details of which have not yet been filed at the Texas Public Utility Commission, includes a $72 million, one-time credit for TXU retail customers in return for dismissal of an Oncor pending rate case of its electric delivery rates.

Stockholders of TXU last month approved a takeover by Kohlberg Kravis Roberts & Co [KKR.UL] and TPG Capital LP [TPG.UL] valued at $69.25 per share.

Earlier this year, Texas regulators ordered Oncor to file a rate case to better document the company's financial picture in advance of the buyout. In August, the PUC rejected TXU's request to delay the rate case until 2008.

The PUC staff, industrial customers, municipalities and two Texas state agencies have agreed to the proposed settlement, Oncor said in a statement. Other parties are expected to oppose any settlement.

Instead of holding a hearing next week to review the merger's implications for Oncor, the PUC will meet Tuesday to determine how significant support for the settlement agreement is, said spokesman Terry Hadley.

While the goal of a settlement is bring all parties to the table, "ultimately, its up to the commission to reject, approve or modify any settlement," Hadley said.

Under Texas law, the PUC lacks authority to block the pending merger but can set rates and set the ratio of debt to equity at Oncor. The buyout group said it will not increase Oncor's debt to pay for the transaction.