Mergers News

Texas agency rejects Oncor rate-case delay request

HOUSTON, Aug 16 (Reuters) - Texas regulators on Thursday rejected a request by TXU Corp.'s TXU.N Oncor power delivery group to delay a commission review of its rates.

In March, the PUC initiated a rate case for Oncor, TXU’s electric delivery unit, more than a year ahead of schedule, citing the potential impact of an ownership change on Oncor operations.

Dallas-based TXU, Texas largest power company, is in the process of being acquired by private equity firms led by Kohlberg Kravis Roberts & Co. [KKR.UL] and TPG [TPG.UL], formerly Texas Pacific Group, for $32 billion.

Oncor wanted to delay the rate case until July 1, 2008, due to its complexity and an ongoing PUC review of the sale transaction.

Under the current schedule upheld by the commission, the company has an Aug. 28 deadline to make a filing in the rate case.

In its request for a delay, Oncor said initial indications are that it “can justify a sizable increase in rates” based on increased depreciation expense, an insurance reserve deficit and pension expense.

Commission members also chided an attorney involved with the buyout by Texas Energy Future Holdings Limited Partnership for misrepresenting the breadth of authority the agency has to enforce numerous public commitments made by the buyers.

Among other promises, the buyout group has vowed to reduce electric rates and to cut back the number of coal-fired power plants TXU had planned to build in Texas.

Commissioner Julie Parsley pointed out discrepancies in public statements made by the buyout group in newspapers and in its commission filings during the open meeting.

The commission is reviewing the sale of Oncor, which it regulates, but has no authority to enforce promises made by the company’s retail unit regarding prices or a promise by the generating arm to build fewer coal plants, Parsley said.

The commission can enforce the buyer’s commitment not to transfer debt from the transaction to Oncor or to raise rates based on the sale.

“We are asking you to sync up your PR campaign with your legal campaign,” PUC Chairman Paul Hudson said to attorney Michael Tomsu.

Tomsu apologized for any “artful wording” that may have led to public confusion and said the buyers stand behind all their commitments.

“We are not backing off those commitments,” Tomsu said.

TXU has set a Sept. 7 shareholder vote which requires a two-thirds majority to proceed with the proposed sale.