| Buyers of TXU: State has no authority to enforce rate cut |
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| by Will Lutz | Sun, Aug 26, 2007, 07:24 PM |
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It didn't take long after the legislative session for TXU and its proposed buyout by the Texas Pacific Group and Kohlberg, Kravis, & Roberts to become controversial again. In response to a question posed by the Public Utility Commission, TXU filed legal documents stating that the state has no authority to enforce the promised electric rate cut for North Texas consumers, though the investors say they are still committed to it.
"[T]hey [questions asked by the PUC] are also not about whether TEF will live up to its commitments after the Transaction closes (it will, whether they are the subject of a Commission order, or not). Rather, these issues are about what commitments the Commission has the legal authority to enforce ... Through the passage of Senate Bill 7 in 1999, the Legislature clearly eliminated the Commission’s jurisdiction over retail prices except in very limited circumstances ... Nor did the Legislature give the Commission any authority to regulate the construction of new electric generating units," wrote attorneys for the investors in a Aug. 6 filing with the Public Utility Commission. Now both the Houston Chronicle and the Dallas Morning News have written stories about the controversy, quoting consumer groups criticizing the TXU buyers. Here's the krux of the legal argument: in 1999, when the state deregulated the retail electric market, it ordered utilities to split its deregulated retail electric company from the company that maintains the poles and wires ("the wires company"), which remains regulated. Most Dallas residents are unaware of this distinction, because TXU chose to own both the deregulated electric provider and the regulated wires company. (They're separate companies but both owned by TXU.) In other metropolitan areas (Houston, Corpus Christi), the main utility chose to sell either the wires company or the retail provider. The Public Utility Commission has substantial authority over the wires company (which is now called Oncor in the Dallas area), but very little authority over the deregulated wires company. In a nutshell, the Public Utility Commission can enforce all of KKR and TPG's promises with respect to Oncor, and the company has requested that it do so. (For example, there was a promise not to put any transaction-related debt onto Oncor.) But, KKR and TPG argue, it cannot enforce retail electric commitments, such as the rate cut. Even though the PUC does not have the authority to enforce the rate cut, individual consumers do. Texans in the Dallas area who are dissatisfied with the rates or terms of service from their existing retail electric provider have the opportunity to switch and choose another one. Also, most electric providers, including TXU, have a variety of plans, some of which are month-to-month and others that are long-term. The long-term plans usually have a lower rate, but there is a penalty for switching before the end of the contract. The PUC operates a website at http://www.powertochoose.org where Texans can enter their ZIP code and see what plans and prices are offered in their area. 
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