Texas PUC May Require $100 Million in Customer Rate Credit Provided Through REPs In Approving Oncor Change-In-Control

Texas Public Utility Commissioners yesterday weighed whether to require Oncor to issue $100 million in rate credits as a condition of approving the acquisition of Oncor by various Hunt Consolidated companies and affiliates.

The Hunt Companies had proposed the $100 million in rate credits as a supplemental condition for acquisition approval

However, the Commission previously devoted little attention to the commitment, as Commissioner Kenneth Anderson, in particular, has said that he found such one-time credits extracted from companies in exchange for merger approval to be distasteful

As the credits were proposed late in the case, their implementation has not been fully evaluated or considered, though Hunt proposed a process similar to the process used to provide ratepayer credits during the 2008 Energy Future Holdings leveraged buyout. Regarding such 2008 credits, REPs were only provided the credits upon agreeing, in writing, to wholly pass such credits through to their customers

The Hunt companies have specifically proposed that Oncor AssetCo would fund a $100 million rate credit to Oncor Electric Delivery Company retail electric providers over a two year period, "to be directly paid or credited to their retail customers in three separate credits." The three credits would be paid as follows: 2016 - $25 million; 2017 - $50 million; 2018 - $25 million, and allocated among customer classes using the revenue distribution adopted in Oncor's last rate case

The potential $100 million in credits under the Hunt acquisition of Oncor received new life yesterday during an open meeting as the Hunt companies pressed for approval of an initial lease governing Oncor AssetCo and Oncor Electric Delivery Company. The Commission has indicated that it will treat such leases as tariffs, requiring Commission approval, but the Hunt companies said that they need the leases to be in place for closing, and therefore sought expedited approval of the initial leases on an "interim" basis.

While there are hold harmless conditions regarding Oncor rates, certain stakeholders and Commissioners were wary of such expedited approval of a tariff governing rates.

Commissioner Brandy Marty Marquez suggested that if the Hunt companies wanted to have an expedited lease approval that was not subject to a full Commission proceeding, they could agree to share with ratepayers some of the tax expense, which is being collected from customers through current rates, that they are to avoid under their proposed Real Estate Investment Trust structure.

That suggestion prompted Anderson to re-introduce the issue of the $100 million in proposed customer credits. While Anderson remains cynical of such rate credit proposals generally, Anderson suggested that the $100 million may be used here as a proxy of potential future ratepayer savings from any future decision on tax expense, and in exchange for approval the initial leases on an expedited basis.

The Commissioners did not make a decision on the issue, or the case generally yesterday, but are scheduled to reach a final decision on March 24.

Regarding the issue of tax expense, while no decision was reached, Anderson and Marty Marquez indicated that while they would not require a specific amount of ratepayer sharing of any tax saving in the changer-in-control order, they would support language indicating that the Commission's public interest finding is premised on the possible potential savings which may be ordered in the future under a tax expense rulemaking or rate case, though specific language was not voted on.

Additionally, regarding a potential merger of Oncor and Sharyland delivery rates, the final order is likely to only require a study of the issue, which no specific deadlines or requirements, though, again, a final order was not yet reached.

Docket 45188