The Public Utility Commission (PUC) of Texas, in a June 7 order on rehearing, said that it does not approve the purchase of Oncor Electric Delivery Company by NextEra Energy (NYSE:NEE) because the proposed transactions are not in the public interest.
As noted in the order, NextEra Energy proposed to acquire the 80.03% share of Oncor held indirectly by Energy Future Holdings in a transaction governed by an agreement and plan of merger by and among Energy Future Holdings, Energy Future Intermediate Holdings, LLC, NextEra Energy, and EFH Merger Co., LLC. Energy Future Holdings would be merged with and into EFH Merger Co., LLC, with EFH Merger Co., existing as the surviving company, and the successor to Energy Future Holdings. As a result, the PUC added, NextEra Energy would own 100% of Energy Future Holdings and its subsidiaries, including Energy Future Intermediate Holdings, and Oncor Holdings, which holds an 80.03% ownership interest in Oncor.
The joint applicants also sought PUC approval of a transaction in which NextEra Energy would acquire Texas Transmission Holdings Corporation’s indirect 19.75% ownership interest in Oncor in a transaction governed by an agreement and plan of merger by and among Texas Transmission Holdings Corporation, NextEra Energy, and NextEra Energy affiliate WSS Acquisition Company. The PUC added that WSS Acquisition would merger with and into Texas Transmission Holdings, with Texas Transmission Holdings existing as the surviving company. As a result, NextEra Energy would own 100% of Texas Transmission Holdings Corporation and Texas Transmission Investment, LLC, including the latter’s 19.75% interest in Oncor, the PUC said.
The application also addressed NextEra Energy’s privately negotiated agreement to purchase the remaining 0.22% minority interest in Oncor held by Oncor Management Investment LLC, subject to closing the proposed transaction with Energy Future Holdings, the PUC said.
NextEra Energy intended to fund $12.2bn in order to obtain 100% of Oncor, and of that amount, $9.8bn would be used to obtain the 80.03% stake in Oncor currently held indirectly by Energy Future Holdings, the PUC said. The financing of the $9.8bn was to include about $7.5bn in debt funding financed at NextEra Energy Capital Holdings, the PUC said, adding that in addition to the $9.8bn, $2.4bn would be used to obtain the 19.75% interest held by Texas Transmission Holdings, and NextEra Energy proposed to pay for that acquisition in cash.
As TransmissionHub reported, the PUC, in an April 13 final order, denied the joint report and application, noting, for instance, that the proposed transactions would introduce Oncor to risks associated with NextEra Energy’s unregulated businesses, including generation development.
NextEra Energy on May 8 filed a motion for rehearing on that April order, the PUC said in its June 7 order.
In its motion, NextEra Energy claimed that rehearing should be granted because the April order contains a number of serious errors that require correction, adding, “The order represents an expansion of power that exceeds the limits set by the Legislature and the bounds of the commission’s own precedent.”
According to the company, the order, for instance, sets forth a new, more stringent public interest standard that requires a showing of tangible benefits to ratepayers that are “unique” and “exclusive” to the transaction.
The company said that the order’s ad hoc imposition of new requirements and the resulting findings and summary denial of the two separately negotiated transactions at issue stand in contrast to those in an order issued last year in another case (Docket No. 45188) where the PUC found a proposed transaction to acquire Oncor to be in the public interest, subject to certain conditions.
The company said that the PUC erred by denying approval of the separately negotiated transaction to acquire Texas Transmission Holdings’ minority ownership interest in Oncor on the basis of facts specific to the transaction to acquire Energy Future Holdings’ majority ownership interest.
On rehearing, the PUC should determine that PUC approval is not required to close the Texas Transmission Holdings transaction – a conclusion supported, for instance, by the fact that the PUC did not exercise jurisdiction over the transaction in which Texas Transmission Holdings acquired its indirect 20% interest in Oncor, NextEra Energy said.
Alternatively, if the PUC determines that it does have jurisdiction, the PUC should issue a favorable public interest determination as to the Texas Transmission Holdings transaction because the order’s discussion of perceived risks, benefits, and ring-fencing provisions do not apply to the Texas Transmission Holdings transaction, and the record evidence supports a favorable public interest determination as to that separate transaction, the company said.
In its June 7 order, the PUC said that NextEra Energy’s application highlighted the interconnected nature of the transactions, and noted that the transaction with Energy Future Holdings would not close unless NextEra Energy received PUC approval to acquire all the equity securities of Oncor, including those held by Texas Transmission Investments.
Throughout the PUC’s review of the proposed transactions, parties focused on the consequences and public interest evaluation of the proposed transactions as a comprehensive plan. The PUC added that at no time during the proceeding did NextEra Energy amend its application to seek approval of the transaction to acquire the 19.75% interest in Oncor held by Texas Transmission Holdings. NextEra Energy offered no evidence to evaluate that single, standalone transaction, and based on the evidentiary record, the PUC said that it is unable to evaluate NextEra Energy’s proposed transaction with Texas Transmission Investment on a standalone basis.
Among other things, the PUC said that a public interest evaluation of the purchase of Texas Transmission Holdings would necessarily be different than the proposed transactions addressed in the application.
“On the current state of the record and the application, it would be inappropriate for the commission to rule on any single piece of the original application,” the PUC said. “It is inappropriate for NextEra Energy to attempt to amend its application to request different relief in a motion for rehearing.”
To the extent, however, that NextEra Energy is deemed to have requested that the PUC approve the single transaction with Texas Transmission Investment, the PUC said that it finds that NextEra Energy has failed to meet its burden of proof to show that any single transaction is in the public interest, and so that request is denied.