FERC, in an order issued on Dec. 11, concluded that the proposed transaction under which Sempra Energy will indirectly acquire 80.03% of the ownership interest in Oncor Electric Delivery Company (Oncor) “is consistent with the public interest and is authorized, subject to” certain conditions, including that the companies are to notify FERC within 10 days of the date that the merger has been consummated.
As noted in the order, the companies in October filed an application under sections 203(a)(1) and 203(a)(2) of the Federal Power Act requesting authorization for the proposed transaction.
Oncor is owned 80.03% by Oncor Electric Delivery Holdings Company LLC (Oncor Holdings), 19.75% by Texas Transmission Investment, LLC, and 0.22% by Oncor Management Investment LLC, the order noted, adding that Oncor Holdings is a subsidiary of Energy Future Intermediate Holding Company LLC (EFIH), which is a wholly owned subsidiary of Energy Future Holdings Corp., (EFH).
To effectuate the proposed transaction, Sempra Energy formed Sempra Texas Merger Sub I, Inc. (Merger Sub), which is wholly owned by Sempra Texas HoldCo LLC (HoldCo), and Sempra Texas BidCo LLC (BidCo), which wholly owns HoldCo, the order noted.
Under the proposed transaction, Merger Sub will merge with and into EFH, as reorganized by a bankruptcy proceeding, the order noted. Upon consummation of the proposed transaction, Sempra Energy will indirectly own 100% of the ownership interests of EFH, EFIH, and Oncor Holdings, as well as 80.03% of the ownership interests of Oncor, according to the order, which further noted that the remaining ownership interests in Oncor continue to be held by Texas Transmission Investment and Oncor Management Investment.
Under the proposed transaction, Sempra Energy will acquire the indirect ownership interests in Oncor for $9.45bn in cash, the order stated.
The companies state that the proposed transaction raises no horizontal market power concerns, the order said, noting that the proposed transaction does not involve a combination of entities that compete in wholesale electric power markets and will not result in any change in market concentration for wholesale capacity or energy.
Also, the companies state that the proposed transaction does not raise vertical market power concerns, the order said. According to the companies, the jurisdictional transmission facilities currently owned by Oncor are covered by tariffs, which Oncor has on file with FERC and are consistent with FERC’s open access principles, and the proposed transaction would not alter Oncor’s currently effective tariffs. The order also noted that Oncor’s transmission facilities in ERCOT are regulated by the Public Utility Commission (PUC) of Texas as open-access facilities.
The tariffs will not be altered by the proposed transaction and will continue to be in effect following the consummation of the proposed transaction, the order said, adding that Oncor’s non-jurisdictional transmission service in Texas will continue to be fully subject to the PUC’s ratemaking jurisdiction. The applicants conclude that the proposed transaction will have no adverse effect on rates, the order said.
Among other things, the order noted that Oncor explains that the proposed transaction arises in the context of the ongoing bankruptcy proceeding and is subject to bankruptcy court and regulatory agencies’ approvals. According to Oncor, it is not possible for the companies to prepare proposed accounting entries showing the effect of the proposed transaction at this time, FERC said, adding that if the proposed transaction results in any adjustment to the books and records of a jurisdictional entity required to keep its books in accordance with FERC’s Uniform System of Accounts, it is to submit its proposed accounting for the proposed transaction within six months of the date that the proposed transaction is consummated.
According to a Dec. 12 statement posted on Sempra Energy’s website, Sempra Energy on Aug. 21 entered into the agreement to acquire EFH. In September, the U.S. Bankruptcy Court for the District of Delaware approved EFH’s entry into the merger agreement with Sempra Energy and, on Oct. 5, Sempra Energy and Oncor filed a joint Change-in-Control application with the PUC, the statement noted.
The PUC on Oct. 16 set a procedural schedule to complete a review of Sempra Energy’s and Oncor’s case within 180 days, by early April 2018, according to the statement.
The EFH transaction closing remains subject to further approvals by the U.S. Bankruptcy Court and the PUC, among other approvals and closing conditions, the statement noted.