For all the lobby firepower working on behalf of TXU, somebody forgot Rule Number One in dealing with the Texas Legislature: Never, never, never suggest that lawmakers don't have the power to take legislative action. At least not out loud, as occurred in Monday's phone call in which the principals explained the proposed buyout to investors. Within 24 hours, a Senate committee had passed a bill -- which surely won't receive serious opposition -- "clarifying" the Public Utility Commission's responsibility to sign off on the proposed sale of TXU. And on what grounds could the PUC block the sale? That it is not in the interest of the "public good." You expected a narrow definition?
This is not just window dressing; the same team that bought TXU, KKR and Texas Pacific, has run afoul of utility regulators in other states. Fort Worth Star Telegram columnist Mitchell Schnurman reports that "regulators in Oregon and Arizona rejected separate proposals by Texas Pacific and KKR to buy major utilities there. They feared that residents would eventually pay for the higher debts incurred from the buyouts and the cost of flipping the businesses. In New Jersey and Maryland, utility acquisitions were turned down over worries about rates and the concentration of market power, because electric companies were the prospective buyers."
Senate Business and Commerce chairman Troy Fraser had TXU chairman John Wilder in his line of fire before the buyout announcement; the dramatic news this weekend has only prompted Fraser to reach for a bigger gun. Fraser and his committee, colleagues--notably Kevin Eltife--expressed disgust at Wilder's $200 million compensation package at TXU. With the proposed buyout, rumors abound that that figure will more than double.
"This appears to be all about John Wilder and his compensation. He could ride off into the sunset [with hundreds of millions more] at the expense Texas electric customers," Fraser said.
Fraser will continue to press forward with legislation that fixes a "flaw" in the 1999 electric deregulation bill that allowed utility companies to track their rates to increasing gas prices but didn't give the PUC authority to force rates back down when gas prices receded. Fraser said he told Wilder in March of last year that TXU should reduce its rates when gas prices fell. "When I saw that Wilder was keeping profits up as long as he could, I realized he was shopping the company," Fraser told me.
Fraser's bill giving PUC authority to approve the TXU buyout also instructs the regulatory body to prevent a utility from transferring debt to its public, regulated divisions (in TXU's case, its lines and transmission company) in order to make other parts of the company more profitable for sale.
Fraser continues to believe that deregulation is not working for residential customers because not enough competition exists. He will attempt to correct that by requiring utilities to market outside their incumbent areas. And he would prevent a utility from owning more than 25 percent of the generating power with a marketing region.
Is this re-reg? "Not even the first cousin of re-reg," Fraser says. "This is an attempt to create more competition."
Fraser also had the answer to my question yesterday about the fate of all the lobbyists hired to promote TXU's (now moot) enormous coal construction strategy. "New assignments," he said, with more than a little mirth. In fact, TXU is likely to split up into three companies, which means three times as much work.
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