Deal for utility could protect Texas customers
Berkshire Hathaway plans to buy Oncor, the largest utility in Texas, for $9 billion
Investor Warren Buffett’s Berkshire Hathaway has tentatively agreed with regulators and customer advocates to protect Oncor from risks and debts of its parent company, a step that could help its bid to acquire the largest utility in Texas.
Berkshire Hathaway has tentatively agreed with regulators and customer advocates to wall off Dallas-based utility Oncor from risks and debts of its parent company, a step that could help the conglomerate win approval for the $9 billion deal to acquire the largest utility in Texas and Oncor’s bankrupt parent.
The move is aimed at protecting ratepayers from incurring costs not related to the distribution of electricity and ensuring that Oncor has the resources to maintain its transmission lines and the reliability of the system. Such concerns led the state Public Utility Commission to reject two earlier bids to buy Oncor and its parent, Energy Future Holdings, out of bankruptcy.
Late Thursday, Berkshire Hathaway Energy, a subsidiary of billionaire investor Warren Buffett’s Berkshire Hathaway, said it would pay $9 billion to acquire Energy Future Holdings and Oncor, which provides electricity to 10 million Texans. Oncor owns and operates the grid for most of North Texas. Energy Future Holdings has been in bankruptcy for three years as it has worked to restructure its $40 billion debt.
Berkshire said it values Oncor at $11.25 billion. Another group may bid for Oncor, Bloomberg News reported Friday, citing unnamed sources.
In a 13-page document, the PUC’s executive director, a consumer advocate lawyer, the Office of Public Utility Counsel and an industrial power trade group all agreed to support Berkshire’s ac-
qui sit ion, as long as the company agrees to their conditions. Those conditions also include maintaining a separate board of directors for Oncor and allowing Oncor to retain dividends, instead of passing them along to the parent company.
While the PUC must review the proposed deal, the agreement could bring Berkshire success where other companies failed, said Geoffrey Gay, a lawyer for the Steering Committee for Cities Served by Oncor, a group that advocates for cities and consumers. Gay signed the agreement and helped draft it.
“Fortunately for Berkshire Hathaway, they did what the prior two applicants did not do,” Gay said Friday.
Brian Lloyd, the PUC’s executive director, said the deal would fortify Oncor against risks that could be borne by ratepayers.
There were two earlier attempts to acquire Oncor, both rejected by the PUC. Most recently, Florida’s NextEra Energy tried to acquire Oncor in an $18.4 billion deal that the PUC declared was not in the public interest because customers would have had to pay for 15 percent of NextEra’s $45 billion in debt. NextEra had also asked the PUC to adjust its “ring fence” policy, which prevents transmission and distribution utilities like Oncor from owning power generation assets.
The policy is designed to protect transmission company assets and give ratepayers a buffer from financial risks, a protection that NextEra wanted to weaken, the PUC said.
In May 2016, an $18 billion deal to buy Oncor led by Dallas billionaire Ray Hunt fell apart over regulatory concerns. NextEra lost in the original bidding process to Hunt.
Berkshire would have to agree to keep the ring fence in place if it hopes to acquire Oncor, according to the agreement drafted by the PUC staff. It also asks that Berkshire never raise Oncor’s rates to help manage any expenses or debt associated with Energy Future Holdings’ bankruptcy.
Berkshire is expected to seek approval from a bankruptcy court before it files a request for the PUC to approve the acquisition.
If approved, the deal will likely change little for Oncor customers, since Berkshire would be expected to keep Oncor’s staff in place, Gay said.