America’s biggest retiree group wants Texas regulators to reject oilman Ray L. Hunt's proposal to buy the state’s biggest electric transmission company, suggesting Hunt's control would shift wealth from everyday Texans to rich folks in suits.
But the Dallas energy and real estate mogul is pushing back. His company called the argument "alarmist and misguided."
The scuffle comes as the Public Utility Commission readies for next week’s hearings on the Hunt-led plan to take over Oncor, whose transmission and distribution lines deliver power to more than 3 million Texas homes and businesses in North and West Texas.
In a report and news blast this week, AARP said the sale would “harm consumers, enrich utility owners at the expense of ratepayers, and create significant new risk.”
The retiree group, which counts 2.2 million Texas members, joins other consumer advocates raising concerns about the proposal, which is the lynchpin of efforts by Oncor’s parent, Energy Future Holdings, to emerge from one of the largest bankruptcies in American history.
Hunt’s camp fired back Thursday, accusing AARP of trying to shape public opinion through the media, rather than participating in the regulatory process.
“We are disappointed by AARP’s alarmist and misguided claims and conclusions, which are not supported by the facts,” Jeanne Phillips, a spokeswoman for Hunt Consolidated, said in a lengthy statement.
A Delaware bankruptcy court has already approved Energy Future’s plan to shed $42 billion in debt. But Texas regulators still need to sign off on the Oncor sale, a roughly $18 billion transaction that is the bankruptcy deal's biggest piece.
The commission will begin hearings on the proposal Monday that could stretch into the next week. The energy world will closely watch as the three commissioners seek to balance Hunt's interests with those of Texas ratepayers and the electric grid.
Hunt’s plan is complicated, and the business structure he is proposing has never been tried for a utility this big. That's making some watchers nervous.
To save on federal income taxes, Hunt wants to reorganize Oncor into a real estate investment trust, essentially dividing it into two companies: one owning the assets (power lines, trucks and transformers, for instance), while the other rents the equipment, operates it and deals with customers.
That financial structure has long served the real estate world. Shopping malls, for instance, commonly use it, as investors back a broad entity that rents space and other assets to individual stores.
The structure would help Oncor borrow money at lower rates, proponents say, which could ultimately translate into lower electric rates for customers.
But it’s nearly unprecedented in the energy world. Hunt owns the only other U.S. utility organized in such a trust: Sharyland Utilities, which serves just 50,000 customers in small patches of rural West and North Texas and has the highest rates in the state.
Hunt calls that experiment a success. Critics aren’t so sure.
Several others aspects of the idea have prompted questions, including whether Oncor will be protected from the debt of its new parent, as it was when Energy Future sank.
The utility commission’s staff experts have called the broad proposal “not in the public interest," writing that it could inflict “significant potential harm to ratepayers.”
AARP synthesized much of that criticism in its report, prompting Hunt’s harsh rebuttal.
“Hunt’s proposal seeks fair and equal tax treatment under the law as it currently applies to all other utilities in Texas — nothing more and nothing less. Claims counter to this are false,” the company's statement said.
The company also said it's proposing several “protections that keep Oncor financially secure,” even if they ultimately look different from what’s in place now.
If the commission rejects Hunt's plan or adds major stipulations, Energy Future could be thrust back into bankruptcy negotiations that cost it some $1 million each day in legal fees.
Disclosure: AARP is a corporate sponsor of The Texas Tribune. Oncor and Energy Future Holdings were corporate sponsors of the Tribune in 2012. A complete list of Texas Tribune donors and sponsors can be viewed here.