Dive Brief:

• While not an outright rejection of the proposal, The Dallas Morning News reports Texas regulators have signaled to NextEra Energy that it is unlikely the two sides can reach an agreement that would allow the company to purchase Oncor Electric out of bankruptcy.
• The Public Utilities Commission of Texas wants Oncor to have a board of directors independent of NextEra leadership—a point which NextEra officials previously called a "deal-killer."
• While the NextEra-Oncor deal is not officially done, multiple sources told the Dallas Morning News it appears very unlikely to move forward. Last year, a group of investors led by Hunt Consolidated withdrew their proposal to purchase Oncor after disputes over how the utility would be structured.

Dive Insight:

It appears that a second bid to purchase Oncor Electric could fall through once again as state regulators demand more consumer protections or benefits—and would-be suitors balk. If the deal fails, it would be the second time a company has walked away from talks to purchase the Texas utility.

According to The Dallas Morning News, there are several sticking points between regulators and NextEra, but the most significant appears to be calls for an independent board at Oncor.

"The lack of a truly independent, disinterested board and the lack of independent board control over the dividends are what worry me the most," PUCT chairwoman Donna Nelson said at a meeting yesterday. NextEra CEO Jim Robo had wanted to name a majority of the board members in addition to himself serving.

Last year, the PUCT approved a draft order for the deal at the end of 2016. And in January, federal regulators approved NextEra's plan to purchase Oncor, moving the much-debated deal closer to fruition. But some tension from the staff of the PUCT appeared when they said additional consumer protections need to be put in place before regulators approved the deal. NextEra's substantial merchant generation fleet carries "much more risk than that of a T&D utility," particularly if protective ring-fencing keeping Oncor at distance from the parent company is removed," staff said. 

Now it appears the deal, valued at more than $18 billion, could return to square one.

A previous proposal, initiated in 2015, would have seen Hunt Consolidated purchase Oncor and convert it into a Real Estate Investment Trust (REIT). That plan caused concern in the Texas power sector because while the practice is common in other sectors, no utility of Oncor's size had ever attempted REIT organization before.

After the Hunt team walked away from the deal, NextEra stepped in with its proposal shortly after its proposed merger with Hawaiian Electric Co. fell through.