Oncor to regulators: Hunt deal could raise rates

Dive Brief:

Hunt Consolidated's proposal to purchase Oncor out of bankruptcy and operate it as a real estate investment trust (REIT) could raise power bills for millions of customers, utility officials told regulators this week, if Hunt is allowed to merge the utility giant with a much smaller power provider it already owns.
Sharyland Utilities, Hunt's smaller power provider, struggles with high rates, in part because of the rural, diffuse nature of the service territory, the Texas Tribune reports. Merging Sharyland with Oncor would lower rates for 50,000 Sharyland customers, but Oncor officials are wary of the impact on their own ratepayers.
The proposal has also come under criticism for helping the utility avoid federal income taxes involved in the deal. Staff at the Public Utility Commission of Texas say the REIT arrangement would move $250 million annualy from ratepayers to shareholders.

Dive Insight:

Oncor serves about 3 million customers and Sharyland just 50,000, so it's easy to see why folding the smaller territory into the larger could bring down rates. Due in part to its large service area, Sharyland customers are already paying almost twice the state average in power prices.

But Oncor is warning regulators that such a move could raise rates for its current customers by 1.25%. “The bottom line is, while an Oncor and Sharyland combination may make sense at some point, the impact on Oncor and its customers should be carefully examined,” the utility said in a filing this week with regulators.

The Texas Tribune reports Hunt has not proposed combining the utilities' operations, but did commit to considering the option if the acquisition of Oncor moves forward.

As part of the plan to pull Energy Futures Holding out of bankruptcy, a group of creditors wants to split the company into two halves, with Hunt Consolidated leading a group of creditors which will own regulated transmission and distribution utility Oncor, and another group taking over the struggling power generation assets.

The newly restructured REIT would be owned by the consortium and managed by Hunt, and would lease the transmission and distribution assets to Oncor, who will operate the system on the REIT's behalf.