Dive Brief:

• The Public Utilities Commission of Texas has broadly approved Hunt Consolidated's plan to purchase Oncor out of bankruptcy, but uncertainties remain and The Dallas Morning News reports it is unclear if investors will buy into the altered arrangement.
• The newspaper also reports a group of cities served by Oncor plans to bring a rate case before regulators next month, challenging assurances that power prices will not rise as a result of the deal.
• Hunt's plan to purchase Oncor out of bankruptcy and operate the utility as a Real Estate Investment Trust was estimated to create a $250 million annual tax savings for the company, leading regulators to push a plan that would share the benefits more equitably between investors and ratepayers.

Dive Insight:

Texas regulators last week approved Hunt Consolidated's proposal to purchase Oncor, but The Dallas Morning News reports the decision was made to meet a deadline of March 27 and many details of the arrangement are still unclear.

Any impact on rates will be unknown for a year, and there are a variety of procedural steps still left. So far Hunt officials haven't commented on whether investors will actually accept the deal as approved by the PUCT.

The newspaper reports the approval includes "dozens of pages of restrictions" aimed at the REIT structure, and would require the utility to maintain an investment grade credit rating. The Hunt group must also initiate a process for the PUC to set rates charged between pieces of a proposed new corporate structure, which can take several months but must be completed by November 5. The November date is a deadline in the larger bankruptcy proceedings, the news outlet reports.

The REIT structure became the focal point of the lengthy proceeding, in part because no utility of Oncor's size has used it before. But the proposal is drawing attention within the industry, and CenterPoint Energy has announced it is also considering the REIT structure for all of its utility business.

As part of the plan to pull Energy Futures Holding out of bankruptcy, a group of creditors want 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.

Under Hunt's proposal, the first lien creditors of Texas Competitive Electric Holdings Company (TCEH), the merchant energy subsidiary of Energy Future Holdings, will receive TCEH's assets in a tax-free spinoff. That portion of the deal will satisfy approximately $25 billion in claims. Following that, the consortium would acquire EFH and its 80% ownership stake in Oncor. The newly restructured REIT would be owned by the consortium and managed by Hunt.