Dive Brief:

• Texas regulators have for a second time rejected NextEra Energy's $18.7 billion bid to acquire Oncor Electric, citing concerns about the independence of the utility's board and the possibility of increased risk for ratepayers.
• The reasons were same ones leading to the initial rejection, and NextEra largely declined to alter its bid or agree to stipulations when it asked regulators to reconsider their April decision.
• The largest distribution utility in Texas has become a white whale for would-be suitors. Before NextEra's bid was twice rejected, regulators nixed an acquisition proposal from real estate firm Hunt Consolidated. Oncor has been searching for a new owner since its parent company Energy Future Holdings declared bankruptcy in 2014.

Dive Insight:

In a largely unsurprising decision, Texas regulators held fast to their insistence that Oncor Electric's board must be independent and the company's finances separate from its corporate parent.

NextEra "has failed to meet its burden," the Public Utilities Commission wrote in the June 6 order.

Late last month, the PUC had signaled its intention to reject the deal again.

"I haven’t changed my decision upon reading their motion for rehearing," said Commissioner Brandy Marty Marquez. 

"I, too, remain unpersuaded," said Commissioner Kenneth Anderson. "I'm inclined to believe our original decision was the correct one."

In rejecting the NextEra offer, Texas regulators said they wanted to ensure Oncor's independence and financial security. But in April, NextEra CEO Jim Robo announced the company would ask the commission to reconsider. In a call with analysts and journalists, he said the company would hold firm on issues around Oncor board members and its ability to access dividends.

"We think we would be a terrific owner of Oncor for the state and for its customers. I think we would add enormous value to customers in Texas from how we would operate the utility." Robo told analysts. But he added, "obviously we can't pay $18.7 billion for utility that we can't run. And we can't control the board and we can't have access to dividends."

Accepting those conditions, he said, would be "bad business."

Regulators have been particularly concerned with the business structure that will result from the acquisition. NextEra was the original frontrunner for Oncor before EFH canceled a planned auction and agreed to Hunt's proposal to spin off Oncor as a Real Estate Investment Trust.

Regulators ultimately nixed that idea; Oncor would have been the largest utility to have been operated under that financial structure.