By Tom Kleckner

AUSTIN, Texas — Texas regulators quickly dispensed with two multiyear cases before them Thursday, clearing the way for Sempra Energy to acquire Oncor and for Lubbock Power & Light to migrate from SPP to ERCOT.

The Public Utility Commission made only minor revisions to the Sempra-Oncor order and added several tweaks to the LP&L order, spending more time during its open meeting congratulating those involved in the two proceedings.

PUC Chair DeAnn Walker recalled attending the National Association of Regulatory Utility Commissioners winter meetings, where she heard a financial analyst say, “What’s best for us is when a utility commission speaks, they stick to what they have asked.”

“This commission and the intervenors spoke at least twice, maybe three times in the preliminary order, on what their expectations were to get things done,” Walker said, referring to the Sempra-Oncor settlement agreement with all intervenors in its application (Docket No. 47675). “Sempra listened to that and came forward and did that. I think it speaks for y’all and it speaks for the commission that we have now stuck to what we said we were asking for.”

Oncor ‘Saves Best for Last’

The PUC’s approval of Sempra’s acquisition of Energy Future Holdings’ 80.03% interest in Oncor all but seals the California-based company’s pursuit of Texas’ largest electric utility. Sempra has already received approval from FERC and the U.S. Bankruptcy Court for the District of Delaware, where EFH filed for bankruptcy in 2014. (See Bankruptcy Court OKs Sempra-Oncor Deal.)

Sempra has succeeded where others failed. Its $9.45 billion all-cash bid for Oncor caught Warren Buffett’s Berkshire Hathaway Energy off-guard in August, while Hunt Consolidated and NextEra Energy saw their acquisition attempts fall apart before the PUC.

“We clearly saved the best for last with Sempra,” Oncor spokesman Geoff Bailey told RTO Insider outside the PUC’s hearing room. “We’ve got a four-year process behind us, and we’re ready to move forward into the future. I think I speak for all Oncor employees when I say it’s an exciting day for the company. We’re excited to get everything behind us.”

“We appreciate the commission’s support throughout this long, four-year process to find a new majority owner for Oncor,” Oncor CEO Bob Shapard said in a statement. “We believe this is an excellent outcome for our company, our customers and our employees. Sempra Energy is a well-run company, and we believe they will be a strong, stable majority owner for Oncor and an excellent partner for Texas.”

Headquartered in San Diego, Sempra is a Fortune 500 company with 16,000 employees and about 32 million consumers around the world. The company earned more than $11 billion in revenue last year.

Oncor operates the largest distribution and transmission system in Texas, delivering power to more than 3.5 million homes and businesses while operating more than 134,000 miles of lines.

Sempra CEO Debra Reed said she was pleased the commission found the transaction to be in the public interest.

“Sempra Energy is committed to being a good partner for the state and is supportive of Oncor’s mission to provide Texans with safe, reliable and affordable electric service,” she said.

In reaching an agreement with various consumer groups before the PUC, Sempra agreed to employ strict ring-fencing measures that include an independent board of directors, to extinguish EFH’s debt and to pass tax savings on to Oncor customers. (See Sempra, Oncor Reach Agreement with Texas Intervenors.)

Shapard and General Counsel Allen Nye will both retain positions on the post-acquisition board of directors as chairman and CEO, respectively.

“You can’t get your fancy pants on now that you are going to be CEO and think you’re too big for us,” Walker told Nye. “You have to come visit us and see us from time to time. I know you have a company to run, but this is a regulated industry, and guess what we do.”

“I‘ve had the distinct pleasure of being here almost 25 years now, and I have no intention of going away,” Nye responded. “This place means the world to me. You can get used to seeing me.”

Sempra will fund the purchase through of combination of about 65% equity and 35% long-term debt. It said in a letter to the PUC that it intends to acquire Oncor Management Investment’s 0.22% interest in Oncor when or after the transaction closes.

Should Sempra pursue the remaining 19.75% interest in Oncor held by Texas Transmission Investment, it would need to secure the commission’s approval and adhere to the same regulatory commitments to which it has already agreed.

Sempra said that the transaction “remains subject to certain customary closing conditions” and that it expects to wrap it up “shortly.”

Bailey promised that Oncor’s customers “will see no changes and not be impacted by this transaction.”

LP&L Welcomed into ERCOT

“Welcome to ERCOT, hopefully,” Walker said to Lubbock Mayor Dan Pope after the commission approved a draft order allowing the city’s utility to join the ISO (Docket No. 47576). “It is by far the best ISO/RTO in the United States.”

Speaking to the media minutes later, Pope agreed with Walker as he called it a “big day.”

“In some ways, this is pretty historic,” he said, noting Lubbock is the largest municipality to join ERCOT in almost 25 years. Pope said the key reason the city decided to join the ISO’s open-access market is because “it is the most efficient, competitive energy grid in the country, and it provides the most choice.”

LP&L announced in 2015 that it intended to move about 70% of its load from SPP to ERCOT. The city’s power needs are currently met through two long-term contracts with Southwestern Public Service, one of which expires in June 2021, LP&L’s target date to join ERCOT.

LP&L has agreed to pay $22 million annually over five years to compensate ERCOT’s transmission customers for additional infrastructure costs and to make a one-time $24 million payment to SPS for previous infrastructure costs. (See PUCT Nears Approval on LP&L Move to ERCOT.)

The PUC directed LP&L to work with Sharyland Utilities — which has proposed a $247.5 million, 345-kV project that overlaps with the facilities necessary to integrate Lubbock’s load into ERCOT — to coordinate their responsibility for respective parts of the system. Lubbock must also determine how to extend customer choice to all its customers.

Pope said the city and LP&L are already working on interconnecting with ERCOT and giving all its customers a competitive option. “Ideally, all of our citizens have to have that ability to opt in,” he said.

Speaking for SPP, General Counsel Paul Suskie said the RTO recognizes that membership and participation is voluntary.

“Entities have the ability to make decisions they believe are best for their organization and their customers, which Lubbock has done in this situation,” Suskie said.