AUSTIN, Texas — Having thrice been rejected in its attempts to acquire Oncor Electric Delivery earlier this year, NextEra Energy is now making a long-shot bid to acquire a minority ownership in Texas’ largest electric utility.
However, the state’s Public Utility Commission has been resistant. During an open meeting Thursday, it invited Texas utilities to file amicus briefs and comments to help the commission determine whether Oncor should be a party to the proceeding (Docket 47453).
NextEra and Texas Transmission Holdings Corp. (TTHC) filed a joint application with the PUC in July seeking permission to complete an acquisition of TTHC’s 19.75% interest in Oncor. However, staff in August ruled the application deficient, saying neither applicant is a public utility under state regulations and that the case should not proceed without Oncor’s involvement.
“Information that is possessed by Oncor relating to Oncor’s facilities, customers and financial records will be necessary to assess the statutory factors to be considered in this proceeding,” staff said.
In September, Oncor filed for intervention as a party to the proceeding, making it clear to the PUC that it is not an applicant and “is not seeking commission approval of the proposed sale.”
“We didn’t want [the case] dismissed on a technicality that the utility wasn’t a part of it,” Oncor CEO Bob Shapard told the commissioners. “That would essentially be us ruling on the issue. We’re clearly not advocating the transaction, but we felt like it should be put it back in your hands, where it belongs, and not ours, to make a decision.”
“Thanks,” Commissioner Ken Anderson responded wryly.
TTHC is owned by Cheyne Walk Investment, BPC Health, Borealis Power Holdings and Hunt Strategic Utility Investment.
NextEra last year tried to acquire the minority share along with the rest of Oncor, but the commission rejected the deal in April. It then turned down two subsequent requests for rehearing. (See NextEra-Oncor Deal Meets Third Denial.)
Anderson said he was not ready to consent to a preliminary order, saying he has a concern as to whether the applicants should include the utility in question, even if the acquisition is hostile or “not friendly.”
“Should the utility be an applicant or joint party, or not an applicant at all?” Anderson asked. “How can you be opposed to a transaction and be both applicant and an opposing party? Oncor has not filed any briefing materials because they weren’t party to order, or didn’t want to be. Can the [utility or its holding company] be forced to be an applicant? Can they be forced to be joined?”
Anderson said the utility’s stockholders and ratepayers should not bear the costs in these kinds of transactions and asked for a “full airing” of the issues. Newly minted PUC Chair DeAnn Walker agreed, asking for additional briefings from the parties.
Parties have until Oct. 12 to file briefs on whether Oncor should be a joint applicant, whether the commission has the authority to order Oncor’s participating in the case, and when the 180-day timeline to consider the application should begin.
The PUC said it may consider the draft order at its Oct. 26 open meeting.
“How we decide this has ramifications that go beyond this,” Anderson said. “Let’s say we have another … hostile takeover bid and [the acquirer] files a [sale, transfer and merger form] seeking to approve it. The consensus in an existing brief is the commission can require you to be a party. If a utility is forced to participate in a proceeding, should the real party, the real applicant be required as a condition to be either an intervenor or a co-applicant, to agree in advance to reimburse the utility for all the expenses by the utility?”
California-based Sempra Energy has since become the third entity to seek regulatory approval of an Oncor purchase. Sempra emerged from a pack of suitors in August and said it would put down $9.45 billion for bankrupt Oncor parent Energy Future Holdings and its 80% interest in Oncor. (See Sempra Begins ‘Listening Tour’ of Key Stakeholders.)
Oncor, Sharyland Face More Work in Proposed Swap
Oncor and Sharyland Utilities went into the open meeting hoping for a final order in their proposed swap of $400 million in assets, but instead they discovered they have much work in front of them (Docket 47469).
Walker filed a memo before the meeting, asking the parties for more specificity on the assets to be transferred and expressed her concern about the proposed treatment of the refunds related to the energy efficiency cost recovery factor (EECRF) for both Oncor and Sharyland.
“I really believe this transaction is in the best interest of the ratepayers,” Walker said. “I’m not trying to be a deal-killer, but I have questions and concerns.”
Walker asked for responses by Oct. 4 to help the PUC meet its Feb. 1 deadline for reaching a decision.
The asset swap would resolve rate cases for both Oncor and Sharyland and would help the latter address customer complaints about Sharyland’s high rates. The two companies are continuing to hammer out details in settlement negotiations.
“Systemwide rates are the goal here,” said Vinson & Elkins’ Jo Ann Biggs, representing Oncor. “After the [new] rates go into effect, Oncor would prefer a single refund under the EECRF. We want to treat Sharyland customers like all Oncor customers.”
One of the issues is whether Oncor can charge incoming Sharyland customers for deploying an advanced metering system (AMS), already in place in much of its service territory.
“We feel strongly that Sharyland customers should be treated like Oncor customers,” said Laurie Barker, with the Office of Public Utility Counsel (OPUC). “We feel like it’s important Sharyland customers be treated like any other customer that comes into the Oncor system. We’ll have that same issue with the AMS charges.”
The PUC approved a preliminary order on the proposed swap in August. (See “PUC Approves Preliminary Order in Oncor-Sharyland Asset Swap,” Public Utility Commission of Texas Briefs: Aug. 31, 2017.)
The order lists a set of 27 issues to be discussed before the PUC renders a decision, which is due by Feb. 1. Oncor and Sharyland filed a settlement agreement in July, asking the PUC to expedite the case by deciding it without referring it to the State Office of Administrative Hearings (SOAH). The companies said Sharyland’s current retail customers will receive “substantial rate relief” under the transaction, in which Sharyland will take over 258 miles of 345-kV transmission from Oncor in exchange for Sharyland’s distribution network and retail delivery customers.
The PUC on Thursday did approve Oncor’s request to recover a retail-customer surcharge over the next nine months of almost $27.2 million, as corrected by an administrative law judge (Docket 46884); Sharyland’s amendment to a certificate of convenience and necessity for an $18.6 million, 7-mile, 138-kV transmission line southwest of Abilene in West Texas (Docket 46726); and applications by Oncor (Docket 47235) and Sharyland (Docket 47248) to adjust their energy efficiency cost recovery factors. Should the transaction be closed, Oncor would be refunded nearly $6.1 million for over-recovered energy-efficiency costs in 2016, and Sharyland would be credited about $243,000 for its over-recovered 2016 costs.
But the commission dismissed a Sharyland request dating back to 2015 to deploy an advanced metering system (Docket 44361) and a rate review rendered moot by the swap (Docket 45414).
Walker Takes Chairman’s Gavel in First Meeting
Walker wasted no time asserting herself in her new role during her first open meeting.
After calling the meeting to order, Walker admitted she was nervous and excited. She then asked for a moment of silence to recognize the many victims of Hurricane Harvey, including, by name, a Kentucky lineman who was killed during the restoration effort.
The meeting marked Walker’s return to an organization she served as an assistant general counsel and an ALJ from 1988 to 1997. She thanked staff and her family for their support, and Texas Gov. Greg Abbott for her appointment.
Abbott “has bestowed a great duty, obligation and honor on me. I take it very seriously,” she said. “He has taught me how to do hard work, and to do it with integrity. I assured him that is my intention while I am here, to work hard and to serve with integrity.”
Adrianne Brandt, who was formerly with San Antonio’s CPS Energy and chaired ERCOT’s Technical Advisory Committee, will serve as Walker’s adviser, effective Oct. 16.
Walker replaces Donna Nelson, who stepped down as the PUC’s chair in May. She will fill out the remainder of Nelson’s term, which expires in September 2021. (See Texas PUC Chair Nelson Stepping Down.)
Previously Abbott’s senior policy adviser on regulated industries, Walker spent 15 years at CenterPoint Energy as director of regulatory affairs and as an associate general counsel.
Walker also agreed to take on Nelson’s role with SPP’s Regional State Committee, which Commissioner Brandy Marty Marquez had been filling.
“I think it’s a great opportunity for you to step into SPP and see what that is all about,” Marquez told Walker. “They’re great people.”
Anderson will continue representing the PUC on the Organization of MISO States. Anderson and Marquez have kept the three-seat PUC running while waiting on Nelson’s replacement. Anderson has served on the commission since September 2008 — a record tenure — though his term expired Aug. 31. Marquez’ six-year term expires in September 2019.
Utilities Make Final Harvey Restoration Reports
Texas utility representatives gave the commission a final update on their Hurricane Harvey restoration efforts, after which the commissioners extended their Aug. 31 order directing retail providers to offer their customers deferred payment plans, “recognizing that many customers are still recovering” (Project 47552).
The utilities said their efforts were aided by the state government, mutual-assistance agreements between each other and community support.
“Customers were bringing us food, even when it wasn’t needed,” AEP Texas CEO Judith Talavera said.
“Texas rocks,” said Kenny Mercado, CenterPoint’s senior vice president of electric utility operations. “I can’t say enough about the friends and neighbors who chipped in.”
Mercado said the heavy rains and flooding resulted in the utilities relying on air boats, drones, amphibious vehicles and mobile substations to restore service.
“We were using different equipment than we’ve ever used before. I’m not sure we even knew we had air boats,” he said.
ERCOT COO Cheryl Mele said the ISO did much of its work in preparing for Harvey’s landfall. Transmission and generation outages resulted in a load drop of 15 to 20 GW below normal August conditions, she said.
“We never had a shortage of generation on the system,” Mele said, noting ERCOT never had to shed load or call for imports. The ISO issued reliability unit commitment instructions just twice.
Walker asked PUC staff to work with the utilities in evaluating the future use of mobile substations, ensuring an accurate outage count and how to better share equipment.
“This to me is about Texans helping Texas,” Walker said. “I know El Paso Electric and [Southwestern Public Service] never got called on. It’s a lot quicker to get them here than people from Kentucky.”
Walker also wondered aloud whether substations should continue to stand in areas that were flooded.
SOAH to Hear Discovery in LP&L’s Migration to ERCOT
After some debate, the commissioners postponed until their next open meeting a final decision on whether they would hear Lubbock Power & Light’s proposal to migrate part of its load from SPP into ERCOT or send the application to SOAH.
PUC staff will meanwhile conduct an Oct. 9 prehearing conference to set a procedural schedule in the case (Docket 47576). Staff expects an LP&L filing this week, which will set a 180-day deadline for a decision on the migration.
The commission appears to be leaning toward letting SOAH handle discovery for the docket. Several intervenors support that decision, pointing to the “extensive discovery” needed to explore the large number of modeling studies that have been conducted on the issue.
“There aren’t a bunch of documents, but questions about modeling assumptions and what happens under different scenarios,” said Katie Coleman, legal counsel for Texas Industrial Energy Consumers (TIEC). “That could get extensive, given the number of studies in the case.”
ERCOT, SPP and LP&L have all filed studies in the case, which began in 2015 when Lubbock announced it intended to move 470 MW of its approximately 600 MW of load into ERCOT. LP&L is hoping for a decision before March 2018, which will enable it to maintain its plan to integrate with ERCOT by June 2021, after extending a power purchase agreement with SPS.
Anderson noted that while SOAH would develop “specific facts” that would help the commission reach a decision, “90% of that decision is going to revolve around big policy issues.”
“The ALJ’s decision would be purely advisory,” he said.
Walker agreed with Anderson, saying the decision would be “policy-driven.”
“I guess we’ll hear it ourselves,” Anderson said.
SPS, TIEC, ERCOT, the Office of Public Utility Counsel and Golden Spread Electric Cooperative have intervened in the case. Oncor and the Alliance for Retail Markets have filed pending motions to intervene.
Commission Approves RMR Rule Change
The commissioners approved revisions to its reliability-must-run (RMR) service rules, accepting Anderson’s modifications that exempt seasonally mothballed units from the must-run alternative (MRA) solicitation process (Project 46369).
Staff’s draft order adjusts the suspension-of-operations notice requirements and complaint timeline, requiring written notification to ERCOT at least 90 days before a generating resource is seasonally mothballed. The ISO would then have 60 days to respond.
The order also gives ERCOT discretion to decline entering RMR service agreements based on the economic value of lost load; requires ERCOT board approval of staff recommendation regarding RMR and MRA service; and requires capital expenditure refunds related to the service agreements in certain circumstances.
The ISO and its stakeholders have already taken action to address RMR contracts, driven by a 2016 agreement with NRG Texas Power’s Greens Bayou Unit 5 in Houston. The contract was terminated last month. (See ERCOT Ending Greens Bayou RMR May 29.)
ERCOT’s recent protocol revisions require that RMR units only be procured when they have a material impact on expected transmission overloads, clarify the grid operator’s commitment process for RMR units, and update the contracting and reimbursement process for RMR units.
