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Rep. Barton sets sights on TXU takeover proposal |
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The House Energy and Commerce Committee's top Republican is taking aim at the proposed TXU leveraged buyout, suggesting he would support demolishing the wall that protects the Texas power market from federal oversight and electricity imports.
Texas Rep. Joe Barton's suggestion that he would open his home state's electricity market to federal oversight is seen as a warning for the proposed $45 billion deal by Texas Energy Future Holdings, a holding company formed by Kohlberg Kravis Roberts and Texas Pacific Group to buy TXU.
"I don't support the merger," Barton said in an interview today. "It's not good for retail prices, and not good for the consumer. It's good for the shareholder (Barton noted that he owns 400 shares of TXU stock), and it's good for management."
Barton's reason: The deal would spur further increases in TXU electricity rates, which have already risen from 3 cents to 15 cents a kilowatt hour.
"One certainty is that retail electricity prices in North Texas in three to four years will be higher than they are today," he said.
Last Friday, Barton asked the Federal Energy Regulatory Commission, the Public Utility Commission of Texas and the Electric Reliability Council of Texas (ERCOT) for their views of the deal and its effects on the market and consumers in the state, and said he wants answers by the end of the month.
In his letter to FERC Chairman Joe Kelliher, Barton suggested ERCOT's continued independence from FERC "may no longer make good policy or economic sense."
"The realities of today's electricity marketplace may call for an opening of ERCOT to a more robust interstate system, and to jurisdiction of the same regulatory authority that regulates other interstate electricity delivery throughout the United States," he said.
FERC review at issue
Of immediate concern, though, is whether FERC will be able to review the merger given that it has no authority over Texas markets. Insiders point to one of the questions in Barton's letter asking whether the Energy Policy Act of 2005, which expanded FERC's merger authority to cover deals between holding companies, would include holding companies in Texas.
The TXU takeover was announced last month to great fanfare and praise from environmentalists and others because of the new firm's commitment to cut back on TXU's controversial plan to build 11 coal-fired power generators and instead focus on renewable energy and energy efficiency and take up the fight to do something about climate change.
But the proposal has raised hackles among those who, like Barton, fear that the buyers are focusing on the investment deal and are more interested in TXU's resale value than operating in the Texas market and providing electricity for consumers there.
There is some simmering resentment that the deal is being fueled by New York money, as Goldman Sachs, Lehman Brothers, Citigroup and Morgan Stanley also are involved, and that national environmental groups were in on the deal before anyone in Texas knew about it.
Indeed, Barton long has been a supporter of TXU, whose current executives are among the ranks of utility executives who have questioned the extent to which Congress wants to pass legislation dealing with climate change.
Barton said the plans to abandon eight of the 11 coal plants raised his concerns about reliability in the Texas market, particularly as the state's power demand is growing by 3 percent a year. Others privately note that the power plant cutbacks also would reduce jobs and demand for coal.
Jeff Eller, a spokesman for Texas Energy Future Holdings, said the companies "respect Rep. Barton's concerns and look forward to working with him to present our viewpoint of the Texas power industry."
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