TXU Buyout - Questions raised over disclosure

By R.A. DYER - Star-Telegram Staff Writer - Tue, Jul. 17, 2007
AUSTIN -- TXU and the investors purchasing it have moved to block regulatory review of their much-touted commitments to cut rates and coal-plant construction, consumer advocates say.

TXU, together with the private-equity firm buyers Kohlberg Kravis Roberts & Co. and TPG, formerly Texas Pacific Group, promised to cut rates 15 percent and forgo building eight of 11 proposed coal-fired plants when the transaction closes.

But AARP policy analyst Tim Morstad said that many questions remain about those promises and that company lawyers are arguing against further disclosures during a proceeding at the Texas Public Utility Commission.

"KKR/TPG took the air out of strong legislation involving the buyout by promising to put all its commitments into writing [and] make them legally binding -- [but] they have failed to do what they promised," said Morstad, referring to company commitments during this year's legislative session.

TXU spokeswoman Lisa Singleton said that the companies will follow through with the commitments but that many of the questions raised by consumer groups fall outside the purview of an ongoing regulatory proceeding at the PUC.

The companies' commitments "are detailed out in the PUC filing; they're detailed out in the testimony that was given and the other commitments that have been made publicly several times," Singleton said.

Politics
TXU and KKR promised to cut rates and suspend plans to build the coal plants just as lawmakers were considering bills that could have further restricted the $47 billion transaction. The bills failed, in large part, because of those promises and heavy lobbying by the companies, Morstad and others said.

Company attorneys and those representing customer groups have been involved since April in a proceeding at the PUC in which the agency is reviewing the buyout. If the commission finds the buyout is not in the public interest, it can order changes and, in theory, block part of the transaction.

Jim Boyle, an attorney representing several municipalities before the PUC, says a provision of House Bill 624, which was adopted during the legislative session's final minutes, lets the PUC hold TXU and KKR to its promises.

"But we don't know what the commitments are without knowing the details," Boyle said. "We don't know the details of the commitment to the power plants, whether it's for one year or one month or two years and what the exceptions are."He also noted that Don Evans, future nonexecutive chairman of the new TXU, wrote in a recent op-ed piece that the PUC should hold the company to its commitments.

"Any argument ... against having the commission review the price cut commitment or the coal unit reduction commitment have been totally undermined by the admissions made by Mr. Donald Evans," Boyle wrote in a filing at the PUC on behalf of various municipalities.

Looking ahead

But TXU's Singleton said the promised rate cuts and the proposed coal-plant cancellations fall outside its regulated transmission business, which is the only part of the business for which the PUC has authority in the ongoing proceeding.

But she said the company will still keep its promises.