March 9, 2007

Austin American-Statesman
Tony Bennett Opinion: Need for oversight.

By Tony Bennett

Twenty million Texans could be affected by the proposed buyout of TXU, making a thorough review of the transaction by the Public Utility Commission of Texas (PUC) and regulatory approval imperative before this proposal moves forward.

Part of this buyout reaches far beyond the TXU service area and could increase the monthly utility bills of every rate payer on the power grid overseen by the Electric Reliability Council of Texas (ERCOT). The buyout could also impact the reliability of ERCOT's Texas power transmission grid. Texas consumers — residential, commercial and industrial — deserve the PUC's careful attention to this transaction.

Sen. Troy Fraser, chairman of the Texas Senate Business and Commerce Committee, should be applauded for authoring and passing legislation out of his committee to ensure that the Public Utility Commission has the clear authority to review the buyout before the transaction closes.

To be sure, major financial transactions or buyouts like the bid for TXU are an important part of the free market. However, it is important to note that a critical part of TXU, its utility business, is still regulated and its customers captive to it. Dealings with the regulated side of TXU are at the heart of this matter because regulated utilities are accountable to the public.

Here's how the TXU buyout could affect the entire ERCOT power grid, which covers about 75 percent of the land area in Texas and delivers about 85 percent of Texas' overall power usage to 20 million Texans: 

The regulated electricity transmission side of TXU delivers electricity to consumers in its service area. Regulated utilities such as TXU invest large sums to build transmission capacity and expend additional resources to keep those lines maintained. Because of the interconnected nature of the grid, how utilities do business affects the reliability of other parts of ERCOT, including Central Texas and Houston.

Just as reliability doesn't stop at a utility's border, transmission costs are not passed along solely to consumers within a utility's service area. Instead, the costs are accumulated from all the utilities so that all Texans in ERCOT pay for our state's electricity transmission costs equally. So, far beyond the TXU service area, Texans have a very important stake in how transactions such as the TXU buyout affect transmission costs and the reliability of ERCOT's delivery system.

Ultimately, the financial stability of a utility is important to customers. If a utility assumes new debt or is less able to operate and maintain their facilities, customers throughout ERCOT could suffer. These considerations would be part of a PUC review of the TXU purchase.

Texas manufacturers face some of the highest electricity rates in the nation and as such, the cost of energy — and its impact on job growth — is a priority for the Texas Association of Manufacturers. This reality, coupled with the breadth and reach of the TXU transaction, warrants oversight of the PUC to measure impact on consumers, jobs and economic growth in our state.

No Texas utility has ever been sold without meaningful regulatory review — we should make sure the largest one in history is not the first.

Bennett is chairman of the Texas Association of Manufacturers.