Texas lawmakers introduced a bill Tuesday which, if passed in time, would give the state’s Public Utility Commission the power to review and reject the $45 billion (€34.3 billion) buyout of Dallas, Texas-based utility company TXU.
Following Monday’s announcement that private equity firms Kolhberg Kravis Roberts and Texas Pacific Group plan to acquire TXU in the largest ever leveraged buyout – with the blessing of key environmental groups – numerous state legislators cried foul.
“They basically stiff-armed us,” Senator Troy Fraser, the bill’s author and chairman of the Senate Business and Commerce Committee, told the Houston Chronicle.
“Over the past 12 months, I have expressed concerns about the competitive market forces and their residential electricity rates. The sale of TXU to a private equity firm only heightens those concerns,” Fraser said in a statement. “While I appreciate the involved parties’ willingness to address coal plants and carbon emissions, at the end of the day we must continue to protect ratepayers.”
Disturbed that lawmakers and consumer advocacy groups weren’t given seats at the bargaining table, state legislators questioned the proposed buyers and sellers at a Tuesday hearing of the House Committee on Regulated Industry.
Fraser and State Representative Phil King expressed concern that the debt involved in the deal would be allocated to consumers; TXU said the company’s regulated transmission and distribution service arm would not be taking on any debt to finance the deal.
Lawmakers also scoffed at the 10 percent residential rate cut promised as part of the buyout.
“You’re only giving them back whatever they’ve been overcharged,” Turner said, KVUE News reported.
KKR partner Fred Goltz, at the hearing, responded, “I’m not in a position to speak about the past. But what I can tell you is we believe we’ve worked very hard to come to the double digit rate decrease that we proposed.”
Turner also said Houston area customers were paying for the profits reaped from the firms’ last such deal in Texas, the Chronicle reported. In 2004, the two firms were part of a consortium of investors, including The Blackstone Group and Hellman & Friedman, which bought Texas Genco for $3.7 billion and subsequently sold it in 2006 for $5.8 billion.
Asked if the firms had similar intentions for a quick sale, KKR told the legislators it would make a 5-year commitment to TXU, provided regulatory conditions remain the same.