Control Number: Item Number: 587. Addendum StartPage: 0

Transcription

1 Control Number: Item Number: 587 Addendum StartPage: 0

2 PUC DOCKET NO JOINT REPORT AND APPLICATION OF ONCOR ELECTRIC DELIVERY COMPANY AND TEXAS ENERGY FUTURE HOLDINGS LIMITED PARTNERSHIP PURSUANT TO PURA PUBLIC UTILITY COMMISSION OF TEXAS AARP S STATEMENT OF POSITION AARP Texas files this Statement of Position in lieu of testimony in the above-referenced docket. I. Summary AARP believes that the legal standard by which the Commission shod proposed acquisition is whether it provides net benefits to Oncor s customers, rat whether the acquisition results in harm to customers. Based on its review of the testimony and discovery responses filed by Oncor Electric Delivery/Texas Energy Future Holdings Limited ( Applicants ) and intervenors, AARP believes lhai ihe acquisition, as proposed, doesn t provide net benefits to customers. 11. Discussion First, AARP is very concerned with the additional risk created by the addition of $24.5 billion in junk-bond rated debt to finance the acquisition. This $24.5 billion in new debt obligation is not offset by commensurate benefits for consumers. If only one-third of this new debt burden gets passed along to Oncor-area residential ratepayers, an average of $26 will be added to the monthly electric bill of each household for the next ten years. 1 Approximately one-third of the electrical load is delivered to residential customers, and there are approximately 2.5 million Oncor-area residential customers. If it is more appropriate to assume that this debt will be made up on TXU s generation business, Luminant, it amounts to an average $12.50 monthly levy on every ERCOT household (approx. 5.3 million for the next ten years).

3 This $24.5 billion will be paid primarily for the privilege of transferring ownership froin a publicly-traded Texas company to private, out-of-state investors. The acquisition would do little towards relieving looming statewide electricity shortages. In fact, the buyers stand to gain if tlie electricity supply shrinks because Luniinant, TXU s affiliated power generating company, will be paid more to generate cheap electricity. Higher prices for electricity generation are boi-ne by all retail electric providers and ultimately all ratepayers in ERCOT The sheer size of this new debt is not just a drain on Texas ratepayers, it s also a potential drain on critical electricity investment in Texas. Simply put, this transaction soaks up $24.5 billion in available credit that could otherwise be used towards creating significant value for the ERCOT market and ratepayers. As a result of this transaction and the tightening credit market, other companies that seek to finance new power plants, extensive energy efficiency programs, etc. may find tlie credit markets too costly to make the needed investmelit. Second, even though the buyers claim that this new debt will be structured to iiisulate Oiicor fi-om default risk, the $24.5 billion drag on TXU enterprise-wide puts additional financial pressures, and thus risk, on Oncor and its ratepayers. AARP agrees with the concerns raised by other parties on this issue. See, for example, the testimony of TIEC (Williams Direct Testimony at 39-40), which states, Currently, Oncor receives approximately 50 percent of its revenue directly from wire The ERCOT 2006 Annual Report states that ERCOT sounded the alarm for additional generation or demand resources in response to its projections that the ERCPT market will fall below its 12.5% reserve margin in Annual Report, p. 8. GF Energy L.L.C., as included in the workpapers of Jeffry Pollock, Independent Assessment of Proposed Leveraged Buyout of TXU: The Impact on Consumers. [TXU s] generation business is a huge profit maker. The ability to generate cheap and sell high into the wholesale markets makes TXU on eof the profitable utilities in the U.S. With wholesale prices set against the price of natural gas, lignite coal and nuclear generation costs are no more than 25% of the wholesale price TXU gets for the electricity produced. 2

4 charges collected and then forwarded back from TXU Energy, its affiliated retail electric provider ( REP ). On an annual basis, these wires rates represent over $1 billion in revenue. As Oncor s largest account receivable, TXU Energy has the ability to seriously disrupt the financial stability of Oncor. Should the $24.5 billion not fall on Oncor directly, TXU Energy and its affiliated power generating company, Luminant, are more likely to bear this debt. Even if the $24.5 billion does not come from the portion of an average residential bill that represents transmission and distribution charges, this transaction puts many, if not all, of those same Oncor residential ratepayers at additional risk due the increased financial pressure put on TXU s retail and power generating affiliates to recoup this enormous premium. AARP supports the testimony of OPC (Johnson Direct Testimony at 11) which states, However, despite Oncor s proposed ring fence, the transaction will expose Oncor s ratepayers to additional risks in the event of financial distress within other units of TXU...Even if the likelihood of an adverse outcome is assumed to be low, the consequence of the event would be extreme and even catastrophic. For that reason, the residual risk for ratepayers from this transaction outweighs the minimal level of tangible benefit provided by the transaction. Finally, regarding the ultimate evaluation of this proceeding, AARP supports the testimony of N~cor Steel - Texas that states, the public interest affected by the proposed transaction extends beyond Oncor s proposed transmission and distribution lines - a fact implicitly recognized in several of TEF s commitments involving TXU Energy and L~rninant. ~ In summary and concusion, AARP agrees with PUC staff testimony that urges the Commission to step back from the trees and look at the forest as it makes its decision in this Docket No , Direct Testimony of Dennis W. Goins, p. 11 3

5 proceeding. Given the new $24.5 billion dollar burden ratepayers face if this acquisition is completed, the Coinmission should use eveiy tool in its toolbox to protect ratepayers by breaking through artificial limitation? in this case to ensure an even greater benefit flows to ratepayers. Respectfully submitted, LAW OFFICE OF DON E. WALDEN n ;&Lf&& D n E. Walden State Bar No North Mopac, Suite 300 Austin, Texas (512) (512) Fax CERTIFICATE OF SERVICE trs/ : The undersi ned does hereby cer ify that a true and correct copy of the foregoing document was served on this 4._" day of /?L?a upon all parties of record to this proceeding by first class mail, hand delivery, or fax. R Don E. Walden 5 According to a report in The Dallas Morning News on August 26,2007, procedural irregularities may have inappropriately impacted of the scope of this proceeding. 4