Texas Senate OKs three TXU-related bills; PUC gets deal authority

Boston (Platts)--15Mar2007

The Texas Senate on Thursday unanimously approved three bills that could
complicate -- or even threaten -- the $45 billion plan by private equity firms
Kohlberg Kravis Roberts and Texas Pacific Group to buy TXU.

The bills approved by the Texas Senate include S.B. 896, which would give
the Public Utility Commission of Texas direct authority to veto the sale of a
half-interest or more in a public utility if the deal were found not to be
"consistent with the public interest."

The bill, which was amended to its current form by its author -- Texas
Senator Troy Fraser -- hours after the TXU buyout deal was announced, says
that if the PUC finds that such a transaction is not in the public interest,
the commission "shall take appropriate action, which may include: disapproving
the transaction; or if appropriate, taking the effect of the transaction into
consideration in ratemaking proceedings and disallowing the effect of the
transaction if the transaction will unreasonably affect rates or service."

In conducting its review, S.B. 896 says the PUC "shall consider the
extent to which the transaction facilitates the development of the competitive
market, the extent to which the transaction mitigates market power in either
the retail or wholesale electricity market, or other purposes consistent with"
state law.

The bill also would direct the PUC to reject the transfer of the right to
transmit and distribute electricity to the new owner of a T&D utility if the
commission decided that the prospective buyer "has debts or is capitalized in
a manner that would adversely affect the rates or services" of the utility
once it was under new ownership.