May 21, 2019

Power company merger review bill on its way to the governor

by Wendell Bell
Source – Grid Monitor
Posted 05/21/2019

 The Texas Legislature approved a bill on May 17 to change the conditions under which the Public Utility Commission (PUC) must review and approve mergers and acquisitions of power generation companies. 

Under current law, PUC review is triggered by transactions involving one percent of the “total electricity for sale” in the state.  The legislation would increase the threshold to ten percent.  It would not alter a separate provision that prohibits any company from owning more than twenty percent of “installed capacity” in the ERCOT power region.

Senate Bill 1211, authored by Sen. Kelly Hancock (R- North Richland Hills) and sponsored in the House by Rep. Phil King (R-Weatherford), would implement a recommendation from the PUC’s biennial Scope of Competition Report.  The report noted that the one percent trigger causes the agency to process numerous transactions despite the negligible likelihood any would reach the twenty percent cap. The bill seeks to preserve the PUC’s ability to prevent transactions that might create monopoly market power while reducing the administrative burden on the commission and entities involved with small mergers and consolidations.

The bill also would eliminate confusion regarding what kinds of mergers require PUC approval. Many transactions involve passive investors, such as banks, that have ownership interests in power companies but are not themselves power companies. The bill would clarify that PUC approval is required only when power generation companies consolidate. 

The bill passed the House on May 17 by a vote of 141-1, having cleared the Senate 31-0 on April 11.  It is now on its way to Governor Greg Abbott’s desk.

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