Late last week, TXU Corp. senior executives backed down from a threat to the Public Utility Commission of Texas (PUCT) that the company could be forced to shut in gas-fired peaking plants following the recommendation that it be fined $210 million for market manipulation.
TXU had said it could not make a return on its investment in the peaking plants under the PUCT staff's interpretation of the Texas power market. However, TXU Corp. CEO John Wilder and TXU Wholesale CEO Michael McCall, who wrote the letter to the PUCT last week, apologized Friday for the statements.
"TXU apologizes for creating any perception of threatening to shut down power plants in Texas," McCall said. "TXU is not permitted to unilaterally shut down power plants. Such a step can only be done after a review by ERCOT [Electric Reliability Council of Texas]. There is no intention to shut down plants, especially those needed to ensure reliability. Today we are asking the PUC[T] to disregard this filing. We will resubmit a more appropriate document after consulting with the investors."
The mea culpa came at the behest of Kohlberg Kravis Roberts & Co. (KKR) and Texas Pacific Group (TPG), the lead investors in a proposed private equity buyout of TXU by the recently formed Texas Energy Future Holdings LP (TEF).
"TXU's April 2nd letter to the Public Utility Commission referencing potential power plant shutdowns was not shared with the investor group in advance, and we strongly disagree with it," KKR and TPG said Friday.
"Today, we are asking and strongly advising TXU to settle this issue with the Public Utility Commission and reach an agreement with the PUC in regard to future actions as they pertain to the balancing energy to ensure that affordable and reliable power will be available at all times. Once TEF's acquisition of TXU is completed, TEF will ensure that the company takes these actions."
The buyout backers and TXU management have come in for heavy criticism by some lawmakers, regulators and consumer advocates who say that their proposal would be bad and that announcement of the deal was done in a heavy-handed fashion. State Sen. Troy Fraser (R-Horseshoe Bay) has been a TXU critic and sponsor of pending legislation that could force a reworking of the deal or even its cancellation.
"TXU's threat was unfortunate and it is good they admitted their mistake," Fraser said Friday. "However, I find it interesting they knew they could not shut down power plants without prior approval, yet they were still willing to issue unwarranted threats. This type of behavior is only consistent with their track record of ratepayer and market abuse."
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