According to a report commissioned by a group called Texas Coalition for Affordable Power (TCAP), Oncor has collected around a half billion dollars in fees from Texas electricity ratepayers in the past several years in order to pay federal income taxes. This money, according to TCAP, was never actually paid to the federal government. Texas regulations allow utilities such as Oncor to collect fees from customers to pay federal income taxes but don’t actually require the fees to be used for that purpose.
Texas is a “Power to Choose” state which means that consumers in most parts of the state are free to select their Retail Electric Provider. However, the transmission utilities, including Oncor, are still regulated monopolies. They are responsible for delivering electricity to consumers regardless of who the retail provider is. The electric company whose name appears on the bill charges consumers pass-through fees that go back to Oncor to pay for the cost of delivering the power.
Oncor is owned by the same parent company that owns the retail electric provider TXU. The parent company, Energy Future Holdings (EFH), has been in financial trouble since an ill-fated leveraged buyout in 2007 left the company with an unsustainable amount of debt. The buyout amounted to a massive bet on the direction of natural gas prices by a group of large investors. Soon after the buyout the bottom feel out of natural gas prices and never recovered.
As a result EFH has been losing money since 2008 and consequently has not paid any federal income taxes. According to the report, the money collected by Oncor ostensibly to pay federal income taxes has simply gone into the pockets of EFH and used to help service their massive debt payments. The report further contends that since EFH appears to be heading towards bankruptcy or some other form of restructuring, the money collected for taxes will likely never be paid to the federal government.
See Also: A New Fee On The Electric Bill of Dallas / Fort Worth Customers
TXU Energy appears to be the most expensive electricity provider in Texas – at least we could not find any company with higher rates. Just a few months ago they said they were not willing to “chase prices” in order to gain/keep customers. It is that mentality that is pushing TXU’s parent company to the brink of bankruptcy. Energy Futures Holdings (EFH) purchased TXU in 2006, and TXU has lost money every quarter since. EFH debt now totals over $40 billion.
TXU Rates Compared to Other Electric Providers
Since the deregulation of our electricity market gave us the power to choose in 2002, Texas consumers have had the luxury of shopping around for their electricity. Before deregulation you didn’t have a choice of which electricity provider you used. You were assigned a provider based solely on your location. For example, if you lived in Dallas, you paid TXU for your electricity. Likewise, Houstonians received their monthly electric bill from Reliant. You had no choice and no voice in the matter.
Current Lowest Cost Providers in TXU’s Area
Unfortunately, not everyone in TXU’s area is aware they now have a choice, and TXU takes advantage of that fact. TXU hopes that they are going to be the only electric company you look towards when needing electricity, so they just throw out a high rate quote and hope you don’t know any better.
But let’s look at the facts. Currently, TXU’s 12-month residential rates are 19.75% higher than the competition. And what about their 12-month Free Nights Plan? The Free Nights Plan is priced a staggering 43.20% higher than competing 12-month electricity plans. TXU’s month-to-month rate is 47.62% higher than competing introductory monthly rates.
It is no wonder TXU has 800,000 fewer customers than they did just a few years ago. With rates that are almost 50% higher than those of the completion, TXU is shedding customers at an increasing speed.
We have been receiving quite a few questions about what will happen when TXU’s parent company, Energy Futures Holdings, declares bankruptcy. The issue is actually fairly complex in the case of EFH, but let’s start by addressing what generally happens to your electricity when your electricity provider declares bankruptcy.
If your Retail Electricity Provider (REP) goes out of business, your electricity will be switched over to the “provider of last resort,” which happens to be Green Mountain for most of Texas. When the switch is made, you will be on a month-to-month contract, meaning you can leave Green Mountain for another provider at any time without having to pay a penalty.
If your REP declares bankruptcy in order to restructure (avoid paying their debts), yet still plans to stay in business, you will not notice any change. You will still be under contract from your existing REP, and they will continue to provide you with electricity. This is what will more than likely happen with TXU.
The complex part of the issue is that EFH also owns Luminant (formerly TXU) and Oncor (formerly TXU). Luminant is the largest energy supplier in Texas, and Oncor owns and operates all of the power lines and meters in the Dallas area, as well as a large portion of North and Central Texas. If EFH’s subsidiaries were to cease operating, the Texas Public Utility Commission would need to step in to keep the lights on for a large percentage of the state’s population.
Although it is probable that EFH will declare bankruptcy in the near future, it is highly improbable that they will cease operations. More than likely, a third party (or parties) would come in to buy the 3 subsidiaries, and they would probably receive very favorable treatment from the PUC and Texas in regards to fees, expenses and taxes. This would be along the lines of what happened to the large investment and retail banks over the last several years.
In light of TXU’s severe financial issues, customers of the ailing giant are jumping ship and switching to other providers. Now is the time to be proactive in switching to an electricity provider that offers good rates and has a strong fiscal standing.
TXU’s parent company, Energy Future Holdings, has yet another legal issue to contend with. EFH is once again being sued over it’s highly pollutive Luminant plant in Longview, Texas. The coal-fired plant, known as Big Brown, is one of the dirtiest in the nation, and the Environmental Integrity Project (EIP) and the Sierra Club are filing suit against it.
Luminant, TXU and Oncor were purchased together by EFH in 2006, and have lost massive amounts of money every quarter since then. Luminant has three coal plants in North Texas that rank among the nation’s top ten worst polluting industrial facilities. Those three plants (Big Brown, Martin Lake and Monticello) alone make up 25% of all the industrial pollution in Texas, and they account for 46% of all pollution related to electricity generation in the state. That is staggering considering there are over 125 power plants of their size in Texas.
Dr. Neil Caiman, Air Program Director of the Lonestar Chapter of the Sierra Club, had this to say about the lawsuit:
Luminant self-monitors its plants, and according to the company’s own data, the Big Brown plant has violated the requirements of its own air permit thousands of times. What’s troubling is that Luminant’s Big Brown plant has very lenient pollution standards compared to other power plants, and the plant is still pumping out more than three times the legal limit. That impacts the health and wellbeing of Texans. For far too long Luminant has failed to clean up its harmful pollution and chosen not to install pollution controls, even as many other power plant operators were cleaning up their plants. Those days are over and in order to bring Big Brown into compliance, Luminant must decide if it will clean up the power plant or retire it.
It comes as no surprise that TXU’s parent company, Energy Future Holdings, reported a massive loss for the first quarter of 2012.
In accordance with GAAP, EFH reported a net loss of $304 million for the quarter, and an adjusted net loss of $280 million — significantly worse than lass year’s Q1 loss.
EFH is the holding company that owns Oncor (electricity transmission and delivery), TXU Energy (electricity provider) and Luminant (electricity generator).
EFH has been making headlines recently because of their worsening debt issues. EFH’s debt is now rated 8 levels below junk, and most of the street believes that bankruptcy is now unavoidable.
EFH has lost almost $5 billion over the last two years. EFH debt now totals $41.7 billion — a staggering sum. With revenue of only $7 billion, EFH is in dire straits.