Group Claims Oncor Unnecessarily Charged Fees to Texas Electricity Consumers
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.
Are TXU Rates The Most Expensive Electricity Rates In Texas?
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.
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.
TXU Reports Abysmal First Quarter 2012 Earnings
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.
Fitch Downgrades the Debt of TXU — Again
The hits just keep on coming for TXU.
Fitch Ratings downgraded the debt of TXU’s parent company, Energy Future Holdings Co. (TXU), from CCC to CC, which “implies very high levels of credit risk such that default of some kind appears probable at some point in the future,” the company said in a statement. Fitch cut its unregulated subsidiaries to eight levels below junk and said a default appears probable.
Energy Future Holdings was taken private in 2007 in the largest buyout in history.
Energy Future Holdings’ electricity retail unit, TXU Energy, also has had “significant” customer losses and increased competition may pressure profit margins at the unit, Fitch said.
The “current highly leveraged capital structure” at Energy Future Holdings’ unregulated unit “is no longer sustainable and some kind of default seems inevitable,”according to the report.