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UPDATE: Texas regulators approve Sempra acquisition of Oncor

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UPDATE: Texas regulators approve Sempra acquisition of Oncor

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Members of the Public Utility Commission of Texas smile before voting to approve the Sempra-Oncor deal.
Source: PUCT

Texas regulators on March 8 unanimously approved Sempra Energy's acquisition of Oncor Electric Delivery Co. LLC, the last obstacle overcome by the California company in its purchase of the Texas transmission and distribution utility.

It took just over six months for the deal — $9.45 billion in cash plus $7 billion in assumed debt — to go from announcement to final approval. Sempra has now succeeded where others companies, including Hunt Consolidated Inc., NextEra Energy Inc. and Berkshire Hathaway Energy, came up short.

Oncor CEO and Executive Director Bob Shapard said earlier this week that he expects the transaction to officially close within three business days following the receipt of an approved order by the Public Utility Commission of Texas.

"The Commission concludes that, if all the regulatory commitments and conditions specified... are met, the proposed transaction offers sufficient benefits to ratepayers to find that the transaction is in the public interest," the PUCT order reads.

Regulators praised Sempra for its approach to the transaction. Chairwoman DeeAnn Walker spoke on how she attended a recent analyst day hosted by the company when an executive said, in her words, "What's best for [Sempra] is when a utility commission speaks, that they stick to what they've asked."

"I thought about this last night," Walker continued. "This commission and the intervenors spoke three times [on] the preliminary order in this case, and what their expectations were to get this done. Sempra listened to that, and came forward and did that, and I appreciate that."

Commissioner Brandy Marty Marquez shared a similar sentiment. "Just as important as it is for [Sempra] to hear, it is so wonderful for [the PUCT] to be heard," she said. "They heard what this commission said, as opposed to trying to not listen. They just came willing to listen."

While Sempra Chairman, CEO and President Debbie Reed was not in attendance at the PUCT meeting, she said in a statement that "[w]e are pleased the Commission has found our transaction to be in the public interest. Sempra Energy is committed to being a good partner for the state and is supportive of Oncor's mission to provide Texans with safe, reliable and affordable electric service."

Shapard and E. Allen Nye Jr., Oncor's senior vice president, general counsel and secretary, were present, grinning from ear to ear during a friendly exchange with commissioners before the vote was cast. Nye is set to take over as the company's CEO after Shapard retires in the near future.

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Oncor CEO Bob Shapard (left) and general counsel Allen Nye.
Source: PUCT

"We always called him 'that nice Mr. Nye,'" Walker said.

"Thank you for taking care of this, sticking with us and fighting for it," Marquez told Shapard and Nye.

From campaign to completion

Sempra early on launched a charm offensive to woo PUCT members, working to address commissioners' concerns over past attempts to scoop up Oncor.

A bankruptcy court in September 2017 approved Sempra's proposal to acquire the troubled Energy Future Holdings Corp., which owns 80.03% of Oncor. Although the California company has to defend the deal structure after a PUCT member raised questions, Sempra has since secured the consent of federal regulators and every intervenor in the PUCT proceeding.

Signatories to the deal included PUCT staff, the Office of Public Utility Counsel, the steering committee of cities served by Oncor, the Texas Industrial Energy Consumers, the Alliance for Retail Markets, Golden Spread Electric Cooperative and Nucor Steel. The Energy Freedom Coalition of America and the Texas Legal Services Center initially opposed the settlement agreement but later signed on to the acquisition.

To help finance the acquisition, Sempra in January closed the sale of $5 billion of senior unsecured notes.

Now that the deal has gone through, Sempra will be adding more than 3.4 million retail electric customers, over 16,000 miles of transmission lines and close to 116 million MWh in retail sales volume. Sempra has 1.4 million retail electric customers through its subsidiary San Diego Gas & Electric Co.

Commissioners are requiring Sempra to file annual compliance reports with the PUCT, along with other analyses.