TXU now a bit shaken up

I was in the midst of writing a post about Gov. Perry signing SCR 20 on Friday, when I checked the news and saw all this hubbub about TXU's plans going up in smoke.

Last week, after Travis County District Judge Stephen Yelenosky ruled that Gov. Perry shouldn't have issued the executive order to fast-track the new coal plants, the administrative hearings for seven coal-fired plants that were supposed to start the next morning were delayed for four months.

Then came the news on Friday that Kohlberg, Kravis & Roberts (KKR) and the Texas Pacific Group are now bidding to buy out TXU. KKR has a speciality for buying out fledgling companies and turning them around to boost their portfolio and improve their standing in the stock market. In order to get the buyout approved, though, TXU has canceled plans for 8 of their 11 plants, due to the large opposition to these plants.

So far, environmental groups such as Environmental Defense, Public Citizen, the Sierra Club, and other local groups registered their staunch opposition from the get-go. Then along came natural gas companies, the Texas Baptists, Sen. John Kerry -- and Albert J. Huddleston, a pro-business Republican who helped finance the Swift Boat television ads that played no small part in Kerry's 2004 botched presidential run, and finally the Catholics piled on. What's that old adage about politics and strange bedfellows?

Seemingly, the opinions of the above groups and the barrage of news articles, and all the court proceedings led TXU to accept the bid from KKR and Texas Pacific late yesterday evening. The buyout, roughly $44 billion - $32 billion for the purchase, plus $12 billion in debt - is the largest private sector acquisition ever.

This shocks me on the one hand since they won't make nearly as much money from a potential cap-and-trade program as I'd thought or from ratepayers. The other shocking aspect is that TXU's fearmongering seems to fall flat: they had been saying that Texas needed these plants, or else. Energy shortages! Dependable resources! ¡Rolling blackouts! Actually, the hollowness of the need argument isn't all that shocking....

The other concrete outcomes of the bid agreement, in addition to withdrawing permit applications for eight proposed coal plants, Texas Pacific Group and KKR have agreed to:

• Terminate TXU's previous plans to expand coal operations in other states
  


• Endorse the U.S. Climate Action Partnership (US CAP) platform, including the call for a mandatory federal cap on carbon emissions
  


• Reduce the company's carbon emissions to 1990 levels by 2020
  


• Promote Demand-Side Management programs to reduce energy consumption
  


• Double the company's expenditures on energy efficiency measures
  


• Double the company's purchase of wind power
  


• Honor TXU’s agreement to reduce criteria pollutants in Texas by 20% (TXU’s 20% pledge was contingent upon approval of all 11 plants)
  


• Establish a Sustainable Energy Advisory Board, on which Environmental Defense regional director Jim Marston and Ralph Cavanagh from the Natural Resources Defense Council will serve
  

Regardless, the war over coal plants and Texas energy needs is far from over. TXU still has plans for 3 more plants, not to mention the 8 other coal-fired units that will be built by other companies. Stay tuned for more.