About Air and Water

Monday, June 4, 2007

Big guns used to kill electric utility reform

Lobby group that opposed the legislation
included many with friends in high places


By R.G. RATCLIFFE - Copyright 2007 Houston Chronicle Austin Bureau - June 1, 2007
AUSTIN — The lobbying that weakened and ultimately killed electric utility reform, clean-air legislation and regulation of the $45 billion buyout of TXU
Corp. during the recent legislative session was a friend and family affair.

The public focus of the legislation has been on high electric rates and the
multibillion-dollar buyout of TXU Corp. in Dallas. Lawmakers wanted to rein in high electric bills while the state's utilities fought anything that resembled renewed government control of a market that was deregulated in 1999.

The utility lobby groups, with 90 registered lobbyists, included a former business adviser to Lt. Gov. David Dewhurst, the brother of Dewhurst's chief of staff, the son of Speaker Tom Craddick's next-door neighbor and a pair of
political consultants who have helped at least a third of the Legislature win
office.

And that does not mention the fact the teams also included eight former
legislators, former Dallas Mayor Ron Kirk, a former Texas secretary of state and
former Texas Railroad Commission Chairman Barry Williamson.

The board of directors for the proposed new TXU also has influence in Austin:

•Former U.S. Secretary of Commerce Don Evans is from Midland and is a longtime Craddick friend.
Plains National Bank Chairman James Huffines was finance chairman of Gov. Rick Perry's 2006 re-election campaign.
•And former Ambassador to Sweden Lyndon Olson is a prominent Waco Democrat who has helped finance a political committee run by House Democratic Caucus Chairman Jim Dunnam.
"Where things fell apart is where they often do: in the dark rooms and back
halls of the Capitol," said Tom "Smitty" Smith of Public Citizen, one of the
groups pushing for reform. "We don't know whose fingerprints are on the razor."

Effect of buyout move
The legislative session opened in January with lawmakers taking aim at high
electric rates. Environmental groups were fighting plans for a major expansion
of coal-fired electricity-generating plants in Texas, including 11 units proposed by TXU.
Everything suddenly changed in February with the announcement that TXU was being
bought out by an investor group led by Kolberg Kravis Roberts & Co. of New York and Fort Worth-based The Texas Pacific Group.

To get environmentalists on board, the investor group agreed to withdraw permit
requests for eight of the coal-fired generating units.

The buyout also upset plans by Sen. Troy Fraser, R-Horseshoe Bay, and Rep. Phil King, R-Weatherford, to take control of rising electric rates because their legislation was based on a TXU business structure that would be altered by the buyout.

In new legislation, Fraser wanted to force the TXU buyers to sell off the
generating and transmission companies so they would be separate from the retail
provider. He also wanted restrictions so no company could generate more than 30
percent of the power in any area of the state. The Public Utility Commission
would have authority to review the TXU buyout.

A series of bills was designed to meet these goals.

The TXU buyers opposed any legislation that would force them to break the
company up, Fraser and King said.

The legislative package seemed to be on track until it reached a House-Senate
conference committee
about three weeks before the end of the session. Suddenly, Sens. Chris Harris, R-Arlington, and Kim Brimer, R-Fort Worth, took up the cause of the TXU buyers opposing the forced sale of company assets.

King and Rep. Sylvester Turner, D-Houston, said Dewhurst then stepped in to save
whatever legislation was going to pass. However, the lobby teams also appeared
to have an inside track with Dewhurst, who had made his fortune in the electric cogeneration business.
Dewhurst's former chief of staff, Bruce Gibson, had gone to work for TXU as a
policy adviser.

Dewhurst denies influence
Dewhurst's one-time business adviser, former PUC Chairman Dennis Thomas, was on
the TXU lobby team. His current chief of staff, Rob Johnson, had a brother on
the lobby team of NRG Energy Inc., a generating company with interests in the
bill.
Dewhurst said he was completely unmoved by any outside influences.

King said negotiators heard that Perry would veto any bill that required TXU to
sell off divisions.

The compromise, Senate Bill 482, dropped PUC review of the buyout, the market-production limits and the requirements that TXU break up the company.

But TXU would have to operate its divisions separately with "firewall" protections. A new standard of $1-million-a-day fines for market manipulation would have been established, with company executives facing possible felony charges for violations.

And consumers would be given a 10 percent rate cut if they were still on the
most expensive electric rate plans.

The compromise did not include a 15 percent rate cut sought by Democrats or
additional air-quality requirements for coal plants.


The bill's final moments
On the Saturday before the session ended, TXU and the buyers pulled their
lobbyists from the Capitol and assured Dewhurst and Craddick that they were not
going to try to kill the bill. A perception exists, however, that that was for
show.
"That's when they (TXU and the buyers) decided to kill the bill Sunday or
Monday," King said. "They're the only ones that benefited by there not being a
bill."

House Democratic Chairman Dunnam began working to kill the bill on parliamentary points of order and succeeded in the Legislature's final minutes. Dunnam said he opposed the legislation because it did not provide "meaningful" rate cuts and did nothing to lower emissions at the proposed coal plants.


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