SECURITIES AND EXCHANGE COMMISSION
(Release No. 35-27671; 70-10046)
TXU US Holdings Company
Order Granting an Exemption under Section 3(a)(1)
April 29, 2003
TXU US Holdings Company ("TXU Holdings"), Dallas, Texas, a Texas Corporation, has filed with the Securities and Exchange Commission ("Commission") an application under section 3(a)(1) of the Public Utility Holding Company Act of 1935, as amended ("Act"), for an order exempting TXU Holdings and its subsidiary companies from regulation under all of the provisions of the Act, except section 9(a)(2). The Commission issued a notice of the filing of the application on January 10, 2003.1
TXU Holdings is a wholly owned subsidiary of TXU Corp., an exempt holding company under section 3(a)(1) of the Act.2 TXU Holdings owns all of the outstanding common stock of Oncor Electric Delivery Company ("Oncor"), an "electric utility company" within the meaning of section 2(a)(3) of the Act, and several direct and indirect non-utility subsidiaries. Prior to implementation of the restructuring plan that is described below ("Restructuring"), TXU Holdings, which was then named TXU Electric Company) ("TXU Electric"), was engaged in the generation, transmission, purchase and distribution of electric energy in the north-central, eastern and western parts of Texas. Also, prior to the Restructuring, TXU Corp. indirectly owned all of the issued and
outstanding common stock of TXU SESCO Company ("TXU SESCO"), which owned and operated an electric transmission and distribution system serving parts of ten counties in eastern and central Texas. TXU Corp. also owns all of the issued and outstanding common stock of TXU Gas Company, a gas utility company that serves more than 1.4 million industrial, commercial, residential and agricultural customers in the north-central, eastern and western parts of Texas.
Oncor (under the name TXU Electric Delivery Company) was incorporated under Texas law on November 6, 2001 in order to facilitate the structural separation (unbundling) of TXU Electric's electric transmission and distribution ("T&D") assets from its electric generation assets in accordance with the requirements of electric utility restructuring legislation passed in Texas in 1999.3
As part of the Restructuring: (1) TXU Electric transferred all of its T&D assets and certain associated liabilities to Oncor as a capital contribution; (2) TXU Electric transferred all of its electric generation assets to six new indirect subsidiaries, each of which has been determined by the Federal Energy Regulatory Commission to be an exempt wholesale generator ("EWG") under section 32 of the Act;4 (3) the electric transmission and distribution assets of TXU SESCO were acquired by Oncor through a statutory merger of a subsidiary of TXU SESCO, to which such assets had been transferred, into Oncor; 5 and (4) TXU Electric transferred the merchant energy trading operations previously conducted by other subsidiaries of TXU Corp. and other subsidiaries engaged in providing energy services, mining operations, and fuel procurement to various new subsidiaries.
The record indicates that TXU Holdings no longer conducts any business operations of its own, but is a holding company only. TXU Holdings has one direct public-utility subsidiary (Oncor), whose operations are conducted wholly within the State of Texas, and numerous direct and indirect non-utility subsidiaries, including EWGs. TXU Holdings directly owns all of the voting securities of Oncor, an electric utility company, and directly and indirectly owns all of the voting securities of TXU Energy Company LLC ("TXU Energy"), which serves as the holding company for TXU Holdings' non-utility subsidiaries (including EWGs).
Oncor is a regulated T&D company principally engaged in providing delivery services to retail electric providers that sell power in the north-central, eastern and western parts of Texas. Oncor operates within the Electric Reliability Council of Texas ("ERCOT"), an intrastate network of investor-owned entities, cooperatives, public entities, non-utility generators and power marketers. ERCOT is the regional reliability coordinating organization for member electric power systems in Texas and the Independent System Operator of the interconnected transmission system of those systems, and is responsible for ensuring equal access to transmission service by all wholesale market participants in the ERCOT region. Oncor's operations do not include the production or sale of electricity (at wholesale or retail), but rather consist only of providing T&D services and other related non-utility services.
Under the Texas restructuring law, Oncor is not allowed to be a seller of electricity, but instead is limited to transmitting and delivering power that is produced and sold by third-party electricity suppliers who have non-discriminatory access to and use of Oncor's transmission and distribution lines. Oncor does not own or operate any generation facilities.
As of December 31, 2002, Oncor had total assets of $9,022,000,000, including net property, plant and equipment of $6,056,000,000. For the year ended December 31, 2002, Oncor reported total operating revenues of $1,994,000,000, operating income of $477,000,000, and net income of $122,000,000.
TXU Energy, through numerous direct and indirect non-utility subsidiaries, engages in power production (through EWGs), wholesale energy sales, retail energy sales and related services and portfolio management activities, including risk management and certain trading activities, primarily in Texas.
As of December 31, 2002, TXU Holdings had total consolidated assets of $24,519,000,000. For the year ended December 31, 2002, TXU Holdings reported total operating revenues of $8,140,000,000, operating income of $691,000,000, and net income of $352,000,000.
TXU Holdings asserts that the requirements for an exemption under section 3(a)(1) of the Act are met because TXU Holdings and Oncor, its only public-utility subsidiary, are both incorporated in Texas, the state in which Oncor conducts all of its public-utility operations.
To qualify for exemption under section 3(a)(1) of the Act, Oncor must be predominantly intrastate in character and carry on its business substantially in the state of Texas, the state in which each Oncor and TXU Holdings is incorporated. Section 3(a)(1) further requires that an exemption not be detrimental to the public interest or the interest of investors or consumers. Nothing in the record of this matter suggests that granting the requested exemption would be detrimental to any of these protected interests.
TXU Holdings states that fees and expenses in connection with the application will be approximately $20,000.
Due notice of the filing of the application has been given in the manner prescribed by rule 23 under the Act, and no hearing has been requested of or ordered by the Commission. Based on the facts in the record, the Commission finds that the applicable standards of the Act are satisfied and that no adverse findings are necessary.
IT IS ORDERED, under the applicable provisions of the Act and rules under the Act, that the application, as amended, be granted immediately, subject to the terms and conditions prescribed in rule 24 under the Act.
For the Commission, by the Division of Investment Management, pursuant to delegated authority.
1 Holding Co. Act Release No. 27637.
2 See TUC Holding Company, et al., Holding Co. Act Release No. 26749 (Aug. 1, 1997).
3 See Texas Utilities Code §39.051.
4 Subsequently, TXU Electric sold the generating assets of two of the six EWGs to an affiliate of Exelon Corporation.
5 TXU SESCO no longer owns or operates any facilities used for the generation, transmission or distribution of electric energy. TXU SESCO is now an indirect subsidiary of TXU Energy Company LLC, the holding company for TXU Holdings' merchant energy business.