The El Paso City Council will hear and discuss a presentation Tuesday on options the city has to buy the region’s only electric utility.
It marks the first time city representatives and the mayor will publicly consider the idea, which, in the past, they have shown little interest in. Any effort by the city to take over the utility could disrupt the $4.3 billion sale of El Paso Electric to a private equity firm.
That deal was announced in June and is slated to close in 2020 if it gets regulatory approval from various federal and state agencies – as well as the city of El Paso.
There are several efforts in El Paso to get the city to consider blocking the sale of the 118-year-old publicly traded utility to a private equity firm, JP Morgan’s Infrastructure Investments Fund, or IIF.
The sale proceedings hit a snag on Thursday when the Federal Energy Regulatory Commission sent attorneys for El Paso Electric and JP Morgan a letter stating the sale approval application was deficient and that that agency could not process the application until it was provided with the requested information.
The regulatory commission wants to know more about the roles of JP Morgan in relation to the IIF and Sun Jupiter Holdings, the LLC that will purchase El Paso Electric on behalf of JP Morgan.
The six-page letter details information sought by the commission, including details on the owners of the IIF, the relationship between JP Morgan and the IIF, how leaders of the company are chosen and who oversees day-to-day decisions regarding the IIF’s public utilities.
El Paso Electric has 30 days to respond to the commission’s letter.
“Failure to respond to this letter within the time period specified may result in an order rejecting the filing,” the letter states.
Javier Camacho, spokesman for El Paso Electric, said the utility is working to resolve the application deficiencies and is still on track to close the sale next year.
“We are working to provide the information FERC requested. We remain confident that this agreement is in the public interest, particularly given the significant benefits for (El Paso Electric) and its customers, employees and community,” Camacho said in an emailed statement.
El Paso Electric and the Public Utility Commission of Texas announced an agreement on principle for the sale last month. An update will be available Friday, Camacho said.
The CEOs of two major El Paso business groups, the El Paso Chamber and Borderplex Alliance, have thrown their support behind the sale of the utility to the IIF.
“While some have questioned this transaction, we want to be clear on our stance – including why we believe it is essential for this transaction to be approved and the real risks if it is not,” the chamber’s David Jerome and Borderplex’s Jon Barela wrote in a recent op-ed.
They continued: “If the transaction is not approved, there are no guarantees as to what happens to El Paso Electric as it will likely need to look for other partners or sources of funding to make the necessary investments to support our growing energy needs.”
The IIF has included several economic development provisions and promises in its sale offer, but some groups say the proposals are not enough.
The IIF and El Paso Electric will contribute $100 million over 20 years to fund growth and economic development in the electric company’s service area, and customers will receive $21 million in credits distributed over three years.
The IIF has said it will also ensure El Paso Electric continues its philanthropy efforts, which includes $1.2 million in donations to various charitable organizations.
Opponents of the sale argue the deal is great for top executives but not so much for ratepayers. Some opponents, including former El Paso Mayor Larry Francis, have said they believe the IIF is overpaying for El Paso Electric.
Sunrise Movement El Paso, a grassroots group of organizers and environmental activists, are opposing the sale because, they say, ownership under the IIF will lead to a loss in local control over the utility. The group argues that could lead to increased rates and fewer options for renewable energy sources.
The city could potentially derail the deal between El Paso Electric and JP Morgan since it is one of the entities that need to approve the sale. And if El Paso were to try to buy up the electric company, it wouldn’t be the first Texas city to do so.
The city of San Antonio purchased its electric utility back in 1942 for $34 million, which was loaned to the city by Goldman Sachs.
The city of Austin has owned its electricity utility since the turn of the 20th century and has at least once rejected offers for it to be sold to private companies.
There are 15 Texas cities that have municipally owned electric utilities, according to Electric Reliability Council of Texas, which operates the electric grid and manages the deregulated market for much of the state.
The Texas cities that own their electricity utility are closer to the center of the state and their service areas do not cross over into other states. El Paso Electric’s service area spans two states — from Hatch, New Mexico to Van Horn, Texas.
El Paso Electric also gets power from the Palo Verde Power Station, which is located in Arizona.
The item on Tuesday’s City Council agenda for a “presentation and discussion on municipalization of El Paso Electric” was placed on the agenda by the city manager’s office.
The meeting is scheduled for 9 a.m. Dec. 10 at City Hall, 300 N. Campbell.
Email El Paso Inc. reporter Sara Sanchez at firstname.lastname@example.org or call (915) 534-4422, ext. 105.