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May 23, 2017

Texas Leaders Are Failing to Pursue Conservative Principles, And The Thwarted Sale of Oncor Is A Perfect Example

  Dallas Morning News

We’re in the final days of the 85th Texas Legislature, and as a conservative I find myself experiencing a disconcerting level of déjà vu.

In yet another legislative cycle, Texas voters have sent a substantial cadre of conservative legislators to Austin, and yet again, anything resembling a free-market agenda has barely budged.

It’s becoming a familiar pattern: Conservative politicians campaign promising radical change on spending, education, taxes and regulation. Voters send them to Austin, where they spend four months trying to expand firearms and limit abortion, and then when the legislature is done, Republican and Tea Party groups all over the state laud them for being “conservative champions.”

Wash, rinse, repeat.

Meanwhile, other states are reforming their tax codes, introducing school choice, removing barriers to entrepreneurship and fostering economic dynamism through deregulation.

For conservatives, free-markets and limited government are just as important as the social stuff, but there’s not as much free-market reform going on in Texas as you might think. The truth is, in far too many areas Texas harbors Big Government regulatory policies that are out-of-step with the voters’ clear desire for Texas to be a haven of limited government.

For instance, Texas is one of only four states with laws protecting auto dealers from the competition of direct sales. Texas has laws protecting small liquor stores from competition, and forbids price competition for title insurance. These are nanny state, protectionist policies. In Texas.

But perhaps the worst recent example stems from the Public Utility Commission, where old-fashioned top-down rule by three appointed bureaucrats still reigns.

The PUC has just turned away a second attempt to acquire Oncor, the regulated electric transmission and distribution company and the last bankrupt remnant of Energy Future Holdings. Millions of Texas residences and businesses need a healthy Oncor to supply them with energy, but the PUC has twice refused to allow willing and financially able buyers to take over Oncor because three appointed bureaucrats didn’t like the deals.

It’s all very well and good to think that a different deal would be better, but there are only so many parties willing to spend $18 billion of their own private capital for Oncor, and I don’t see any of the PUC commissioners stepping up to the plate. A deal requires an actual buyer, not some theoretical buyer that fits the preferences of the PUC’s three appointed bureaucrats.

PUC Chairwoman Donna Nelson says whoever buys Oncor should not be able to control its board. Can you imagine that? You don’t have to be an M&A expert to understand that no one is going to spend $18 billion to buy Oncor if they can’t control what they have just purchased.

Here’s the kicker: The Obama administration -- no friend of mergers -- approved NextEra’s purchase of Oncor. So the Texas PUC is more regulatory than the Obama administration.

The Texas legislature has had to rein in the PUC before. In 2005, the legislature finally got around to deregulating the Texas telecom industry. Up to that point, the PUC, three appointed bureaucrats, had been literally setting prices for telecom services. Moving from a price controls regime to a free market required taking power away from the PUC, which they fought kicking and screaming. The legislature prevailed, and Texas consumers have been benefiting ever since.

It’s the nature of appointed regulators to trust their own preferences over the free market, as Nelson and her two comrades at the PUC clearly do. But markets, not appointed bureaucrats, should determine whether a merger or takeover is a good idea, and markets have decided. The availability of capital for a given deal indicates that those whose own money is at stake have carefully scrutinized a deal and believe it will work. The only skin the PUC has in the game is protecting their bureaucratic turf.

The PUC is out-of-step with the clear desire of Texans for free-markets and limited government over rule by appointed bureaucrats, and if it doesn’t get its act together, another constraint of its power would make a good agenda item for the 86th legislative session.


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