Can a bankruptcy court cut coal pollution in Texas? Green groups say yes

By Mike Lee, Edward Klump | 10/21/2015 07:00 AM EDT

DALLAS — Environmentalists started a long-shot campaign yesterday to steer a Texas power company’s massive bankruptcy away from coal-fired generation.

DALLAS — Environmentalists started a long-shot campaign yesterday to steer a Texas power company’s massive bankruptcy away from coal-fired generation.

The Dallas County Commissioners voted 5-0 on a resolution, backed by the Texas chapter of Public Citizen and the Dallas County Medical Society, calling on the bankruptcy judge handling Energy Future Holdings Corp.’s (EFH) case to clean up three outdated coal plants as part of the company’s reorganization.

Neither the county commissioners nor the environmentalists has standing in the bankruptcy case, which is being handled in a federal court in Delaware. Still, pressure from environmentalists and local governments has worked in the past, said Public Citizen’s Tom "Smitty" Smith.


Almost a decade ago, when financiers first proposed the $45 billion buyout of TXU Corp. that created EFH, more than 30 cities and counties passed resolutions opposing the company’s plans to build new coal plants. EFH ultimately agreed to build three new coal-fired generating units instead of 11 (Greenwire, June 26, 2007).

"We’re calling on EFH’s management to be as responsible on the way out as they were on the way in," Smith said.

The groups plan to enlist other cities and counties in a similar campaign aimed at influencing the bankruptcy court, Smith said.

The plan could also impact bidders for EFH’s assets, said Dallas County Judge Clay Jenkins, who is the county’s top elected official.

"If a buyer knows it’s getting five coal plants that need to be shut down in the next five years, then they can adjust what they’re offering," Jenkins said.

The groups were bolstered by research released last week by the University of North Texas and the environmental group Downwinders at Risk showing that pollution controls on three of EFH’s 1970s-vintage coal plants — combined with other steps — could help reduce peak ozone levels by more than 5 percent (EnergyWire, Oct. 19).

That level of ozone reduction across the Dallas-Fort Worth area would prevent 77 deaths a year, along with 350 emergency room visits and 120,000 school absences, said Robert Haley, a physician who’s on the board of the Dallas County Medical Society. Those health impacts cost consumers $513 million a year, Haley said, and the plants are worth only $424 million.

Ozone, or smog, is a lung irritant that contributes to asthma, heart disease and other health problems. The Dallas-Fort Worth area has violated U.S. EPA’s ozone standards since they were written in 1990, and environmentalists have complained that state regulators have been slow to impose pollution controls on major industries.

EFH declined to comment on the Dallas County vote. It said in a written statement last week that the ozone research is "sponsored by a small group of physicians with the Dallas County Medical Society and activists with Downwinders at Risk and are part of a continuing campaign that fits their political agenda."

Bankruptcy hearing set for next month

The discussion comes as the bankruptcy court prepares to consider EFH’s reorganization plan at a Nov. 3 hearing.

A key part of the bankruptcy is EFH’s plan to sell its roughly 80 percent of Oncor Electric Delivery Company LLC to a consortium led by Dallas businessman Ray Hunt as part of a $18 billion or more deal. Oncor, a regulated utility that delivers power to more than 3 million customers, is separate from the rest of EFH and still produces cash (EnergyWire, Oct. 1).

Separately, EFH sued the company that owns the other 20 percent of Oncor this week, trying to get the company to accept the Hunt-led offer, The Wall Street Journal reported yesterday. The company, Texas Transmission Investment LLC, is controlled by a Canadian pension fund and has held out for a better offer.

EFH also plans to spin off the unit that owns Luminant, its generation business, and TXU Energy, its retail electric provider, according to a company document.

Private equity companies led by Kohlberg Kravis Roberts & Company LP, TPG Capital and the Goldman Sachs Group Inc. bought TXU in 2007 in what was then the biggest leveraged buyout in history. The deal was essentially a bet that long-term power prices would rise, allowing EFH to profit from relatively low-cost coal generation.

Within a few years, though, a fracking boom in Texas unleased a wave of cheap natural gas that made coal-fired plants less attractive, and advances in wind and solar power also helped push down electric prices.

By the time the company filed for Chapter 11 last year, it had $49.7 billion in debt and other liabilities and $36.4 billion in assets.