TXU Comes Under Fire for Alleged Price Manipulations, Distribution Rate Violations

TXU Corp., the Texas electric utility which agreed to be bought by private equity investors Kohlberg Kravis Roberts & Co. for $32 billion, has come under attack by the state's Public Utility Commission [PUC] for what it alleges were manipulations of the utility market in 2005. The company is also accused of transmission and distribution rates that were at least 4% too high, violating strict state regulation and leading to extra profits of $80 million. If found guilty when it appears before the PUC, TXU will face $70 million in proposed market refunds to wholesale power buyers, as well as $140 million in penalties. The findings were confirmed by energy-consulting firm Potomac Economics Ltd., hired by state officials to act as an independent monitor. In addition, Texas legislators are considering empowering the PUC to look into TXU's sale to Kohlberg & Co. to investigate its likely effect on consumers. TXU denied any wrongdoing in sharp terms saying PUC staff "steadfastly refused to share with us the data...used to concoct this irresponsible enforcement action."

Sources: Wall Street Journal, MarketWatch, AP
Commentary: TXU Acquisition: Are Investors Succumbing To Short-Term Thinking? • SEC Alleges Insider Trading of TXU Call Options • TXU Soaring: Largest Leveraged Buyout in U.S. Corporate History At Hand
Stocks/ETFs to watch: TXU Corp. (TXU). Competitors: American Electric Power Co. Inc. (AEP), Centerpoint Energy Inc. (CNP), Reliant Energy Inc. (RRI). ETFs: Utilities HOLDRs (UTH), Utilities Select Sector SPDR (XLU), Vanguard Utilities ETF (VPU)

Seeking Alpha's news briefs are combined into a pre-market summary called Wall Street Breakfast. Get Wall Street Breakfast by email -- it's free and takes only seconds to sign up.