Tom Borelli

As NCAA college basketball fans celebrate “March Madness”, another lesser-known form of madness is transpiring in Texas with the acquisition of the electric utility TXU.

While the March Madness on the basketball court may leave fans disappointed, the TXU madness engineered by the environmental lobby will hurt investors and consumers on a broader scale.

The acquisition of TXU by corporate raiders Kohlberg Kravis Roberts & Company (KKR) and the Texas Pacific Group (TPG) is certainly noteworthy because of its record-setting price tag of $45 billion, but it will probably forever earn its place in history because the deal was designed to placate special interest groups, a.k.a. the “energy pimps.”

These energy pimps established a de facto veto power over this private transaction by establishing themselves as the enforcer of energy policy in Texas. By exploiting the corporate social responsibility (CSR) policies of lending institutions in TXU’s initial energy plan, they became the power broker that had to be paid-off.

It’s a classic example of how CSR policies, voluntary standards that go beyond the legal requirements of business, are increasingly being used to cut their own throats.

Last April, TXU announced plans to invest $10 billion in new electric power facilities to meet the growing demands of the Texas economy. “Texans want ample generation supply, access to lower electric prices and better air quality, and TXU will deliver all three,” said TXU CEO C. John Wilder in a company press release. The release further stated, “The future growth of the now vibrant economy could be dampened by volatile and rising energy commodity prices… There is no quick fix… There is no easy solution to reduce U.S. dependence on foreign energy sources and to reduce power prices.”

Then the announcement of KKR and TPG’s planned acquisition occurred. On March 1, TXU announced a reversal of its plans to build eight new coal-fired power plants, stating, “This is an important step in fulfilling TXU’s commitment, made in connection with the recently announced merger, to immediately seek to suspend the permit application process for the eight units announced last year.”

This sudden reversal raises a number of questions. Notably, who determined additional energy sources to meet growing demand were no longer needed, and who determined dependency on rising natural gas commodity prices was suddenly good for consumers?

The answer is the energy pimps. In this case, it is the Rainforest Action Network (RAN), Environmental Defense and the Natural Resources Defense Council. They opposed TXU’s energy-production plan because it was based on coal — a cheap source of energy but a source of carbon dioxide emissions.

Tom Borelli

Tom Borelli, Ph.D., is a Senior Fellow with FreedomWorks.

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