HOUSTON (AP) — Energy Future Holdings filed for Chapter 11 bankruptcy reorganization in a Delaware court on Tuesday, an expected move that will not harm power production or distribution in Texas as the company halves its $40 billion debt load.
The company owns TXU Energy, which has the largest share of the Texas retail electricity market, and Luminant, the state's largest power generator, but the bankruptcy is not likely to impact consumers in the short-term because distribution and production will continue.
But the long-term impacts of restructuring remain unknown and could lead to the shutdown of some power plants, a large tax bill for the company or a leaner, more competitive market — a plus for consumers who could then enjoy lower electricity bills.
The outcomes, though, will not be fully apparent until the restructuring is complete, which the company hopes to do within 11 months. Surprises, however, are unlikely because Energy Future has been talking to the largest stakeholders, including the IRS and environmental agencies, said James Hempstead, an analyst for Moody's who has been following the company for more than 20 years.
"It's a little anti-climactic," Hempstead said of Tuesday's filing. "They've done a very good job in keeping everyone apprised as to what the situation is going to look like."
Still, a new owner could, for example, decide to either diminish the company's reliance on coal as it becomes more costly to meet federal clean air regulations — such as a cross-state pollution ruling upheld Tuesday by the U.S. Supreme Court — or even shutter old facilities rather than invest in costly updates, Hempstead said. The impact of such decisions could be widespread because several Texas counties and school districts rely on the coal plants for taxes and jobs.
Energy Future Holdings has insisted the coal plants will continue to operate, and Hempstead notes that for now, they are profitable.
Energy Future's troubles can be traced back to its bet that natural gas prices would rise, helping it repay the interest and loans it took to acquire TXU Energy in 2007. But a glut of U.S. shale production has instead brought natural gas prices to record lows, hurting the company's bottom line and its ability to pay its debt. Recently, it skipped a deadline to pay $109 million in interest.
As part of the bankruptcy, Energy Future's subsidiary, Luminant Mining Co., will no longer be able to participate in the state's self-bonding reclamation program. This program allows companies that have $10 million and other assets to avoid putting up cash in advance for required restoration of mined land.