A multi-billion-dollar bid to purchase Oncor  — the state’s largest transmission and distribution utility — has hit a regulatory bump.

Key state oversight officials now warn that their ability to protect ratepayers could be undermined by a $275 million termination fee in the proposed deal. The termination fee would be paid to Florida-based NextEra, the buyer, under certain circumstances if the transaction collapses.

“To me this is going to be a major issue,” Public Utility Commission Kenneth Anderson said during a Sept. 22 meeting. “I just am frankly a bit offended by it. It is what it is — but $275 million? I don’t know where the money is coming from, but it can’t be from Oncor’s ratepayers.”

Oncor serves more than 10 million customers in Texas and operates approximately 119,000 miles in transmission and distribution lines. It is owned by Energy Future Holdings, which declared bankruptcy last year.

Whether the regulatory objection constitutes a mild setback for NextEra or a major road block remains an open question. Commissioner Anderson said the proposed termination fee appeared to be an attempt to ram the deal “down our throats.”  Because Oncor is a regulated monopoly, any change of ownership requires pre-approval by Anderson’s agency.

NextEra, meanwhile, has said it has drafted a letter that addresses many of the concerns. (The letter, filed with the federal court in Delaware that’s handling the EFH bankruptcy, can be read here.)

NextEra’s bid to acquire Oncor comes after the collapse earlier this year of a separate offer by a rival consortium. Regulatory staff and consumer groups objected to complicated tax provisions in that previous deal, and those objections contributed to its eventual failure.

The proposed NextEra deal is more straight-forward, albeit still not without controversy. Commissioner Anderson, for instance, has raised separate conflict-of-interest concerns. PUC chair Donna Nelson also said NextEra may have to address additional tax questions.

“So stay tuned, I guess, is what we’re saying,” she said.

NextEra has said it wants to close the deal by early 2017. If successful, Oncor’s extensive transmission and distribution network would be added to NextEra’s existing fleet of Texas power plants. In all, the transaction be valued at more than $18 billion and require about $9.5 billion in financing, according to reports.

— R.A. Dyer