An environmental milestone deep in the heart of oil country

There's an awesome development in the fight against global warming. Wall Street has decided that ignoring it is bad for business. To be specific, two private equity companies are close to signing a deal to buy TXU Corp., an environmentally challenged power company, and turn it green.

We're not talking about some Earth Day pick-up-the-litter outing. This would be the biggest corporate buyout in history. And it could affect the future of the nearly 150 coal-fired power plants now on drawing boards across the country. Coal plants are a major source of planet-heating gases and ordinary pollution.

In negotiating the $32 billion deal, Kohlberg Kravis Roberts, Texas Pacific and four partners invited two environmental groups to the table. Environmental Defense and the Natural Resources Defense Council blessed the agreement after receiving promises to scrap eight of TXU's proposed 11 coal-fired power plants, spend $400 million to curb energy demand and cut carbon dioxide emissions to 1990 levels by 2020.

Much has been made of the investors' environmentalism. Texas Pacific senior adviser William Reilly headed the Environmental Protection Agency under the first President Bush. And Goldman Sachs, the equity firms' lender, is famous for its environmental conscience.

But make no mistake about it, these executives are not on a social mission. Money stands at the heart of the deal.

"This is not just a matter of 'Let's placate some greens and back out of these power plants,' " said Jon Coifman, spokesman for the Natural Resources Defense Council. "They (the investors) want a fundamentally different business strategy."

What was wrong with the old TXU strategy? Well, take a look.

It starts with a very unhealthy assumption that TXU could game any new laws covering greenhouse-gas emissions, which are clearly on their way. Nearly every serious presidential candidate, Democrat or Republican, vows to deal with climate change, as do nearly a dozen bills in Congress. And much of corporate America — from General Electric to Wal-Mart — is on board.

TXU executives basically said that by rushing through new coal plants, they could make some quick and dirty profits before a law is passed. They added that the plants could be grandfathered in, allowing them to pollute unto eternity. The recent change in congressional leadership, however, makes the "grandfathering" scenario unlikely.

Another misjudgment was infuriating a lot of Texans. The state let TXU hike its electricity prices to reflect the rising costs of natural gas. But when natural-gas prices fell, the company neglected to lower its rates.

The company also underestimated local hostility to primitive coal plants. A project planned for Waco — one of the survivors in the deal — has inflamed nearly everyone in the area, from students to businesspeople to ranchers. Hardly a Greenpeace convention.

TXU tried to make an end run around the citizenry by asking Gov. Rick Perry to intervene. But a Texas court threw out Perry's efforts to fast-track its proposed plants.

All this turmoil has not inspired confidence in TXU's leadership, which is why investors have recently sent its stock south. That lower price gave KKR and Texas Pacific another good reason to pounce.

Nothing against coal, mind you. It's a cheap and abundant energy source. And the know-how exists to burn it cleanly and skim off the greenhouse gases. When that technology is put to work — and some in the industry are trying — we can have another conversation about coal.

In the meantime, there will be no E-ZPass for old-fashioned coal-fired plants. Future buyouts in the utilities sector will be judged and measured by the TXU deal. Wall Street has joined with greens on global warming, and that's a team to contend with.

Providence Journal columnist Froma Harrop's column appears regularly on editorial pages of The Times. Her e-mail address is fharrop@projo.com