After a decade marked more by false starts than successes for private equity trying to break into the electric-utility business, the announced $45 billion private equity buyout of TXU Corp. may be the breakthrough development that opens the traditional utility sector to a wave of new capital, management and innovation, according to White & Case partner Earle O'Donnell, the head of the firm's energy practice.

"The structure of the traditional electric utility industry, with its heavy regulation, relatively protected local markets, and close political relationships at the state level, has tended to reduce financial institution opportunities to own integrated electric utilities," said O'Donnell, a partner in White & Case's Washington office. "But this deal may be a harbinger that the game could change dramatically."

O'Donnell said that the long-term implications of the deal will have the most impact financially. "In an extremely capital-intensive business, the private equity world opens a new well of capital for utilities to modernize and to grow," he said. "This is the most important reason that smart utility managers may be receptive to buyers that the industry may have once resisted."

Additionally, said O'Donnell, "New management ideas may foster a more entrepreneurial, customer-service oriented culture that brings innovation and service enhancement on line faster than in the past."

On the buyer's side, he said, the KKR-led group has shown sophistication and savvy in lining up a coalition of support from local political leaders and environmental groups. "While the outcome of the TXU deal still remains to be seen, the sheer magnitude of the deal suggests that private equity funds will now be a growing factor in the future share and growth of the utility business," O'Donnell said.