Brazos Electric seeks bankruptcy court ruling on energy prices in winter storm

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  • BRAZOS ELECTRICAL ENERGY COOPERATIVE, INC.

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  • TEXAS INC ELECTRICAL RELIABILITY BOARD

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(Reuters) – Brazos Electric Power Cooperative Inc has asked the judge overseeing its bankruptcy to determine that the Texas power operator applied the wrong pricing mechanism for electricity used during the state’s historic winter storm that left behind million people without electricity.

In court documents filed Wednesday, Brazos asked U.S. Chief Bankruptcy Judge David Jones in Houston to issue a partial summary ruling on the case, which he first raised in a lawsuit filed in August in connection with its bankruptcy against the Electric Reliability Council of Texas. Inc (ERCOT) on a $ 2 billion bill it received after the February storm.

Brazos, represented by Norton Rose Fulbright and O’Melveny & Myers, says the speedy resolution of the price dispute will reduce the scope of any further lawsuits on the bill and help him craft a reorganization plan.

Brazos, Texas’ largest and oldest electric co-op, filed for Chapter 11 protection in March after being hit by the massive bill. The bill for the seven-day storm lasted is nearly three times the co-op’s total cost of electricity as of 2020, which stood at $ 774 million, according to court documents. For several days during the storm, ERCOT fixed electricity prices at $ 9,000 per megawatt hour.

The cooperative now claims that ERCOT violated its market participation agreement with it by setting up energy tariffs that are not in line with this contract, which requires that the tariffs be set according to ERCOT’s own protocols in force at the time. Under certain circumstances, a scarcity pricing mechanism can be implemented to increase prices in the event of an energy shortage.

But the ERCOT protocols did not include “hard load shedding” or rolling outages as the trigger for scarcity pricing at the time of the storm, Brazos said in its August complaint. Without this trigger, the cooperative said, ERCOT did not have the power to raise prices to the extent that it did during the storm.

Had the power operator complied with protocols that Brazos said were in place during the storm, prices would have averaged around $ 2,404 per megawatt hour, the co-op said in its complaint.

ERCOT, represented by Munsch Hardt Kopf & Harr, said in court documents that it was simply following orders issued by the Texas Utilities Commission. The power operator recently decided to dismiss the lawsuit, saying that in the event of a conflict, the orders of the PUCT trump the terms of the participation agreement.

The judge should not even decide the issue of pricing, ERCOT said, because it would have to determine the enforceability of state regulations on electric utilities, which it says are only addressed by specific Texas courts or by the PUCT itself. In addition, any decision by Jones would affect other co-ops and market participants not involved in the bankruptcy, ERCOT argued.

The pricing issue is pure legal litigation, which means it can be decided without the need for evidence, Brazos said in Wednesday’s filing. Its official Unsecured Creditors Committee, represented by Kramer Levin Naftalis & Frankel, has also requested a partial summary judgment on the matter.

Brazos asked Jones to consider his claim on October 18, the same day ERCOT’s motion to dismiss the lawsuit is due to be heard.

The case is In re Brazos Electric Power Cooperative Inc, US Bankruptcy Court, Southern District of Texas, No. 21-30725.

For Brazos: Lou Strubeck and Nick Hendrix of O’Melveny & Myers; Jason Boland, Paul Trahan and Steve Peirce of Norton Rose Fulbright; and Lino Mendiola, Michael Boldt and Jim Silliman from Eversheds Sutherland (United States)

For ERCOT: Kevin Lippman, Deborah Perry, Jamil Alibhai and Ross Parker from Munsch Hardt Kopf & Harr

For the committee: Thomas Moers Mayer, Amy Caton, Jennifer Sharret, Sean Coffey, Ronald Greenberg from Kramer Levin Naftalis & Frankel; and John Higgins, Eric Wade, Heather Hatfield and Mr. Shane Johnson of Porter Hedges

Read more:

Brazos seeks more time to control bankruptcy amid new storm laws

Brazos seeks approval for $ 350 million bankruptcy loan

Texas Electricity Co-op files for bankruptcy, citing $ 1.8 billion grid debt

Reporting by Maria Chutchian


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