Texas Electricity Firm Files for Bankruptcy Citing $1.8 Billion in Claims From Grid Operator

March 1, 2021 Updated: March 1, 2021

HOUSTON—Texas’s largest and oldest electric power cooperative on Monday filed for bankruptcy protection in federal court in Houston, citing a disputed $1.8 billion bill from the state’s grid operator.

Brazos Electric Power Cooperative Inc, which supplies electricity to more than 660,000 consumers across the state, is one of dozens of providers facing enormous charges stemming from a severe cold snap last month. The fallout threatens utilities and power marketers, which collectively face billions of dollars in blackout-related charges, executives said.

Unusually frigid temperatures knocked out nearly half of the state’s power plants in mid-February, leaving 4.3 million people without heat or light for days and bursting water pipes that damaged homes and businesses. Brazos and others that committed to provide power to the grid—and could not—were required to buy replacement power at high rates and cover other firms’ unpaid fees.

The state’s grid operator, Electric Reliability Council of Texas (ERCOT), on Friday said $2.1 billion in initial bills went unpaid, underscoring the financial stress on utilities and power marketers. More providers likely will reject the bills in coming days, executives said.

“The municipal power sector is in a real crisis,” said Maulin Patani, a founder of Volt Electricity Provider LP, an independent power marketer that is not a member of the Brazos coop. ERCOT should suspend the service charges to halt further defaults, he said in an interview on Sunday.

An ERCOT spokeswoman did not have an immediate comment. The Public Utility Commission, the state’s regulator that oversees ERCOT, was unavailable for comment.

The city of Denton, in north Texas, last week sued ERCOT in a state court to prevent it from charging it for fees unpaid by other users of the grid. Denton Electric could face tens of millions of dollars for fees that were not collected from others, the suit claimed.

Debt analyst Fitch Ratings last week also warned of potential downgrades to all Texas municipal power firms that use the state’s grid. Costs from the storm “could exceed the liquidity immediately available to these issuers,” Fitch said.

Texas’s attorney general has launched an investigation into the blackout, calling for ERCOT and others to provide documents on the outages, pricing and emergency, saying they mismanaged the crisis.

ERCOT triggered the squeeze when it pushed up spot-market rates to $9,000 per megawatt-hour (MWh) over more than four days and levied huge fees for services. The service fees were 500 times the usual rate, according to industry executives.

Brazos Electric coop executive Clifton Karnei, who sat on ERCOT’s board of directors until last week, signed the Brazos coop’s bankruptcy submissions.

An attorney for Brazos did not reply to a request for comment.

By Gary McWilliams