Texas bankruptcy lawsuit begins with energy bill over $2 billion after 2021 winter storm

Electrical Reliability Council of Texas (ERCOT) Command Center in Taylor, Texas August 14, 2012. REUTERS/Julia Robinson

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  • Grid operator says high prices are part of the energy system
  • Texas’ largest electric co-op says bill expected to be $770 million

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(Reuters) – A lawsuit over a $2 billion bill sent to Texas’ largest electricity cooperative following last year’s deadly winter storm began on Tuesday, the network operator of the State defending the high prices it charged during the storm.

The bill sent by the Electric Reliability Council of Texas (ERCOT) to the now bankrupt Brazos Electric Power Cooperative is at the center of Brazos’ Chapter 11 case in Houston. The co-op filed for bankruptcy last March following the storm, which knocked out power to more than four million homes and businesses and killed more than 200 people as temperatures plunged into single digits in many regions.

Brazos argues that ERCOT violated the terms of its contract by charging $9,000 per megawatt hour for much of the storm, which lasted about a week.

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U.S. Chief Bankruptcy Judge David Jones is now being asked to either allow ERCOT’s $1.9 billion claim in the Brazos bankruptcy or drastically reduce the amount. Brazos says the amount he owes should be closer to $770 million.

The outcome of the lawsuit will determine how Brazos moves forward with its bankruptcy. He said he couldn’t come up with a reorganization plan until he knew exactly how much he owed ERCOT.

An ERCOT lawyer, Jamil Alibhai of Munsch Hardt Kopf & Harr, told the judge on the first day of the trial in Houston bankruptcy court that a key feature of the Texas energy market is so-called pricing. of “scarcity”, which kicks in when the energy supply becomes limited and is designed for emergency situations. This scarcity pricing, he argued, explains the $9,000 per megawatt-hour price.

Alibhai also said that with the storm predicted for months, the high prices should not have come as a surprise to Brazos.

Brazos has long argued that ERCOT’s implementation of such high prices was a breach of its Market Participation Agreement because the conditions required for such pricing were not met. On Tuesday, a Brazos lawyer also claimed that high prices did nothing to solve the problem of power generation during the storm.

Lino Mendiola of Eversheds Sutherland (USA) called the $9,000 per megawatt price “an attempted remedy that did not solve any of the problems caused by the winter storm”.

Former ERCOT CEO Bill Magness, who was fired shortly after the storm, spoke on behalf of ERCOT as the first witness in the trial.

The trial is expected to last several days.

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 US; and Lino Mendiola, Michael Boldt and Jim Silliman of Eversheds Sutherland (USA)

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

Read more:

One Year After Epic Storm, Texas’ Largest Electric Co-op Takes On Grid Operator

De Brazos bankruptcy judge cuts ERCOT defense of $2 billion bill

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