The largest and oldest energy cooperative in Texas is filing for bankruptcy protection, Chapter 11, citing last month’s winter storm which left millions of state residents without power.
The Brazos Electric Energy Cooperative, which serves 16 distribution cooperatives serving more than 1.5 million Texans, said on Monday that it accumulated $ 2.1 billion in accounts during the severe cold that hit Texas between February 13 and 19.
How temperatures plummeted and snow and ice lashed the state over Valentine’s Day weekend, much of Texas’ collapsed electrical network, followed by their water systems. Tens of millions huddled in icy houses that slowly cooled or fled to safety. With gas-fired power plants shut down, frozen wells, a closed nuclear power plant and frozen wind turbines, the state experienced a severe electricity shortage and wholesale electricity prices reached $ 9,000 per megawatt-hour.
The high prices, which should act as an incentive for energy producers to create electricity, did not lead to an increase in available energy, since much of the state’s production capacity was frozen.
Before the freeze, Brazos was “a financially robust and stable company with a clear vision for its future and a strong credit rating from” A “to” A + “,” higher than most electrical cooperatives, said in a press release on Monday.
A $ 2.1 billion bill came
Brazos said it received “excessively high bills” from the Texas Electric Reliability Council for warranty and for the supposed cost of electrical service. The invoices, totaling $ 2.1 billion, were due to be paid in a few days. This is because, as a cooperative, Brazos’ costs are passed on to its members and retail consumers served by its members.
Brazos decided that “it cannot and will not impose this catastrophic financial event on its members and consumers,” said the cooperative.
“Let me emphasize that this action by Brazos Electric was necessary to protect its member cooperatives and its more than 1.5 million retailer members from inaccessible electricity bills, as we continue to provide electrical service throughout the court-supervised process “, Clifton Karnei, executive vice president and general manager of Brazos, said in a note.
Brazos’ bankruptcy filing is probably the first of many due to the winter storm, according to energy analysts. Most Texans have fixed price plans, according to the state public utility commission, in which the customer pays a predetermined amount for each bit of electricity they use. This leaves the retailer exposed to fluctuations in the wholesale energy price.
“We are likely to see a lot of electricity providers going bankrupt, particularly those offering fixed-rate plans to people,” Joshua Rhodes, associate researcher at the University of Texas at Austin, told CBS News recently. “If you’re selling for 10 cents an kilowatt hour and paying $ 9 per kilowatt hour, it won’t be long before you mess up your balance sheet.”
Energy supplier Just Energy said it could close its doors after losing up to $ 250 million in blackouts, according to CBS 11 in Dallas.
Electricity supplier Griddy sued – again
Brazos’ bankruptcy occurs when Texas Attorney General Ken Paxton says he is suing electricity supplier Griddy for passing on bulky bills to its customers during the February winter storm. The lawsuit accuses Griddy of violating the Texas Deceptive Business Practices Act and seeks reimbursement for customers.
Griddy charges $ 10 a month to give people a way to pay wholesale electricity prices, instead of a flat fee. But when temperatures plummeted well below zero last month, wholesale prices soared and Griddy’s customers were left with very high electricity bills. The retailer is facing at least one class action lawsuit by a Texas resident who was hit with a $ 9,300 bill.
ERCOT transferred some 10,000 Griddy customers to other dealerships on Friday. Griddy said that ERCOT “took our members and effectively closed Griddy.”
“We have always been transparent and customer-centric at every stage. We wanted to continue to fight for our members to receive relief and that hasn’t changed,” said Griddy.
Last week, the city of Denton sued ERCOT for more than $ 207 million in electricity bills it incurred during the blackouts.
Irina Ivanova of CBS News contributed to this report.