Texas electricity company files for bankruptcy citing $ 1.8 billion in network operator claims

HOUSTON (Reuters) – Texas’ oldest and largest electricity cooperative filed for bankruptcy in Houston’s federal court on Monday, citing a contested $ 1.8 billion bill from the state’s network operator.

Brazos Electric Power Cooperative Inc is one of dozens of electricity providers facing huge expenses stemming from a severe cold spell last month. Precipitation threatens utilities and energy traders who collectively face billions of dollars in blackout charges, executives said.

Exceptionally cold temperatures brought down almost half of the state’s power plants in mid-February, leaving 4.3 million people without heat or light for days and breaking water pipes that damaged homes and businesses. Brazos and others, which undertook to supply energy to the grid and were unable, were obliged to purchase replacement energy at high rates and cover unpaid fees from other companies.

The state’s electricity grid operator, Electric Reliability Council of Texas (ERCOT), said on Friday that $ 2.1 billion in upfront bills had not been paid, highlighting the financial stress on utilities and energy traders. More providers are likely to reject the accounts in the next few days, executives said.

“The municipal energy sector is in a real crisis,” said Maulin Patani, founder of Volt Electricity Provider LP, an independent energy trading company that is not a member of the Brazos cooperative. ERCOT must suspend service charges to prevent further defaults, he said in an interview on Sunday.

The city of Denton, in northern Texas, last week sued ERCOT in a state court to prevent it from charging fees unpaid by other users of the network. Denton Electric could face tens of millions of dollars for fees that were not charged to third parties, the suit says.

Debt analyst Fitch Ratings also warned last week of possible downgrades for all Texas municipal energy companies using the state’s power grid. The storm’s costs “may exceed the liquidity immediately available to these issuers,” said Fitch.

ERCOT unleashed the squeeze by raising spot market rates to $ 9,000 per megawatt-hour (mwh) in more than four days and charging huge fees for services. Service charges were 500 times the normal rate, according to industry executives.

Brazos Electric cooperative executive Clifton Karnei, who was on ERCOT’s board of directors until last week, signed the Brazos cooperative’s bankruptcy filing. Through its 16 members of utility companies, Brazos supplies electricity to more than 660,000 customers across the state of Texas.