Texas’s biggest and oldest electric power cooperative filed for bankruptcy protection in federal court in Houston on Monday, citing a $1.8 billion bill from the state’s grid operator as the cause.
Brazos Electric Power Cooperative Inc, which serves over 660,000 customers throughout Texas, is one of the thousands of companies facing massive bill increases as a result of a prolonged cold spell last month. According to executives, the fallout challenges utilities and electricity marketers, who are facing billions of dollars in blackout-related costs.
Nearly half of the state’s power plants were knocked out by extremely cold temperatures in mid-February, leaving 4.3 million people without heat or light for days and bursting water pipes that caused damage to homes and businesses. Brazos and others who agreed to supply electricity to the grid, but were unable to do so were forced to purchase replacement power at exorbitant costs and pay other companies’ unpaid fees.
Electric Reliability Council of Texas (ERCOT), the state’s grid operator, reported on Friday that $2.1 billion in initial bills had gone unpaid, reflecting the financial burden on utilities and electricity marketers. Executives say that more providers are likely to refuse the bills in the coming days.
Maulin Patani, a member of Volt Electricity Provider LP, an independent power marketer that is not associated with the Brazos cooperative, said, “The municipal power sector is in a real crisis.” In an interview on Sunday, he proposed that ERCOT suspend the service charges to avoid further defaults.
Last week, the city of Denton in North Texas sued ERCOT to stop it from charging them for fees not charged by other grid users. Denton Electric could be hit with tens of millions of dollars in payments that they didn’t collect from anyone else.
Shortly after, debt analyst Fitch Ratings warned that all Texas municipal power companies that use the state’s grid could be downgraded. According to Fitch, the storm’s costs “could exceed the liquidity immediately available to these issuers.”
The Texas attorney general has opened an investigation into the blackout, seeking information from ERCOT and others about outages, pricing, and the emergency, claiming that they mismanaged the situation.
The pressure was sparked by ERCOT, which increased spot-market prices to $9,000 per megawatt hour (mwh) over the course of four days and imposed exorbitant service fees. According to industry executives, the service fees were 500 times the normal rate.
Clifton Karnei, a Brazos Electric coop executive who served on ERCOT’s board of directors until last week, signed the Brazos coop’s bankruptcy filings.