The largest and oldest power cooperative in Texas is filing for bankruptcy protection Chapter 11, citing last month’s winter storm leaving millions of state residents without power.
Brazos Electric Power Cooperative, which serves 16 distribution members serving more than 1.5 million Texans, said Monday it had amassed $ 2.1 billion in bills during the severe cold that hit Texas between February 13-19.
Like temperatures submerged and snow and ice hit the state on Valentine’s Day weekend, much of Texas’ power grid collapsed, followed by its water systems. Tens of millions of people huddled in icy houses that were slowly getting colder or fleeing for safety. With gas-fired power plants offline, wells frozen, a nuclear plant shut down, and wind turbines frozen, the state experienced a severe electricity shortage and wholesale electricity prices spiked as high at $ 9,000 per megawatt hour.
The high prices, which should act as an incentive for power generators to generate electricity, did not increase the available power, as much of the state’s production capacity was frozen.
Prior to the freeze, Brazos was “a financially robust, stable company with a clear vision for the future and a strong credit rating from” A “to” A +, “higher than most electric chicken coops, it said in a news release Monday.
It came into a bill of $ 2.1 billion
Brazos said it had received “inordinate bills” from the Texas Electric Reliability Council for collateral and for alleged charges for electrical service. The bills, totaling $ 2.1 billion, were due to be paid within days. That’s because the costs of Brazos as a cooperative are passed on to its members and retail consumers served by its members.
Brazos decided that “it cannot and will impose this catastrophic financial event on its members and consumers,” the cooperative said.
“I would like to emphasize that this action by Brazos Electric was necessary to protect the affiliated cooperatives and their more than 1.5 million retail members from unaffordable electricity bills as we continue to provide electrical services during the trial under court supervision”, Clifton Karnei, executive vice president and general manager of Brazos, said in a statement.
According to energy analysts, Brazos’ bankruptcy filing is likely the first of many due to the winter storm. Most Texans have fixed-price plans, according to the state’s public utility commission, where a customer pays a predetermined flat fee for every bit of electricity they use. This exposes the retailer to fluctuations in the wholesale price of energy.
“We will likely see a lot of electricity companies go out of business, especially those that offer flat rates to people,” Joshua Rhodes, a research associate at the University of Texas at Austin, recently told CBS News. “If you sell it for 10 cents per kilowatt hour and pay $ 9 per kilowatt hour, it won’t be long before your balance gets messed up.”
Power supplier Just Energy has said it could go out of business after losing as much as $ 250 million in the outage, according to CBS 11 in Dallas.
Electricity supplier Griddy sued again
Brazos’ bankruptcy comes as Texas Attorney General Ken Paxton said he is suing electricity supplier Griddy for passing huge bills to its customers during the winter storm in February. The lawsuit accuses Griddy of violating the Texas Deceptive Trade Practices Act and asks for a refund for customers.
Griddy charges $ 10 a month to give people a way to pay wholesale electricity prices instead of a flat rate. But when the temperature dropped well below freezing last month, wholesale prices spiked and Griddy customers were left with sky-high electricity bills. The retailer is confronted with at least one class-action suit from one Texas resident hit with $ 9,300 bill
ERCOT moved approximately 10,000 Griddy customers to other utility companies on Friday. Griddy said ERCOT “took our members and effectively closed Griddy”.
“We’ve always been transparent and customer-focused every step of the way. We wanted to continue the fight for our members to get 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 power outage.
Irina Ivanova of CBS News contributed to this report.