Electricity company Texas files for bankruptcy, citing $ 1.8 billion in claims from the grid operator

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

Brazos Electric Power Cooperative Inc is one of dozens of electricity suppliers facing massive costs as a result of a severe cold snap last month. The consequences pose a threat to utilities and energy marketers who collectively have to pay billions of dollars in blackout-related charges, executives said.

Extremely frigid temperatures shut down nearly half of the state’s power plants in mid-February, leaving 4.3 million people without heating or light for days on end and bursting water pipes, damaging homes and businesses. Brazos and others who committed to supplying power to the grid and were unable to do so had to purchase replacement power at high rates and cover the unpaid fees of other companies.

The state’s grid operator, Electric Reliability Council of Texas (ERCOT), said on Friday that $ 2.1 billion in initial bills remained unpaid, underscoring the financial pressure on utilities and energy marketers. More providers are likely to dismiss the bills in the coming days, executives said.

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

The city of Denton, in north Texas, last week sued ERCOT in a state court to prevent the company from charging fees not paid by other users of the net. Denton Electric could pay tens of millions of dollars for fees not collected from others, the lawsuit alleged.

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

ERCOT caused the pressure when it boosted spot market rates to $ 9,000 per megawatt hour (MWH) for more than four days and charged huge fees for services. The service charge was 500 times the normal rate, according to industry executives.

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