Texas power cooperative files for bankruptcy, citing $1.8 billion grid debt

By Gary McWilliams

HOUSTON (Reuters) - The largest and oldest electric power cooperative in Texas filed for bankruptcy protection in Houston on Monday, citing a disputed $1.8 billion debt to the state's grid operator.

Brazos Electric Power Cooperative Inc, which supplies electricity to more than 660,000 consumers across the state, is one of dozens of providers facing enormous charges stemming from a severe cold snap last month. The fallout threatens utilities and power marketers, which collectively face billions of dollars in blackout-related charges, executives said.

Unusually frigid temperatures knocked out nearly half of the state's power plants in mid-February, leaving 4.3 million people without heat or light for days and bursting water pipes that damaged homes and businesses.

Brazos and others that committed to provide power to the grid - and could not - were required to buy replacement power at high rates and cover other firms' unpaid fees.

The grid operator, the Electric Reliability Council of Texas (ERCOT), on Monday said that $2.46 billion in bills went unpaid, underscoring the financial stress on utilities and power marketers. ERCOT acts in part as a clearinghouse, collecting from power buyers and paying those who provide the electrons.

'LIQUIDITY TRAP'

ERCOT triggered the squeeze when it pushed up spot-market rates to $9,000 per megawatt hour (mwh) over more than four days and levied huge fees for services. The service fees were 500 times the usual rate, industry executives said.

Brazos executive Clifton Karnei, who sat on grid operator ERCOT's board of directors until last week, told the federal court that Brazos "finds itself caught in a liquidity trap that it cannot solve with its current balance sheet".

Brazos said ERCOT's $2.1 billion invoice was nearly three times the cooperative's power costs for all of 2020. Brazos responded by issuing a notice of force majeure, rejecting the bills, Karnei's statement said.

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

Debt analyst Fitch Ratings, meanwhile, has warned of potential downgrades to all Texas municipal power firms that use the state's grid. Costs from the storm "could exceed the liquidity immediately available to these issuers," Fitch said last week.

The chairwoman of the state Public Utility Commission, DeAnn Walker, resigned on Monday following scathing criticism from Texas lawmakers of her oversight of the grid operator.

The city of Denton last week sued ERCOT in a state court to prevent it from charging the city for amounts uncollected from other grid users.

Large Texas employer Textron Inc on Monday urged the PUC to roll back power charges.

The Texas attorney general has launched an investigation into the blackout, calling for ERCOT and others to provide documents on the outages and pricing, saying they mismanaged the crisis.

 

(Reporting by Gary McWilliams; Editing by Louise Heavens, David Goodman and Sonya Hepinstall)