Texas ability cooperative data files for bankruptcy, citing $1.8 billion grid credit card debt

By Gary McWilliams

HOUSTON (Reuters) – The premier and oldest electric powered power cooperative in Texas filed for individual bankruptcy security in Houston on Monday, citing a disputed $1.8 billion debt to the state’s grid operator.

Brazos Electrical Electrical power Cooperative Inc, which provides electrical power to additional than 660,000 consumers across the state, is 1 of dozens of suppliers dealing with huge fees stemming from a critical cold snap previous month. The fallout threatens utilities and electric power entrepreneurs, which collectively confront billions of dollars in blackout-relevant prices, executives explained.

Unusually frigid temperatures knocked out approximately 50 percent of the state’s energy plants in mid-February, leaving 4.3 million folks without heat or light-weight for times and bursting water pipes that damaged properties and organizations.

Brazos and many others that fully commited to present electric power to the grid – and could not – have been required to acquire replacement electric power at substantial rates and include other firms’ unpaid service fees.

The grid operator, the Electrical Reliability Council of Texas (ERCOT), on Friday mentioned that $2.1 billion in initial payments went unpaid, underscoring the financial anxiety on utilities and energy entrepreneurs.

‘LIQUIDITY TRAP’

Brazos executive Clifton Karnei, who sat on grid operator ERCOT’s board of directors right until past 7 days, advised the federal courtroom that Brazos “finds itself caught in a liquidity lure that it can not fix with its current balance sheet”.

ERCOT acknowledged Brazos submitting and expects to disclose additional payment defaults by grid consumers, a spokeswoman reported.

“The municipal energy sector is in a real disaster,” said Maulin Patani, a founder of Volt Electricity Company LP, an impartial ability marketer that is not a member of the Brazos cooperative. ERCOT should really suspend the support charges to halt further more defaults, he mentioned in an interview on Sunday.

The General public Utility Fee (PUC), the state regulator that oversees ERCOT, did not reply to requests for remark.

Tale proceeds

Large Texas employer Textron Inc on Monday urged the PUC to roll back again ability fees.

ERCOT, in the meantime, faces legal motion from the metropolis of Denton, which last week sued the grid operator in a state court to reduce it from charging the town for quantities uncollected from other grid buyers.

Strain MOUNTS

Debt analyst Fitch Scores, meanwhile, has warned of likely downgrades to all Texas municipal electricity corporations that use the state’s grid. Costs from the storm “could exceed the liquidity quickly offered to these issuers,” Fitch mentioned past 7 days.

The Texas attorney common has launched an investigation into the blackout, calling for ERCOT and other folks to present documents on the outages and pricing, expressing they mismanaged the disaster.

ERCOT brought on the squeeze when it pushed up location-current market prices to $9,000 per megawatt hour (mwh) in excess of additional than 4 times and levied massive expenses for products and services. The provider costs had been 500 times the usual charge, business executives said.

Brazos Electric powered reported ERCOT issued an bill past week for $2.1 billion, practically a few situations the cooperative’s energy expenditures for all of 2020. Brazos responded by issuing a see of pressure majeure, rejecting the expenses, Karnei’s statement claimed.

(Reporting by Gary McWilliams Enhancing by Christopher Cushing, Stephen Coates, Louise Heavens and David Goodman)