Brazos Electric Power Cooperative defeated, in part, the effort by the Texas electric operator to avoid a lawsuit related to a $2 billion energy bill stemming from the state’s historic February storm that left millions without power.
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In a Houston court, U.S. Bankruptcy Judge David Jones rejected arguments from both the Electric Reliability Council of Texas and the Public Utilities Commission of Texas that the dispute should not be handled in bankruptcy court and that allowing it to continue would infringe upon the state’s sovereignty.
“You’ve all made this far larger than, in my mind, it really is,” Jones said during the hearing.
Brazos, the oldest and largest electric co-op in Texas, filed for Chapter 11 protection in March after it received the enormous bill. According to court papers, the bill covered the seven days the storm lasted and is almost three times the co-op’s total power cost from 2020, which reached a total of $774 million. For several days during the storm, ERCOT set unprecedented electricity prices at $9,000 per megawatt hour.
In August, the co-op filed a complaint within its bankruptcy with the goal of rejecting ERCOT’s claim for the payment of the bill and also substantially reducing the amount, calling the charges constructively fraudulent and excessive.
The PUTC says Brazos is trying to effectively re-price the market. Ruling in favor of the co-op, Texas Assistant Attorney General Jason Binford argued the case could create a precedent that would lead to other electric providers pursing bankruptcy as a means of offloading their energy bills as well.
“I can say with zero exaggeration that this is the most important hearing of my career,” Binford stated.
Lawyers for Brazos argued that the issue is not related to state regulatory powers, but is limited to the terms of the contract between the co-op and ERCOT. Under the contract’s terms, they say, ERCOT applied the wrong pricing mechanism for electricity during February’s storm.
Though he mostly denied ERCOT’s motion to dismiss the case, the judge did dismiss a single count that objects to the claim based on pricing mechanisms outlined in the contract, saying he didn’t fully understand it. However, he will allow Brazos to revise the count.
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