Bankruptcy

Power Co-op reportedly loses hundreds of millions owed to ERCOT from 2021 winter storm as part of bankruptcy plan

Brazos Electric Power Cooperative is expected to file a final plan within days that will chart the Central Texas electric utility’s route out of bankruptcy and into financial stability, according to attorneys involved in the litigation.

The proposed plan reduces the amount the Waco-based electric cooperative owes the Electric Reliability Council of Texas by hundreds of millions of dollars, forces Brazos to sell three of its power plants, creates a fund for struggling low-income residents with high electrical problems. invoices and raises more than $1.5 billion in funding, according to court documents filed in U.S. Bankruptcy Court in Houston.

Brazos filed for Chapter 11 restructuring after ERCOT slapped the company with a $1.9 billion bill for electricity sold to Brazos during the February 2021 winter storm, which knocked out line power plants and caused prolonged blackouts across Texas.

“We believe we have an agreement in principle with all major stakeholders,” Lou Strubeck said. the lawyer representing Brazos. “There will be some final tweaks, but we believe we will have a plan in front of the judge next week for him to approve and allow us to start moving forward.”

U.S. Chief Bankruptcy Judge David Jones has scheduled a hearing for Sept. 13 to consider granting conditional approval of the tentative plan, which is called a disclosure statement.

Under the deal as it stands, Brazos will pay ERCOT more than $1.1 billion immediately and approximately $170 million going forward. In addition, ERCOT will receive part of the proceeds from the sale by Brazos of three of its power plants in 2023.

Lawyers involved in the bankruptcy say Brazos will not have to pay ERCOT about $500 million that ERCOT billed the electricity supplier.

“The settlement with ERCOT is unprecedented as it is the first time that ERCOT has made a settlement of this type,” Strubeck said. “This is one of the most complex and difficult bankruptcies I have ever handled.”

The agreement calls for Brazos and some of its cooperative members to raise between $1.5 billion and $2 billion through securitizations, which would take place in late 2022 and the first quarter of 2023. It also includes the creation of a fund of $140 million. hardship fund” that Brazos customers living near the poverty line can access to help pay their electricity bills – a measure suggested by Jones.

“I want a resolution,” the judge told the lawyers during a hearing earlier this year, “for the person who lives in a trailer in central Texas and somehow lives with 1 $800 a month who can’t afford to double their electric bill because it means they can’t shop the last week of the month That’s what we have to work for.

Brazos blamed its bankruptcy on ERCOT for imposing a staggering $9,000 per megawatt-hour rate — hundreds of times the normal rate — on power buyers during the storm.

ERCOT maintains that the price was justified, given the extraordinary market conditions created by the storm and, moreover, that it had no choice but to impose the high price because it had been summoned to do so by the Texas Public Utility Commission.

Most legal experts thought a deal between Brazos and ERCOT was highly unlikely because the parties were so far apart on their demands.

The Brazos bankruptcy was costly. Since filing for Chapter 11 protection in March 2021, Brazos has paid more than $80 million to legal and financial advisors working on the restructuring.

In total, more than 150 lawyers from law firms – including Norton Rose Fulbright, O’Melveny, Kirkland & Ellis, Munsch Hardt, Porter Hedges, Foley and Eversheds – billed time on the issue. Their rates range from $400 to $1,700 per hour.

Two financial advisory firms, Berkeley Research Group and FTI Consulting, hit Brazos with tabs exceeding $10 million each.

For a longer version of this article, visit TexasLawbook.net.