Texas power cooperative files for bankruptcy facing $2bn bill for storms
Electric service trucks line up after a snow storm on February 16, 2021 in Fort Worth, Texas.
(Getty Images)Texas’ largest and oldest power cooperative, which supplies wholesale energy to 68 counties and an estimated 700,000 customers, filed for bankruptcy protection on Monday, after it faced sudden bills worth more than $2 billion stemming from the catastrophic winter storms that rolled over the state throughout February.
Brazos Electric Power Cooperative, a wholesaler which supplies energy to other power cooperatives that give it directly to customers, said it had “no choice” but to make the move, it announced in a filing in federal court in Houston.
“Simply put, Brazos Electric suddenly finds itself caught in a liquidity trap that it cannot solve with its current balance sheet,” Clifton Karnei, a company executive, said in a sworn declaration.
Brazos is one of the many utility companies under severe financial strain after super-sized winter storms knocked out nearly half the state’s power plants and left more than 4 million people without electricity. State power authorities also ordered further planned blackouts to avoid a total systemic collapse.
Amid this squeeze on the grid, where customers desperately sought power to warm their homes as plant after plant failed, the state’s grid operator, Electric Reliability Council of Texas (ERCOT) raised energy rates to more than $9,000 per megawatt hours to reflect demand. Service fees were jacked up around 500 times the usual rate.
As a result, Brazos and others were suddenly left with massive power bills — as were consumers. ERCOT said on Friday that $2.1 billion in initial bills went unpaid.
“The municipal power sector is in a real crisis,” said Maulin Patani, a founder of Volt Electricity Provider LP, an independent power marketer, told Reuters on Sunday.
The storms may have abated, but their consequences live on in the Lone Star State. If more and more utility bills from companies go unsettled, that could pass on highly disputed settlement costs to other power retailers and municipal power companies to cover the shortfall.
As of midday Monday, hundreds of thousands of Texans were still faced with boil water advisories, and the state’s attorney general said on Monday he’s suing electricity provider Griddy for charging customers huge bills during the energy crunch.
Lawmakers have also begun investigating what caused the failures, one of the worst power outages in US history, and hauled energy executives to a hearing for questions last week.
President Joe Biden visited Texas on Friday to check on recovery efforts.
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