Texas’s largest electric-power cooperative filed for bankruptcy, saying it is overwhelmed by the more than $2.1 billion in sudden bills stemming from the extreme winter weather that blanketed the state last month. The bankruptcy filing by Brazos Electric Power Cooperative Inc. on Monday suggests that while the power blackouts in Texas are over, the process of settling massive bills stemming from the energy crisis is just beginning as the financial fallout spreads.
Brazos on Monday said it had “no choice” but to file for chapter 11 protection after receiving invoices from the state’s grid operator to settle the cost of purchasing energy during the weeklong period when freezing temperatures knocked power plants offline and left millions of customers without electricity for days. “Simply put, Brazos Electric suddenly finds itself caught in a liquidity trap that it cannot solve with its current balance sheet,” Clifton Karnei, the company’s executive vice president and general manager, said in a sworn declaration.
The Electric Reliability Council of Texas, which operates the state’s power grid, said on Friday that some power retailers had failed to pay for energy they purchased during the winter freeze, indicating they lacked the means to settle their bills. Credit-rating firms had flagged a handful of Texas cities, electric cooperatives and power authorities—including Brazos—as being at increased risk following the energy crisis, downgrading them or placing them on negative credit watch.
Mr. Karnei, who also sat on Ercot’s board until resigning last week, said the notion that a financially stable cooperative like Brazos would face bankruptcy was “unfathomable.” Before the winter weather event and resulting blackouts, the cooperative maintained investment-grade ratings. Power costs skyrocketed on the Texas wholesale market last month when power plants tripped offline, substantially reducing energy supplies. Texas regulators ordered prices for wholesale power to be set at $9,000 per megawatt hour for more than four straight days, and imposed ancillary fees that totaled more than $25,000 per megawatt hour, dramatic price increases that had a devastating impact on Brazos, according to Mr. Karnei’s filing.
The price increase was exponential for Texas retail electricity providers, local utilities and consumers compared with average power prices of $22 per megawatt hour last year.
In addition to the Ercot bills, Brazos owes creditors more than $2 billion in funded debt. The cooperative said it was “in communications with its lenders regarding financing options and an efficient chapter 11 process.”
Ercot presented Brazos with invoices for the seven-day event amounting to $2.1 billion, with payment required within days. Brazos responded by telling Ercot that it was abating payment. An Ercot representative said it was aware of the bankruptcy filing and will be participating in the court proceedings. The Public Utility Commission of Texas, which oversees Ercot, also didn’t respond to a request.