According to the latest news, the largest and oldest electric power cooperative in Texas filed for bankruptcy protection in Houston, citing $1.8 billion debt.
Brazos Electric Power Cooperative Inc supplies electricity to over 660,000 consumers across the state. One of the dozens of providers is suffering huge charges arising from a severe cold snap last month. According to executives, the fallout threatens utilities and power marketers, collectively meeting billions of dollars in blackout-related charges.
Extremely frigid temperatures knocked out almost half of the state’s power plants in mid-February, leaving 4.3 million inhabitants without heat or light for days and bursting water pipes that ruined homes and businesses.
Brazos and others that committed to provide power to the grid, and could not, were required to purchase replacement power at high rates and cover other companies’ unpaid fees.
On Monday, the grid operator, the Electric Reliability Council of Texas, announced that $2.46 billion in bills went unpaid, underscoring the financial stress on utilities and power marketers. Significantly, ERCOT collects from power buyers and paying those who provide the electrons.
The municipal power sector is in a real crisis
Significantly, ERCOT triggered the squeeze when it lifted spot-market rates to $9,000 per megawatt-hour over more than four days and levied enormous fees for services. According to industry executives, the service fees were 500 times the usual rate.
Furthermore, Brazos executive Clifton Karnei, who sat on grid operator ERCOT’s board of directors until last week, said that Brazos finds itself caught in a liquidity trap that it cannot solve with its current balance sheet.
Brazos announced that ERCOT’s $2.1 billion invoices were almost three times the cooperative’s power prices for all of 2020.
Maulin Patani, a founder of Volt Electricity Provide4 LP, an independent power marketer that is not a member of the Brazos cooperative, the municipal power sector is in a real crisis. On Sunday, he announced that ERCOT should suspend the service charges to halt further defaults.