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Texas' oldest and largest generation electric co-op files for Chapter 11 Bankruptcy

Posted at 5:49 PM, Mar 01, 2021
and last updated 2021-03-01 19:10:14-05

WACO, TX — Brazos Electric Cooperative, Texas' oldest and largest generation and transmission electric cooperative, filed a voluntarily petition of relief under Chapter 11 of the United States Bankruptcy code.

"This is a financial restructuring; this is not going to affect our operations or provision of electricity to our members at all," Executive Vice President Clifton Karnei said.

This comes after the devastating 2021 Texas winter storm.

ERCOT sent them a bill for $2.1 billion which they were expected to pay in only a few days.

This is when they made the decision to file for bankruptcy.

Brazos Electric did send a Force Majeure Event Letterto ERCOT stating the unprecedented causes that led to the letter were due to extremely high natural gas prices and gas shortages that forced generators to de-rate or go off-line.

Although as they watched gas and electricity prices rise, the bill they received didn't come as a huge surprise.

"Power prices were at the bid cap for over four days straight, so we knew the financial impact of it so by the time we got the bills last week we knew what we were going to get via email," Karnei said.

Robert Tennant, Assistant Professor of Accounting at Texas A&M Central Texas says the price for wholesale electricity skyrocketed during the storm and that led to not only Brazos Electric's $2.1 billion bill but customers receiving higher than normal electricity bills.

"Because everybody was buying it at the spot rate escalated it to being the maximum allowed by law in the state of Texas to $9,000 per megawatt," Tennant said.

Karnei emphasized that filing for bankruptcy helps them not extend the burden of this bill to their member co-op's and their customers.

"It doesn't make any sense to send somebody a bill they cannot pay, and we wanted to protect them from unaffordable electric bills," Karnei said.

The current problem is that as electricity prices increased, customers and other municipalities were still using, creating and buying electricity to survive. Now it's come with the question, "who is going to pay for it?"

Tennant thinks that Brazos Electric won't be the only company with an extremely high bill from ERCOT and more might follow their path.

"Their customers don't have it, they don't have it, none of the municipalities have the liquidity to cover billions of dollars of racked up fees," Tennant said.

"We think the state needs to get involved with down the road because this is a statewide disaster in my opinion," Karnei said.

Brazos Electric has a court hearing scheduled for Wednesday, March 3.

Spanning across 68 counties and with 17 member partners they provide electricity to more than 1.5 million Texans.