A U.S. bankruptcy judge on Tuesday conditionally approved Brazos Electric Power Cooperative’s disclosure statement about its deal with ERCOT and its proposed exit plan from Chapter 11 bankruptcy.
The decision of Chief Judge David Jones, of the U.S. Bankruptcy Court for Southern Texas, allows Brazos — which declared bankruptcy in the wake of the February 2021 winter storm after being billed for $2.1 billion in wholesale prices — to begin soliciting votes from creditors and settle its dispute with ERCOT. The grid operator later revised the amount due to the market to $1.89 billion (21-30725).
Under the terms of the settlement, ERCOT will receive $1.4 billion. Brazos will pay $1.15 billion up front and then make annual payments to ERCOT of $13.8 million for 12 years. The cooperative will also contribute about $116 million from the sale of its generation assets to fund payments through ERCOT for market participants still short from market transactions during the week of the storm. (See ERCOT, Brazos Reach Agreement in Bankruptcy Case.)
Brazos agreed to sell its generation assets and transition to a transmission and distribution utility. It owns about 4 GW of natural gas-fired capacity.
Under the agreement, Cliff Karnei, Brazos’ general manager since 1997, and three other members of the cooperative’s senior management will leave their jobs by March 2023. In addition, Karnei and two others will be barred from working for any ERCOT market participant if they’re acting as a financial counterparty to the grid operator.
The votes and any objections are due Oct. 28. Another hearing has been scheduled for November to consider final approval of the settlement and the exit plan.
Brazos filed for bankruptcy in March 2021 after receiving the $2.1 billion invoice from ERCOT. The cooperative responded with a force majeure event letter and by disputing the charges. (See ERCOT’s Brazos Electric Declares Bankruptcy.)
The co-op then opened an adversary proceeding against ERCOT in August 2021, challenging the Texas Public Utility Commission’s emergency orders directing the grid operator to set prices at their $9,000/MWh limit to reflect the scarcity in the market. It sought to reduce the short-pay claim by at least $1.1 billion, the amount it attributed to ERCOT’s administrative adjustment.
The adversary proceeding trial began earlier this year but was suspended after several weeks to allow the parties to mediate the dispute. (See ERCOT, Brazos Agree to Mediation in Dispute.)
Gregory Power to Full-time Ops
Also on Tuesday, NRG Energy (NYSE:NRG) notified ERCOT that it plans to return its Gregory Power Partners gas-fired facility to fulltime operations, effective Oct. 1.
The company submitted a notification of change of generation resource designation for the three units and their 365 MW of capacity. The plant, located outside Corpus Christi, had been on seasonal operations from May through December. It went online in 2002.
The plant was shut down in late 2016 when its cogeneration partner, Sherwin Alumina, filed for bankruptcy and ceased operations. NRG returned the facility to seasonal operations in 2019. (See ERCOT Approves Seasonal Plan for NRG Cogen Units.)
