A U.S. bankruptcy judge on Monday approved a settlement agreement between ERCOT and Brazos Electric Power Cooperative and the co-op’s exit plan from Chapter 11 bankruptcy, resolving a dispute over $1.89 billion in market transactions during the February 2021 winter storm.
Chief Judge David Jones, with the U.S. Bankruptcy Court for Southern Texas, said the exit plan was “so much better” than he had expected.
Under 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 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 (21-30725).
The cooperative declared bankruptcy in the wake of the winter storm after being billed for $2.1 billion in wholesale prices. ERCOT later revised the amount due to the market to $1.89 billion.
ERCOT said it completed its economic and other principles in the deal. They included avoiding a default uplift to the market; immediate recovery from Brazos of $599.7 million in congestion revenue rights to fully replenish CRR funds and pay down securitization bonds; and ensuring the cooperative is no longer a financial counterparty or a CRR account holder in the market.
“Brazos will no longer be a financial counterparty with ERCOT again,” Chad Seely, the grid operator’s general counsel, told Texas regulators during a Nov. 3 open meeting.
ERCOT said Brazos has indicated the first payments will be made to ERCOT by February.
Summary of market participants’ election to recover short pay from Brazos | ERCOT
The grid operator distributed 755 election notices to market participants that gave them four options to recover their allocable portion of the Brazos short pay claim. Most (51.39%) selected the “accelerated cash” recovery option that will result in a 65% nominal recovery after 12 years, but with 43% of that coming on the effective date. Another 41.85% of the market participants chose “convenience cash” option, which results in a 63% nominal recovery on the effective date.
The 15 market participants who did not make a selection were given a 100% nominal recovery option that will take 30 years.
