Texas Power Company Bankrupted By Electric Bill. Hooray For Deregulation!
You know things have gotten out of hand when the power company can't afford its electric bill. Brazos Electric Power Cooperative, which Reuters notes is Texas's "largest and oldest electric power cooperative," filed for Chapter 11 bankruptcy protection yesterday because it couldn't afford to pay a $2.1 billion charge from the state's grid operator, the Electric Reliability Council of Texas (ERCOT). Brazos Electric had committed to provide power to the grid, but wasn't able to because so many power stations were knocked offline by the winter storm last month. So the company had to meet that commitment by buying power at hugely inflated prices — $9,000 per megawatt-hour, the highest allowed (normal wholesale prices average around $35 per MWH).
On top of that, ERCOT added other fees that bumped the full price of electricity to $25,000 per MWH. In all, Brazos said, ERCOT's bill for just seven days amounted to three times as much as Brazos's wholesale power costs for the entire year of 2020.
Maybe Brazos Electric should have turned off the lights when it left the bedroom, and not just stood there with the fridge door open while deciding what to have for lunch, you ever think of that?
NPR explains the storm was simply catastrophic for the co-op:
Brazos said in court documents that the company was in solid financial shape leading up to the late February cold storm. As February began, the idea the company would end the month preparing for bankruptcy was "unfathomable."
"Yet that changed as a direct result of the catastrophic failures that accompanied the winter storm that blanketed the state of Texas on or about February 13, 2021 and maintained its grip of historically sub-freezing temperatures for days," the company said. "Electric generation equipment and natural gas pipeline equipment have been reported to have frozen, causing the available generation within ERCOT to dramatically decline."
Brazos supplies wholesale power to 16 member co-ops, and normally makes its money from them once they bill their customers. The Chapter 11 filing was essentially a move to protect the member co-ops and ratepayers from being swamped by the huge bill from ERCOT. Its court filing said,
Brazos Electric will not foist this catastrophic 'black swan' financial event onto its members and their consumers, and commenced this bankruptcy to maintain the stability and integrity of its entire electric cooperative system.
The bankruptcy is just the latest fallout from the storm and the blackouts caused when power plants froze up, because they hadn't been winterized, not even after a similar outage a decade ago. Seven members of ERCOT's board have resigned, and on Monday, the head of the Public Utility Commission also resigned.
Also on Monday, Texas Attorney General Ken Paxton sued consumer electric retailer Griddy, which Paxton accused of deceiving customers about the risks of its business model. Griddy touted lower electrical bills by charging customers $10 a month and then selling them power at the wholesale rate. Normally, that was cheaper than many other utilities, but when power costs exploded like an overloaded transformer following the ice storm, customers got bills for as much as $15,000.
Paxton isn't even exactly suing over that; instead, the state's lawsuit
targets Griddy's auto-billing system, which began drafting money out of customer's accounts as the bills rolled in.
"Griddy misled Texans and signed them up for services which, in a time of crisis, resulted in individual Texans each losing thousands of dollars," Paxton said in a statement. "As Texans struggled to survive this winter storm, Griddy made the suffering even worse as it debited outrageous amounts each day."
Griddy has itself been shut down by ERCOT for missing payments, too, so that's fun. The Texas Tribunereports that
Griddy customers will be absorbed by other electrical providers that are contracted with the PUC. But it's unclear if Griddy customers will still be required to pay their bills. Gov. Greg Abbott promised relief on Feb. 22 but hasn't provided details. Griddy declined to answer questions about what responsibilities their customers hold.
We're sure everything will work out for Texans and their plucky, can-sometimes-do power grid. If nothing else, the roughly $2.5 billion that power companies owe ERCOT can always be covered by passing on costs to ratepayers, who will no doubt be delighted to pay through the nose after the blackouts left five million Texans without power. After all, former Gov. Rick Perry volunteered ordinary Texans to shoulder all sorts of hardships to keep Texas power companies free of federal regulation.
[Reuters / NPR / Texas Tribune]
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