The settlement calls for the Waco-base cooperative to promptly repay $600 million it owes ERCOT, and to repay various ERCOT market participants over time
Brazos Electric potentially would repay the entirety of its $1.9 billion financial default from Winter Storm Uri — although some parties also could opt for accelerated but smaller repayments — under a recently announced bankruptcy settlement with ERCOT.
Unveiled November 3 during a Public Utility Commission meeting, the settlement calls for the Waco-base cooperative to promptly repay $600 million it owes the grid operator, and to repay various ERCOT market participants over time.
Brazos, the state’s largest electric cooperative, was among several market players that couldn’t manage spiking power prices during last year’s winter weather emergency and consequently failed to make required payments to ERCOT, also known as the Electric Reliability Council of Texas. The default led to the cooperative’s bankruptcy, which Brazos partially blamed on ERCOT itself.
ERCOT, meanwhile, was forced to withdraw money from a specialized “congestion revenue rights” account because of the short pays from Brazos and others. ERCOT used this CRR money to finance make-whole payments to separate market participants owed money after Winter Storm Uri, and some of those participants participated in the six-month-long settlement discussions.
Under the settlement agreement — if finally approved — Brazos would immediately repay approximately $600 million to ERCOT to replenish its Congestion Revenue Rights account. Market participants with claims against Brazos also would receive repayments, although they would have to wait 30 years for full reimbursements or relinquish part of their claims to receive repayment in an accelerated fashion.
Also under the terms of the settlement, Brazos will no longer be a financial counter-party at ERCOT, all purchase power agreements made by Brazos will expire without extension, and senior management at the cooperative must depart. If accepted by a federal bankruptcy judge, the settlement requires Brazos to sell all generation assets and operate exclusively as a transmission and distribution utility.
The electric cooperative’s case against ERCOT went to trial last March, but then moved onto arbitration after just one week at the urging of federal bankruptcy judge David Jones. The recently announced agreement has been approved unanimously by the ERCOT board and does not require further action by the PUC. It still needs authorization from the federal bankruptcy court, however, and that authorization could come as early as November 14.
To date no objections has been filed with the court. If the settlement is approved, the first funds will flow back to ERCOT in January. More information about the settlement can be found at this link.