Brazos Electric, the largest and oldest electric power company in Texas, announced on Monday that it had filed for bankruptcy because its debts total $10 billion and its assets are only $1 billion.
The firm, which provides power to 16 distribution cooperatives and serves more than 1.5 million residents, was impacted by two winter storms in February that left some 4.3 million businesses and homes without power for several days in the state.
“Prior to the harsh winter weather, Brazos Electric was a financially robust company,” the firm said in a statement, in which it indicated that, under bankruptcy protection, it will initiate a financial restructuring.
During the emergency Brazos and other energy suppliers had to purchase replacement supplies at higher rates and had to pay the rates of other companies.
Last Friday Electric Reliability Coucil of Texas (ERCOT), the entity that operates the state’s power grid, indicated that there were about $2.1 billion in unpaid upfront bills.
“As a result of catastrophic failures during the storms, ERCOT submitted excessively high bills to Brazos for collateral costs, requiring payment within days,” according to the utility.
“As a cooperative whose costs are passed on to members and ultimately charged to the minority consumers served by member cooperatives, Brazos Electric determined that it could not offload this catastrophic financial event onto its members and those consumers,” the statement added.
Last week, the North Texas municipality of Denton sued ERCOT in state court to prevent it from being charged for rates not paid by other grid users.
Denton Electric could find itself on the hook for tens of millions of dollars in unpaid fees from other grid users, according to the lawsuit.
The financial debacle for Brazos, and eventually other Texas electric utilities, is a result of ERCOT’s decision to raise its rates to $9,000 per megawatt-hour for more than four hours and charge hefty fees for its services. Industry sources noted that this increase raised rates 500 times above their usual level.
Brazos Electric’s statement noted that the company will implement a financial restructuring and, in the meantime, “remains committed to providing affordable and reliable electric service to its member cooperatives.”
“This action was necessary to protect cooperatives and more than 1.5 million retail members from unaffordable electric bills,” Clifton Karney, the firm’s Vice President, said in a statement.