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Court approves Brazos Electric reorganization plan, orders $1.89B ERCOT payment

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Court approves Brazos Electric reorganization plan, orders $1.89B ERCOT payment

A federal bankruptcy court judge approved Brazos Electric Power Cooperative Inc.'s reorganization plan to reimburse suppliers for deliveries of high-priced electricity during a 2021 winter storm that caused historic blackouts across Texas.

The cooperative filed for Chapter 11 bankruptcy protection in March 2021 after receiving "excessively high invoices." It will pay $1.89 billion to the Electric Reliability Council of Texas Inc. out of the $2.1 billion that the grid operator billed it — significantly more than the $1.44 billion originally authorized in September, according to a Nov. 14 order signed by U.S. Bankruptcy Court for the Southern District of Texas Judge David Jones. Part of the ERCOT settlement will be funded by selling Brazos Electric's gas-fired generation portfolio which, according to S&P Global Market Intelligence data, totals nearly 2,200 MW of capacity.

"The plan itself and the process leading to its formulation provide independent evidence of the debtor's and such other parties' good faith, serve the public interest, and assure fair treatment of holders of claims," Jones wrote.

Brazos Electric responsibly declared bankruptcy "to protect its cooperative structure, its members, and their ratepayers," Jones continued.

In a separate settlement, the cooperative will also pay subsidiary Brazos Sandy Creek Electric Cooperative Inc. $165 million, to be adjusted should its 25% interest in the 933-MW coal-fired Sandy Creek plant sell for more than $150 million.

Aside from its ownership interest in Sandy Creek, Brazos Electric also had a power purchase agreement for a portion of the plant's output, which it later sought to terminate. The reorganization plan requires the cooperative to pay Sandy Creek Energy Associates L.P. $105.4 million in cash as well as a percentage of the claim's second $130 million "tranche." LS Power Group is the majority owner of the Sandy Creek plant.

In addition, Brazos Electric must pay Tenaska Energy Inc.'s marketing arm, Tenaska Marketing Ventures Inc., $78.7 million of an allowed $84.1 million claim for unpaid gas supplies delivered during the storm. Through its contract with Tenaska, which allowed Brazos Electric to purchase gas based on either spot or indexed prices, the cooperative bought $30 million worth of supplies from Feb. 10 through Feb. 17, 2021.

Brazos Electric, which serves 16 member distribution cooperatives with a combined total of about 660,000 end-use customers, will also establish a ratepayer hardship fund to help customers impacted by bills during the severe cold weather.

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