(Reuters) - The trial of more than $2 billion in invoices sent to the largest electrical cooperative in Texas stemming from last year's deadly winter storm was under way on Tuesday, after the state's grid operator charged higher prices during the storm. defended.
The bill sent by the Electric Reliability Council of Texas (ERCOT) to the now-bankrupt Brazos Electric Power Cooperative is at the center of Brazos' Chapter 11 case in Houston. The cooperative filed for bankruptcy last March after the storm, which knocked out power for more than four million homes and businesses and killed more than 200 people as temperatures dropped to single digits in many areas.
Brazos argues that ERCOT violated the terms of its contract when it charged $9,000 per megawatt during most storms lasting about a week.
Chief U.S. Bankruptcy Judge David Jones is now being asked whether to allow ERCOT's $1.9 billion claim in the Brazos bankruptcy or drastically reduce the amount. Brazos says the amount owed him should be closer to $770 million.
The test results will determine how Brazos proceeds in his bankruptcy. It has said it cannot develop a restructuring plan unless it knows how much is owed to ERCOT.
An ERCOT attorney, Jamil Alibhai of Munsch Hardt Koff & Haar, told the judge on the first day of trial in Houston bankruptcy court that a key element of the Texas energy market is so-called "shortage" pricing, which begins when energy supplies are limited. and is designed for emergency situations. That deficient pricing, he argued, explains the $9,000 per megawatt hour price.
Alibhai also said that because the storm had been predicted for months, the higher prices for Brazos should not have come as a surprise.
Brazos has long argued that ERCOT's implementation of such high prices was a breach of their market participation contract because the conditions required for such pricing were not met. On Tuesday, a lawyer for Brazos also said the higher pricing did nothing to solve the problem of power generation during the storm.
Lino Mendiola of Evershed Sutherland (US) described the price of $9,000 per megawatt as "a measure that does not solve any of the problems caused by winter storms."
Former ERCOT CEO Bill Magnus, who was fired shortly after the storm, took the stand on ERCOT's behalf as the first witness in the trial.
The trial is expected to last for several days.
The case is of Brazos Electric Power Cooperative Inc., US Bankruptcy Court, Southern District of Texas, No. 21-30725.
For Brazos: Lou Straubeck and Nick Hendrix of O'Malvaney & Myers; Jason Boland, Paul Trahan and Steve Pearce of Norton Rose Fulbright US; and Lino Mendiola, Michael Bold and Jim Silliman of Evershed Sutherland (US)
FOR ERCOT: Kevin Lippman, Deborah Perry, Jameel Alibhai and Munsch Hardt Koff and Ross Parker of Haar