Tag:Texas

1
What to Know About ISO/RTO Annual Certification Requirements
2
The Energizer – Volume 110
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Case Notes: Brazos Electric’s Bankruptcy Filing
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Bill Holmes to Present at Renewable Energy Law 2016 in Texas

What to Know About ISO/RTO Annual Certification Requirements

By: Ruta Skučas, Stephanie Staska (Director of Trade and Risk Products at Yes Energy), and Chimera Thompson

Explore an overview of the annual certification requirements in each of the organized wholesale electricity markets operated by the independent system operators and regional transmission organizations (ISO/RTOs) in the United States. Each year, market participants must certify ongoing compliance through an officer’s certification stating that they meet requirements to participate in the market.

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The Energizer – Volume 110

By: Buck B. EndemannMatthew P. ClarkNathan C. HoweNatalie J. ReidDavid Wang, and Olivia C. Ashé

There is a lot of buzz around clean technology, distributed energy resources (DERs), microgrids, and other technological innovations in the renewable energy and clean transport industries and how these developments can contribute to solving longstanding environmental justice issues. As these innovations develop, energy markets will undergo substantial changes to which consumers and industry participants alike will need to adapt and leverage. Every other week, K&L Gates’ The Energizer will highlight emerging issues or stories relating to the use of DERs, energy storage, emerging technologies, hydrogen, and other innovations driving the energy industry forward. 

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Case Notes: Brazos Electric’s Bankruptcy Filing

By: Michael B. Lubic and Sumner C. Fontaine

On 1 March 2021, Brazos Electric Power Cooperative, Inc. (“Brazos”) commenced a chapter 11 bankruptcy case in the United States Bankruptcy Court for the Southern District of Texas. Brazos is a Texas-based non-profit electric cooperative corporation that provides wholesale electricity to its members, which, in turn, provide retail electricity to Texas consumers.  Due to the freezing of essential electric generation and natural gas pipeline equipment during the historic winter storm that blanketed Texas in mid-February 2021 and the resulting spike in wholesale electricity prices, Brazos received approximately $2.1 billion in settlement charge invoices from the Electric Reliability Council of Texas (“ERCOT”).  These invoices, promptly issued during and immediately following the storm, required payment within a matter of days.  In a declaration accompanying the voluntary bankruptcy petition, Mr. Clifton Karnei, Brazos’ Executive Vice President and General Manager, described Brazos’ position following the sudden, dramatic spike in electricity costs as a “liquidity trap that [Brazos] cannot solve with its current balance sheet.” 

Brazos’ first-day pleadings explain that its financial position and need for bankruptcy protection directly result from the effects of February’s winter storm on Texas’ electricity market, specifically on the relationship between Brazos and ERCOT. ERCOT serves a clearinghouse role in one of Texas’ three main energy grids, the Texas Interconnection, which covers 213 of the 254 counties in the state, and is responsible for procuring energy on behalf of its members while also administering the reliable operation of the wholesale electricity market.  To buy and sell wholesale electricity, as Brazos does, ERCOT requires market participants to have sufficient available credit (calculated using a metric based on the participant’s credit limit plus a percentage of tangible net worth, among other factors) to support such participant’s total exposure.  The effects of February’s winter storm on the Texas power grid caused prices to spike to $9,000 per megawatt-hour. The cut-off cap was set on 16 February by ERCOT as demand soared while the state’s electricity supply declined.  For comparison, ERCOT’s monthly prices for wholesale electricity from November 2020 through January 2021 ranged between $21 to $29 per megawatt-hour.  On 16 February, and each of the succeeding three days, ERCOT made collateral calls to Brazos for hundreds of millions of dollars each day, for a total of approximately $1.5 billion in collateral calls.  Brazos filed a notice of force majeure on 25 February, informing ERCOT that it would not satisfy the invoices due to an event outside of Brazos’ reasonable control.  Brazos filed for bankruptcy protection less than one week later.

As of the petition date, Brazos estimates the total principal amount of its funded debt obligations to be approximately $2.04 billion, with $1.81 billion of such debt being secured promissory notes financed through the Federal Financing Bank.  Brazos has fully drawn its $500 million unsecured revolving facility with Bank of America, N.A. and other lenders.  Mr. Karnei states that Brazos’ goals in commencing the chapter 11 case are to preserve its ongoing business operations and propose a reorganization plan to maximize creditors’ recovery.  The first day hearing in front of Judge David Jones is scheduled for 3 March at 2:00 p.m. (EST).

Bill Holmes to Present at Renewable Energy Law 2016 in Texas

K&L Gates partner Bill Holmes will present at the Renewable Energy Law 2016 CLE conference on February 9-10, 2016 in Austin, Texas, hosted by the University of Texas School of Law and the Oil, Gas and Energy Resources Law Section of the State Bar of Texas.

Mr. Holmes will co-moderate the session “Trends in Buying and Selling Renewable Energy: Commercial, Industrial and Wholesale Transactions,” in which he and other presenters will discuss the role of long-term PPAs and hedges in the procurement of renewables by utilities as well as commercial and industrial demand for renewable energy from offsite and on-site sources.

For more information, visit the Renewable Energy Law 2016 website.

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