Residents line up in their vehicles to enter a warming center and shelter after record-breaking winter temperatures, as local media reports most residents are without electricity, in Galveston, Texas, U.S., February 17, 2021. REUTERS/Adrees Latif

Brazos’ $2 billion bill lawsuit survives ERCOT effort to dismiss

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  • Norton Rose Fulbright LLP
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  • Kramer Levin Naftalis & Frankel LLP
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  • Porter Hedges LLP
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  • Eversheds Sutherland (Worldwide) LLP
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    (Reuters) – Brazos Electrical Energy Cooperative Inc on Monday largely defeated an effort by the Texas electrical operator to dodge a lawsuit over a $2 billion power bill stemming from the state’s historic February storm that knocked out energy for tens of millions.

    U.S. Chapter Choose David Jones in Houston rejected arguments from the Electrical Reliability Council of Texas (ERCOT) and Public Utilities Fee of Texas (PUCT) that the dispute shouldn’t be dealt with in chapter court docket and that permitting it to proceed would infringe upon the state’s sovereignty.

    “You’ve all made this far larger than, in my mind, it really is,” Jones stated in the course of the listening to.

    ERCOT stated in a response to a request for remark that it doesn’t touch upon pending litigation. The PUCT didn’t instantly reply to a request for remark.

    Brazos, the biggest and oldest electrical co-op in Texas, filed for Chapter 11 safety in March after it was hit with the large bill. The bill for the seven days the storm lasted is sort of 3 times the co-op’s whole energy price from 2020, which was $774 million, in accordance to court docket papers. For a number of days in the course of the storm, ERCOT set electrical energy costs at $9,000 per megawatt hour.

    In August, the co-op, represented by O’Melveny & Myers and Norton Rose Fulbright, filed a criticism inside its chapter aiming to reject ERCOT’s declare for the fee of the bill and considerably cut back the quantity. It argues that the fees are constructively fraudulent and extreme.

    The Public Utilities Fee of Texas says Brazos is attempting to re-price the market. Ruling in favor of the coop, Texas Assistant Legal professional Common Jason Binford argued at Monday’s listening to, may create a precedent that may lead to different electrical suppliers looking for chapter to offload their power payments as properly.

    Moreover, Binford stated, Texas has a particular process for resolving this kind of dispute. Dealing with the bill in chapter court docket infringes upon the state’s sovereign immunity, he argued.

    “I can say with zero exaggeration that this is the most important hearing of my career,” Binford stated.

    Legal professionals for Brazos argued that the difficulty shouldn’t be associated to state regulatory powers and is restricted to the phrases of the contract between the co-op and ERCOT. Beneath the contract, they stated, ERCOT utilized the flawed pricing mechanism for electrical energy used in the course of the February storm.

    Although he principally denied ERCOT’s movement to dismiss the case, the decide did dismiss one rely that objects to the declare based mostly on pricing mechanisms outlined within the contract between the 2 events, saying he didn’t perceive it. Nonetheless, he’ll permit Brazos to revise the rely.

    The case is In re Brazos Electrical Energy Cooperative Inc, U.S. Chapter Court docket, Southern District of Texas, No. 21-30725.

    For Brazos: Lou Strubeck and Nick Hendrix of O’Melveny & Myers; Jason Boland, Paul Trahan and Steve Peirce of Norton Rose Fulbright; and Lino Mendiola, Michael Boldt and Jim Silliman of Eversheds Sutherland (US)

    For ERCOT: Kevin Lippman, Deborah Perry, Jamil Alibhai and Ross Parker of Munsch Hardt Kopf & Harr

    For the committee: Thomas Moers Mayer, Amy Caton, Jennifer Sharret, Sean Coffey and Ronald Greenberg of Kramer Levin Naftalis & Frankel; and John Higgins, Eric Wade, Heather Hatfield and M. Shane Johnson of Porter Hedges

    Learn extra:

    Brazos Electrical seeks chapter court docket ruling on winter storm power costs

    Brazos seeks extra time to management chapter amid new storm-related legal guidelines

    Texas energy cooperative recordsdata for chapter, citing $1.8 billion grid debt

    Maria Chutchian

    Maria Chutchian stories on company bankruptcies and restructurings. She will be reached at [email protected]