Texas Energy Fallout Tips Power Retailer Just Energy Into Bankruptcy -- 2nd Update
09 Março 2021 - 7:37PM
Dow Jones News
By Alexander Gladstone
Energy retailer Just Energy Group Inc. filed for bankruptcy
protection in the U.S. and Canada on Tuesday, hit with massive
bills from the Texas energy crisis as the financial fallout spreads
after last month's dramatic spike in power prices.
Toronto-based Just Energy said it had received roughly $250
million in bills from the Electric Reliability Council of Texas,
which has issued large invoices to other municipal electric
companies, energy cooperatives and power retailers in the aftermath
of the Texas blackouts.
Just Energy filed for protection in the Ontario Superior Court
of Justice and the U.S. Bankruptcy Court in Houston on Tuesday with
an agreement to borrow $125 million in emergency financing from top
investor Pacific Investment Management Co.
The company said it wouldn't be able to pay amounts due to
Ercot, the state's power grid operator, without that loan package,
including more than $96 million coming due on Tuesday.
The bankruptcy filings "enable Just Energy to continue all
operations without interruption throughout the U.S. and Canada and
to continue making payments required by Ercot and satisfy other
regulatory obligations," the company said.
Just Energy marks the second major bankruptcy among Texas energy
players stemming from last month's electricity crisis after Brazos
Electric Power Cooperative Inc., the state's largest electric-power
cooperative, filed for chapter 11 last week.
Electricity buyers in Texas ran up huge bills with energy at
elevated prices after a winter weather freeze swept the state last
month, knocking power plants offline. Market participants are
disputing many of the invoices, while government officials,
including Lt. Gov. Dan Patrick, have begun putting pressure on
state energy regulators to provide relief.
Ercot declined to comment on the bankruptcy filing.
Last week, Just Energy had pleaded for relief from its bills,
asking the Public Utility Commission of Texas to suspend
collections by Ercot, a clearinghouse that uses money from electric
retailers to pay power plants for the electricity they
generate.
An independent market monitor for the commission, which oversees
Ercot, said in a report last week that wholesale prices were kept
artificially high for more than 30 hours longer than necessary,
creating at least $16 billion in overcharges. The chairman of the
commission has signaled he wasn't inclined to go back and reprice
electricity markets.
On Monday, one of the three commissioners resigned without
explanation, the second to do so since the blackouts. That leaves
only one sitting commissioner, Arthur C. D'Andrea.
Soon after the blackouts began, Ercot ordered prices to go to
the maximum level of $9,000 per megawatt hour for a brief period,
intending to spur generators to produce power. Setting prices that
high didn't have the intended effect because many generators were
struggling with frozen equipment or fuel shortages and weren't able
to produce power for any price.
The decision wound up saddling many market participants with
devastating financial obligations. Windfall profits from when
prices were high went to some combination of generators, traders
and natural gas suppliers, though the exact makeup of the winners
and how much they banked isn't clear.
Just Energy has argued that Ercot should suspend collecting
invoices until questions raised by government authorities regarding
the energy crisis "are investigated, addressed and resolved."
In a bankruptcy-court hearing in Houston on Tuesday, a
bankruptcy judge questioned whether the company should use its
emergency financing to pay Ercot when the bill might end up being
resettled or successfully disputed.
Brian Schartz, a lawyer for Just Energy, said the company wanted
to pay because otherwise Ercot could freeze the company out of the
market and cause it to lose its customers.
"If those customers are gone, it's game over for Just Energy,"
Mr. Schartz said.
In instances where market participants cannot settle their
bills, Ercot spreads the cost among other power retailers,
municipal power companies and other electricity purchasers
Two other energy retailers caught up in the market chaos, Griddy
Energy LLC and Entrust Energy Inc., had their rights to participate
in the Texas energy market revoked by Ercot after they failed to
pay their share of Ercot's shortfall. But Just Energy is the first
such retailer to seek bankruptcy protection since the winter
freeze.
After receiving assurances that Just Energy would be able to
dispute or resettle the invoice even after paying it, the judge
allowed the company to tap its financing package.
Kirkland & Ellis LLP is legal counsel in the bankruptcy
case, numbered 21-30823.
Write to Alexander Gladstone at alexander.gladstone@wsj.com
(END) Dow Jones Newswires
March 09, 2021 17:22 ET (22:22 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.
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