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Brazos Wants To Set Trial Date On ERCOT $1.9B Ch. 11 Claim

May 24, 2022

Bankrupt power provider Brazos Electric Power Cooperative Inc. told a Texas judge Tuesday that it wants to set a date for a trial over the $1.9 billion claim asserted by the Electric Reliability Council of Texas to resume even as mediation among the various parties is ongoing, saying it needs to move its case forward.

During a virtual hearing, debtor attorney Louis Strubeck Jr. of O'Melveny & Myers LLP said the trial, which was suspended in March to shift to mediation, needs to be scheduled for resumption so it can quickly be picked back up if mediation does not work out.

"We think it is really important for a lot of reasons that we go ahead and get some time set aside on your calendar so we can finish the ERCOT trial in case we can't resolve the issue surrounding the ERCOT claim in the mediation," Strubeck told the court. "We don't think there would be any prejudice at all in the mediation in getting dates set aside."

U.S. Bankruptcy Judge David R. Jones paused the trial in early March after eight days of testimony over the validity of ERCOT's claims against the debtor for charges incurred during a February 2021 winter storm event that sent power prices skyrocketing on the Texas electricity market, driving Brazos into bankruptcy. Judge Jones appointed his colleague on the bench, U.S. Bankruptcy Judge Marvin Isgur, to serve as a mediator for the parties to explore a settlement of the issues between them.

The mediation parties include Brazos and ERCOT as well as other parties involved in their own bankruptcy litigation with ERCOT stemming from the 2021 winter storm and the related ERCOT charges. Judges Jones and Isgur hoped the negotiations would lead to a more global resolution of these claims in multiple cases.

ERCOT and others requested an extension of the mediation schedule earlier this month, but Brazos said the resumption of the trial needs to be an option in the short term.

ERCOT attorney Jamil N. Alibhai of Munsch Hardt Kopf & Harr PC said it might be too early to start thinking about resuming the trial as Judge Isgur has scheduled an all-party call in the mediation for later this week, where he is expected to present possible plans for a settlement framework.

"We think the focus should be on this mediation," Alibhai said. "Progress has been made, but it hasn't resulted in a settlement yet."

Judge Jones scheduled a continued status conference for June 13 to give the parties enough time to hear from the mediator and formulate a response on when or if the trial should be rescheduled, saying he has intentionally remained in the dark about the mediation discussions, but the time is drawing near for progress to occur. If the parties cannot come to an agreement about either continuing mediation or moving forward with the trial, he said he is prepared to make the decision.

"I'm giving you another opportunity to continue to control your own destiny and if I don't get some positive information, I'll control it for you," Judge Jones said.

Brazos sought bankruptcy protection on March 1, 2021, saying it had been forced into a liquidity crisis after being hit with $2.2 billion in wholesale power bills and ancillary costs after the previous month's deadly winter storm shut down power generation across the state, leaving millions without electricity for days. During the peak of the storm, the price for electricity on the ERCOT market reached the maximum allowed by law.

In August 2021, Brazos filed its adversary complaint against ERCOT, seeking to reject the power grid operator's $1.9 billion bankruptcy claim stemming from the bill it presented to Brazos in the wake of the storm.

Brazos Electric Power Cooperative Inc. is represented by Louis R. Strubeck Jr. and Nick Hendrix of O'Melveny & Myers LLP, Jason L. Boland, Julie G. Harrison, Maria Mokrzycka, Paul Trahan and Steve A. Peirce of Norton Rose Fulbright LLP and Lino Mendiola III of Eversheds Sutherland.

ERCOT is represented by Jamil N. Alibhai, Kevin M. Lippman, Ross Howard Parker and Deborah Michelle Perry of Munsch Hardt Kopf & Harr PC and Elliot Clark of Winstead PC.

The adversary case is Brazos Electric Power Cooperative Inc. v. the Electric Reliability Council of Texas Inc., case number 4:21-ap-3863, in the U.S. Bankruptcy Court of the Southern District of Texas.

The bankruptcy case is In re: Brazos Electric Power Cooperative Inc., case number 4:21-bk-30725, in the U.S. Bankruptcy Court of the Southern District of Texas.

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