JUST ENERGY GROUP INC. 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
03-09-21 1722ET
