Oldest Texas electricity co-op goes bust after getting hit with $2 billion bill

The largest and oldest power cooperative in Texas is filing for Chapter 11 bankruptcy protection, citing last month's winter storm that left millions of state residents without power.

Brazos Electric Power Cooperative, which serves 16 distribution member co-ops that cater to more than 1.5 million Texans, said Monday that it accumulated $2.1 billion in bills during the severe cold that hit Texas between February 13 and 19.

As temperatures plunged and snow and ice whipped the state over Valentine's Day weekend, much of Texas' power grid collapsed, followed by its water systems. Tens of millions huddled in frigid homes that slowly grew colder or fled for safety. With gas-fueled power plants offline, wells frozen, a nuclear power plant shut down and iced-over wind turbines, the state experienced a severe electricity shortage, and wholesale prices for electricity spiked as high at $9,000 per megawatt-hour.

The high prices, which are supposed to act as an incentive for power producers to create electricity, failed to lead to an increase in available power, since much of the state's production capacity was frozen over. 

Prior to the freeze, Brazos was "a financially robust, stable company with a clear vision for its future and a strong "A" to "A+" credit rating," higher than most electric coops, it said in a press release Monday.

The came a $2.1 billion bill

Brazos said it received "excessively high invoices" from the Electric Reliability Council of Texas for collateral and for purported cost of electric service. The invoices, totaling $2.1 billion, were required to be paid within days. That's because as a cooperative, Brazos' costs are passed through to its members and retail consumers served by its members. 

Brazos decided that "it cannot and will not foist this catastrophic financial event on its members and those consumers," the co-op said.

"Let me emphasize that this action by Brazos Electric was necessary to protect its member cooperatives and their more than 1.5 million retail members from unaffordable electric bills as we continue to provide electric service throughout the court-supervised process," Clifton Karnei, executive vice president and general manager of Brazos, said in a statement.

Brazos' bankruptcy filing is likely to be the first of many stemming from the winter storm, according to energy analysts. Most Texans are on fixed-price plans, according the to state's public utility commission, in which a customer pays a predetermined set amount for each bit of electricity they use. That leaves the retailer exposed to fluctuations in the wholesale price of energy.

"We will probably see a whole bunch of electric providers go out of business, particularly those that offer fixed-rate plans to people," Joshua Rhodes, a research associate at the University of Texas at Austin, recently told CBS News. "If you're selling it for 10 cents a kilowatt-hour and paying $9 per kilowatt-hour, it doesn't take long to mess up your balance sheet."

The power provider Just Energy has said that it could go out of business after losing as much as $250 million in the blackouts, according to CBS 11 in Dallas.

Electricity provider Griddy sued — again

Brazos' bankruptcy comes as Texas Attorney General Ken Paxton said he is suing electricity provider Griddy for passing along massive bills to its customers during February's winter storm. The lawsuit accuses Griddy of violating the Texas Deceptive Trade Practices Act and seeks refunds for customers.

Griddy charges $10 a month to give people a way to pay wholesale prices for electricity instead of a fixed rate. But when temperatures plummeted well below freezing last month, wholesale prices spiked and Griddy customers were left with sky-high electricity bills. The retailer is facing at least one class-action suit from a Texas resident who got hit with a $9,300 bill.

ERCOT shifted about 10,000 Griddy customers to other utilities on Friday. Griddy said that ERCOT "took our members and have effectively shut down Griddy."

"We have always been transparent and customer-centric at every step. We wanted to continue the fight for our members to get relief and that hasn't changed," Griddy said.

Last week, the city of Denton sued ERCOT over $207 million in electricity bills it incurred during the blackouts.

CBS News' Irina Ivanova contributed to this report.