BRAZOS ELECTRIC BANKRUPTCY EFFECTS ON MEMBER DIVIDENDS
Due to Winter Storm Uri in February, and record prices on the ERCOT wholesale electric prices during that week, United’s power supplier, Brazos Electric Power Cooperative (Brazos) in March became one of the very first ERCOT market participants to file for Chapter 11 bankruptcy to prevent those staggeringly high costs from automatically flowing down to United’s members, as well as to the 15 other member distribution cooperatives of Brazos.
And as such, the ripple effect of the ongoing Brazos reorganization has forced United and the other Brazos member distribution cooperatives, who have been bound by wholesale power purchase agreements and operational affiliation with the generation and transmission (G&T) provider, to make contingencies for the bankruptcy and its uncertain effect on future operational strategies and planning.
As a result of those uncertainties, United’s board of directors agreed that suspending member dividend distributions made in the traditional manner this year would be the prudent and financially responsible path to take until the Brazos bankruptcy is resolved.
However, United’s board of directors voted in February to delay a rate increase that was originally planned to take effect on April 1 to, instead, October 1, which in effect reduced member rates by $6 million this year. In comparison, and prior to the storm, United projected an approximate member dividend retirement of $6 million this year. Therefore, while members didn’t receive member dividends this year, they did receive the equivalent amount in rate reductions.