Just Energy Initiates Litigation Against ERCOT and the PUCT In Texas Bankruptcy Court -- EnergyChoiceMatters.com

Just Energy Initiates Litigation Against ERCOT and the PUCT In Texas Bankruptcy Court

November 12, 2021

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Reporting by Paul Ring • ring@energychoicematters.com

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Just Energy Group Inc. ('Just Energy' or the 'Company'), along with its affiliates Just Energy Texas LP, Fulcrum Retail Energy LLC, and Hudson Energy Services LLC (the 'Just Energy Parties'), today initiated a lawsuit (the 'Lawsuit') against the Electric Reliability Council of Texas ('ERCOT') and the Public Utility Commission of Texas (the 'PUCT') in the United States Bankruptcy Court for the Southern District of Texas (the 'Texas Bankruptcy Court').

Just Energy said, "The Lawsuit seeks to recover payments that were made by the Just Energy Parties to ERCOT for certain invoices relating to February 2021, when a historically severe winter storm known as 'Winter Storm Uri' severely impaired Texas’ power-generating resources. As previously reported, the Just Energy Parties and certain of their affiliates commenced cases under Chapter 15 of the United States Bankruptcy Code on March 9, 2021 in the Texas Bankruptcy Court."

The suit generally alleges arguments put forth in previously reported filings before the PUC by various stakeholders which had argued that the PUC's setting of prices at $9,000 violated law

Just Energy alleges in the suit as follows: "The actions of the PUCT and ERCOT not only failed to solve the electricity shortage, but they also violated Texas law. Neither the PUCT nor ERCOT possesses the substantive authority to set prices in the wholesale electricity market in this manner; the PUCT did not follow the statutorily-prescribed rule-making procedures; and the PUCT’s actions were not supported by evidence as required by law. The PUCT violated the Texas Administrative Procedure Act (the 'APA') by setting prices without proper notice or making an evidentiary showing that the market’s scarcity pricing signals were not working and that the inflated prices would accomplish their apparent intended purpose of stimulating power generation. The PUCT also violated the Public Utility Regulatory Act (the 'PURA'), which mandates that pricing must be the function of competitive forces—not regulatory fiat."

Just Energy further alleged, "Similarly, ERCOT’s actions found no support under, and were inconsistent with its Standard Form Market Participant Agreement with each Plaintiff (collectively, the 'SFA'), which incorporates by reference, and requires compliance with ERCOT’s nodal protocols (the 'ERCOT Protocols'). At the time of the storm, the ERCOT Protocols did not include firm load shed among the considerations relevant to determining whether scarcity pricing would be appropriate. Yet, the PUCT and ERCOT impermissibly set the HCAP at $9,000/MWh based on firm load shed; charged prices for ancillary services that exceeded the HCAP of $9,000/MWh; and failed to allow prices to fall below $9,000/MWh when firm load shed ended."

Just Energy alleged, "Just Energy is entitled to relief under the Bankruptcy Code because the Transfers are subject to (a) avoidance as unauthorized post-petition transfers (11 U.S.C. § 549); (b) turnover (11 U.S.C. § 542); (c) setoff (11 U.S.C. §§ 553 and/or 558); (d) disallowance (11 U.S.C. §§ 502(b), 502(d)); and (e) avoidance under Canadian law or any other applicable law. The Transfers should be recovered and distributed to Just Energy’s creditors. The Bankruptcy Code provides remedies because this Court did not approve the Transfers, and they are subject to avoidance on that basis alone. Nor could this Court ever have approved the Transfers when the invoices are based on the PUCT Orders, which themselves are unlawful under the APA and the PURA, and otherwise are inconsistent with the ERCOT Protocols and the SFA. Alternatively, even if the PUCT Orders are valid, Just Energy still has valid claims under the Bankruptcy Code because ERCOT could not have applied the $9,000/MWh price after 1:05 a.m. on February 18."

Just Energy stated, "In total, the Transfers consist of payments made by Just Energy (and in the case of Hudson, BP) to ERCOT of no less than $274 million relating to both the imposition of a system wide offer cap of $9,000/MWh and ancillary charges in response to invoices that Plaintiffs received relating to the week of February 13 through February 20."

Just Energy sought that the court:

• Award recovery of all Transfers in an amount not less than $274 million;

• Award such other and further relief, in law and equity, as this Court deems just and proper; and

• Award damages to Plaintiffs in an amount to be proven at trial, including pre judgment and post-judgment interest and attorneys’ fees to the extent awardable

Bankruptcy Court for the Southern District of Texas
Adversary Proceeding #: 21-04399
Lead BK Case: 21-30823

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