Optim Energy seeks assumption of ERCOT power sales contracts

Optim Energy LLC on April 22 asked its bankruptcy court to let it assume contracts that allow it and two of its affiliates to sell power out of their Texas power plants into the Electric Reliability Council of Texas (ERCOT) market.

ERCOT manages the flow of electric power to 23 million Texas customers and schedules power on an electric grid that connects 40,500 miles of transmission lines and more than 550 generation units. ERCOT also manages financial settlement for the competitive wholesale bulk-power market and administers customer switching for 6.7 million premises in competitive choice areas, Optim Energy noted in the filing at the U.S. Bankruptcy Court for the District of Delaware.

  • In January 2013, bankrupt affiliate Optim Energy Altura Cogen LLC entered into a Standard Form Market Participant Agreement with ERCOT (the “Altura Cogen Contract”). This affiliate runs a 600-MW, gas-fired power plant.
  • Also in January 2013, Optim Energy Twin Oaks LP entered into a Standard Form Market Participant Agreement with ERCOT (the “Twin Oaks Contract” and, together with the Altura Cogen Contract, the “ERCOT Contracts”). Twin Oaks runs a 305-MW, coal-fired power plant.

“By the ERCOT Contracts, Altura Cogen and Twin Oaks sell the electricity generated by the Altura Cogen Plant and the Twin Oaks Plant to the public through ERCOT,” the filing said. “Altura Cogen and Twin Oaks have each named EDF North America Trading Company as their qualified scheduling entity to represent them for scheduling and settlement transactions with ERCOT pursuant to the ERCOT Protocols (as defined in the ERCOT Contracts).”

The company added: “Here, the Debtors have determined, in their business judgment, that assumption of the ERCOT Contracts will benefit their estates. Simply put, assumption of the ERCOT Contracts reaffirms the Debtors’ continued operations as a going concern and their participation in the Texas energy market. Without the benefit of the ERCOT Contracts, the Debtors could not sell the electricity generated by the Altura Cogen Plant and the Twin Oaks Plant to the public through ERCOT. Without this ongoing revenue stream, the Debtors would generate insufficient operating income to support their postpetition business operations as a going concern. Without sufficient income, the Debtors’ chapter 11 plans would be jeopardized. The Debtors want to avoid the occurrence of this parade of horribles. The importance of the ERCOT Contracts to the Debtors cannot be overstated, and the Debtors respectfully submit the Court should authorize the assumption of the ERCOT Contracts as a sound exercise of the Debtors’ business judgment.”

There is a May 6 deadline for any party to object to the assumption of these contracts and a May 13 hearing at the court on this motion.

Hurt by weak power markets in Texas and a high debt load, Optim Energy, which owns three power plants in Texas, on Feb. 12 sought Chapter 11 protection. 

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.