ERCOT says EFH reorganization won’t hurt reliability

In a document posted on its website, the Electric Reliability Council of Texas (ERCOT) said Jan. 1 that the ongoing Chapter 11 bankruptcy reorganization case involving Energy Future Holdings (EFH) and its subsidiaries should not have much impact on reliability in Texas.

“As the bankruptcy proceeding moves forward, ERCOT continues to focus on maintaining system reliability and managing the efficiency of the market,” ERCOT said in a fact sheet.

“It is our understanding that EFH and its affected subsidiaries expect to continue operating generation assets and serving retail customers in Texas,” ERCOT said. “Additionally, Oncor’s transmission business is not included in the bankruptcy filing. Therefore, ERCOT sees no immediate concerns related to system reliability or market efficiency associated with this filing.”

ERCOT understand that Oncor, the regulated transmission provider associated with EFH, is “ring-fenced,” meaning its activities are handled separately from EFH’s deregulated generation and retail assets and operations.

ERCOT sought to answer some of the frequently asked questions about the bankruptcy case and how it might affect the regional electric grid. “ERCOT expects business as usual from EFH’s impacted subsidiaries that operate in the ERCOT market and therefore believes there will be no immediate impact to system reliability or the efficiency of the market,” ERCOT said.

ERCOT will ask that all Standard Form Agreements, the contracts under which companies operate in the ERCOT market, be assumed by EFH’s affected subsidiaries.

ERCOT will also maintain its existing collateral and, “if necessary” will obtain post-petition collateral from EFH counterparties to cover those counterparties’ obligations (including market exposure) under the ERCOT rules. In the event of a Default, collateral would be available to mitigate any potential losses in accordance with ERCOT rules.

ERCOT also said that it monitors the credit quality and exposure of all counterparties on an ongoing basis.

ERCOT does not expect the bankruptcy filing to have any immediate impact on day-to-day operations of EFH’s impacted subsidiary generation assets.

ERCOT also not believe that the absence of a “forward capacity market” in the region has any bearing on the current EFH bankruptcy filing.

“The financial issues that led to this bankruptcy filing are not a reflection of problems with the ERCOT market,” ERCOT said. “ERCOT’s understanding is that this is a balance sheet issue for the parent company (EFH), which was formed in 2007,” ERCOT concluded.

About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at wayneb@pennwell.com.