Saddled with more than $250 million in charges from the Electric Reliability Council Of Texas Inc. that amassed as the state's power system buckled during a rare arctic blast in February, Toronto-headquartered retail energy provider Just Energy Group Inc. and its affiliates on March 9 sought creditor protection from the Ontario Superior Court of Justice.
Later on March 9, Just Energy also filed for Chapter 15 bankruptcy protection in the U.S. Bankruptcy Court for the Southern District of Texas. A Chapter 15 proceeding aligns a U.S. case with the process followed in the filing company's home country.
A March 9 court order from the Ontario Superior Court of Justice gives Just Energy an initial 10-day stay of all proceedings against the company, its directors and employees, subject to an extension by the court. "If granted, the requested relief will ensure that the Just Energy Group's business can continue as a going concern while it explores restructuring solutions," the company said in its filing in Ontario.
In addition, the company reached an agreement on a $125 million debtor-in-possession financing to address the insolvent company's urgent liquidity crunch.
Together, the actions are aimed at enabling Just Energy "to continue all operations without interruption throughout the U.S. and Canada and to continue making payments required by [the Electric Reliability Council of Texas] and satisfy other regulatory obligations," the company said in a Form 6-K filing with the SEC.
Just Energy may have incurred losses and additional costs of C$312 million related to its business in Texas, according to its filing in Ontario, which lists the company as insolvent. In a separate news release, Just Energy stated its obligations in U.S. currency, putting its total at "over US$250 million." The company provides retail electricity and natural gas services in nine other U.S. states, along with Texas, and six Canadian provinces.
'Ripple effects' amid repricing uncertainty
The impact of price shocks in the Texas wholesale power market have caused "ripple effects" and "threaten the viability" of its business, Just Energy said. The largest independent retail energy provider licensed by ERCOT, Just Energy has "hundreds of thousands" of customers in Texas, according to a spokesperson.
It is one of several retail energy suppliers imperiled by the Texas energy crisis.
Brazos Electric Power Cooperative Inc., for instance, filed for Chapter 11 bankruptcy protection on March 1, owing ERCOT over $1.8 billion. ERCOT also has barred at least two retail energy providers that are late on payments, Entrust Energy Inc. and Griddy Energy LLC, from participation in its markets.
The debtor-in-possession financing and initial court orders will allow the company to make payments to ERCOT and to avoid losing its customers to other electric providers, a Just Energy spokesperson said in an email.
The fate of it and other retail electric companies could pivot on whether or not Texas energy regulators decide to reprice skyrocketing real-time and ancillary services transactions during the storm, as ERCOT's independent market monitor recommended and as Texas Lt. Gov. Dan Patrick demanded March 8. In a March 3 request to the Public Utility Commission of Texas, Just Energy asked regulators to order ERCOT to deviate from its normal invoice deadlines until the issues related to the crisis are "investigated, addressed, and resolved."