Winter 2021 dumped snow and ice across the nation. Uri is one storm that will go down in history as one of the most devastating natural disasters in history. However, what kind of storm has the power to disable the Lone Star state and bankrupt at least three energy suppliers? The details behind the fallout may surprise the public.
The Calm Before the Storm
Despite meteorological evidence, there was truly no way to predict the ultimate energy demand that Uri would create. Hindsight points to a lack of preparation and undue strain on already weakened grid systems. Historical data simply did not support a need for preparation across every energy system.
Never before did a seasonal weather event affect natural gas, electricity, and renewable energy sources, in addition to other utilities, quite like the recent storm. Families affected by the freezing temperatures could not remember any other time that the weather was so harsh for so long. Likewise, there was no indication that the extended outages would become uncontrollable amid completely unyielding weather conditions.
Multiple communities and an untold number of families were affected by the resonating effects of the harsh and unrelenting winter this year. Pipelines across Texas and much of the Southwest were frozen, stalling the delivery of crude oil and natural gas. One by one, power grids dimmed and finally fell completely dark.
Unable to cope with the crushing blow, energy companies began to assess their financial options. Even with all equipment thawed and working, energy resource reserves were dangerously low. Refineries, wind farms, and suppliers reviewed their losses in terms of long-term impact. Many conducted internal audits and sought external appraisal services.
Industry Giants Surrender
Seven Electric Reliability Council of Texas (ERCOT) board members resigned amid the chaos. The CEO of the regulatory agency was terminated and top executives provided deposition statements about that state of affairs.
Unable to meet financial obligations while waiting for subsidiary payments, Griddy, Just Energy, and Brazos Electric sought relief through public announcements. Unfortunate circumstances surrounding the perfect storm forced one of the oldest and largest power producers in Texas into bankruptcy. In a press release filed by Brazos Electric Cooperative on March 1st, managing members outlined a plan for financial reconstruction.
The initial plan is to prevent further losses and protect members of the cooperative. Understanding the mounting costs and unavoidable pass through to retail customers, the established energy mogul has prioritized action measures. Representatives will assist with ongoing review and investigative resources.
Planning Next Steps
For more than three decades, Appraisal Economics has offered expert appraisals and valuation services specific to the power plant and electric power generation industry. Our leading experts in the field can decipher relevant data and help our clients reach the best outcomes for unique circumstances. Further, Appraisal Economics has extensive experience performing reliable appraisals in connection with complex bankruptcy proceedings.
The major storm in February 2020 ravaged the land from Northern Mexico all the way to Canada. Aside from blizzard conditions, traffic accidents, and loss of business revenue, a much greater fallout occurred. The Texas power crisis proved to be among the worst industry upsets in history. Damage done in less than one week will take years to fully unravel.