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A Case Study - Retail Electric Provider Bankruptcies Texas Commercial Energy the Company or TCE filed for bankruptcy protection on March 6 2003 in the Southern District of Texas following a sudden and dramatic rise in the price of wholesale electricity TCE is a Retail Electric Provider REP serving commercial and light industrial customers in the region of Texas administered by the Electric Reliability Council of Texas ERCOT TCE acquires electricity on the wholesale market and then resells it on a retail basis to its customers TCE enters into 12 24 or 36 month contracts with its customers to supply electricity at a fixed price When the wholesale price of power exceeded the price TCE was charging the result was the inability of TCE to pay its bills as they came due At the time of the bankruptcy TCE was purchasing almost its entire supply of energy on ERCOTs Balancing Energy market as opposed to locking in a steady supply of power at a fixed price At the time of the bankruptcy TCE lacked the financial resources to properly hedge its power supply against price fluctuations in the market ERCOT established the Balancing Energy market as a mechanism to allow REPs to buy and sell small amounts of electricity for immediate delivery and thereby balance their fluctuating obligations to supply and purchase power ERCOT acted as the middleman between REPs and generation companies for the purpose of providing a marketplace for additional power to compliment the REPs fixed-price supply ERCOT is a quasi-governmental non-profit entity responsible for maintaining the electric grid and the integrity of the electric power market in the majority of Texas The Thompson Knight LLP traditional integrated regulated utility has not existed in Texas since deregulation in January of 2002 The ERCOT model has three categories of participants - Generation Companies Generators Transmission and Distribution Service Providers TDSPs and Retail Electric Providers REPs REPs purchase power from the Generators and deliver
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