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Metered Electrical Energy Delivered by a Defendant to the Debtor Constitutes “Goods” Under the Unambiguous Text of §503(b)(9)

In re Escalera Res. Co., 563 B.R. 336 (Bankr. D. Colo. 2017)

Debtor Escalera Resources Co. produces coal bed methane gas from its wells in Wyoming. Defendant PacifiCorp d/b/a Rocky Mountain Power, a public utility company, supplied the Debtor with metered electrical energy. The Debtor sought protection under the Bankruptcy Code, and PacifiCorp filed a proof of claim for $240,479.43 on the basis of “electricity sold by electric utility”. PacifiCorp asserted that about $87,853.94 portion of the claim was entitled to administrative expense priority under §503(b) (9). PacifiCorp alleged that this was the value of the electricity sold to the Debtor and received by the Debtor in its ordinary course of business during the 20-day period before the petition date. The Debtor opposed. The Debtor did not challenge the amount of the claim but contended that none of the claims should receive administrative expense priority treatment. The Debtor argued that electricity was not a “Good” under the Uniform Commercial Code and §503(b)(9).

The Court, however, agreed with PacifiCorp and allowed its claim of $84,253.95 as the worth of electrical energy it supplied the Debtor during the 20-day period that preceded the date the Debtor declared bankruptcy as an administrative expense claim under §503(b)(9). The Court found that all bankruptcy courts construing §503(b) (9) in the context of electrical energy have adopted the UCC Section 2-105 definition of “goods.” But, despite this uniformity in initial analytic approach, such bankruptcy courts have reached starkly contradictory results concerning whether electrical energy is “goods.” After carefully reviewing the text of UCC Section 2-105 and UCC case law (both in and outside of bankruptcy), the Court reached its conclusion about whether electrical energy satisfies the UCC definition of “goods.” The Court pointed out that under UCC Section 2-105, “goods” are: (1) things existing and identifiable; (2) movable at the time of identification; and (3) capable of being sold. The Court stated that there are no other requirements beyond these. The Court further said that federal antitrust law, federal labor law, federal energy regulatory law, state tort law, tax law and international treaties (including the international equivalent of the UCC) all confirm that electrical energy is “goods.” Accordingly, the Court ruled that the metered electrical energy delivered by PacifiCorp to the Debtor constituted “goods” under §503(b) (9). The Court allowed the PacifiCorp’s claim seeking payment of $84,253.95 worth of electrical energy as an administrative expense claim under § 503(b)(9).