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Texas Energy Firm Moves to Dismiss Trustee Claim Reduction Bid


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July 20, 2022, US Bankruptcy Court for Southern Texas – Defendant Electric Reliability Council of Texas, Inc. (“ERCOT”) moves the Bankruptcy Court to dismiss or abstain from hearing the amended complaint of Anna Phillips, trustee (the “Trustee”) of the bankruptcy estate of Entrust Energy, Inc et al. (“Debtors”). 

Entrust Energy, together with its Debtor affiliates, is a retail energy company based in Houston that sells and delivers electricity and natural gas commodities to residential and commercial customers in deregulated utility markets across the United States. ERCOT is the independent system operator managing one of the main power grids in the US that covers 213 of the 254 Texas counties. According to Texas Utility Code § 39.151(a)(2), ERCOT is responsible for “ensuring the reliability and adequacy of the regional electrical network”. 

ERCOT has filed a proof of claim of over $296 million in the bankruptcy case of the Debtors. The Trustee alleges that the amount of ERCOT claim is contrary to the Debtor parties’ contract with ERCOT and ERCOT’s own protocols. The complaint alleges that ERCOT’s electricity charges during winter storm Uri, were exorbitant and excessive. The Trustee therefore seeks a significant reduction of the ERCOT claim. 

ERCOT claims in its motion that the “filed rate doctrine” bars judicial recourse based upon allegations that the entity’s “filed rate” is too high, unfair or unlawful. ERCOT cites a Fifth Circuit decision in Tex. Commercial Energy v. TXU Energy, Inc. 413 F.3d (5th Cir. 2005) to claim that under the filed rate doctrine, any rate “approved by the governing regulatory agency is per se reasonable and unassailable in judicial proceedings brought by ratepayers.” ERCOT seeks a dismissal of the Trustee’s complaint alleging that it challenges a “filed rate”. 

ERCOT cites Section 1334(c)(1) to plead that the Court should abstain from deciding the claims stated in the complaint. ERCOT contends that the complaint has been filed post-confirmation of the Plan and the estate has ceased to exist. ERCOT also seeks abstention contending that the state law issues predominate over bankruptcy issues in this case and that Debtor Entrust has filed a related proceeding in a state court raising many of the same issues as in the Trustee’s complaint. 

ERCOT requests dismissal of Trustee’s claims under Texas Uniform Fraudulent Transfer Act (TUFTA) alleging that the Trustee’s pleadings fail to identify an existing creditor with an allowable claim that arose in the proper time period to sustain a TUFTA claim. ERCOT also seeks dismissal of Trustee’s gross negligence claim arguing that the Trustee fails to allege a cognizable private tort duty owed by ERCOT to Entrust.  

Anna Phillips v. Electric Reliability Council of Texas , Inc. (In re Entrust Energy, Inc. et al), AP No. 22-03018, US Bankruptcy Court for the Southern District of Texas. 

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