In extraordinary exchanges, U.S. Bankruptcy Judge David Jones characterized former PUC chair DeAnn Walker as “unreliable” and admonished former PUC commissioner Arthur D’Andrea to remain truthful under oath.
In extraordinary courtroom exchanges, a U.S. bankruptcy judge has characterized former PUC chair DeAnn Walker as “unreliable” and admonished former PUC commissioner Arthur D’Andrea to remain truthful under oath.
The judge’s comments came during a trial in Houston in which Brazos Electric Coop has accused the state’s primary grid operator, ERCOT, of needlessly maintaining elevated wholesale energy prices during last year’s weather emergency. The Waco-based cooperative filed for bankruptcy in March 2021 after receiving a $1.9 billion bill from ERCOT relating to the storm, and the coop now wants U.S. Bankruptcy Judge David Jones to reduce the claim.
On March 3 — after wading through days of expert testimony and publicly dressing down Walker and D’Andrea — Jones paused the trial to give ERCOT and Brazos time to mediate their dispute. Another Houston-based bankruptcy judge has been assigned to oversee the mediation.
With regard to former PUC chair Walker — she took the stand on February 24, testified for several hours, but then had her truthfulness questioned by Judge Jones shortly before he dismissed her.
“I see no purpose in highlighting the areas of your unreliability,” Jones told the former chair. “But I will tell you that I am disappointed at your conduct. I am disappointed at your lack of candor. I am disappointed at your lack of reliability given the position you held. You are excused as a witness.”
Both Walker and D’Andrea lost their jobs as utility commissioners after the devastating outages. Millions of Texans went without power during the emergency event, hundreds of Texans died and several major market participants—including Brazos Electric—fell into bankruptcy. Brazos has said that an imprudent decision to keep wholesale energy prices at a $9,000 per megawatt-hour cap for a prolonged period contributed to its financial ruin.
Wholesale energy selling at that cap fetches prices hundreds of times higher than energy sold during most other periods. ERCOT and PUC analysts had expressed the belief that such prices would shore up the grid during the crisis by encouraging generators to maintain operations and discouraging large energy users from coming online. However, Brazos and others have criticized ERCOT and the PUC for maintaining the cap after the worst of the crisis was over.
Judge Jones’ rebuke of the former PUC chair came as she described how the PUC took action to ensure wholesale power sold at the cap during the early hours of the crisis, and as she described the actions that she took to ensure prices remained at the cap for an additional 33 hours after rolling outages subsided.
In theory, Walker explained in her testimony, wholesale energy prices on the ERCOT‑administered market should rise to the cap during “load shed”—that is, during those periods when ERCOT has ordered rolling outages. However, soon after ERCOT ordered rolling outages, the organization reported that prices still were not clearing consistently at $9,000 per mWh.
Concerned, the PUC commissioners on February 15, 2021 conducted an emergency vote in which they directed ERCOT to override its own systems in order to ensure that prices remained fixed at the cap during load shed. Then, two days later, after ERCOT lifted its load-shed instructions, Walker participated in another decision made at ERCOT’s command center to maintain prices at the cap.
Because of that second decision, wholesale energy prices remained elevated for an additional 33 hours, and potentially contributed to the bankruptcy of Brazos and other market participants. During her testimony, Walker said she saw no need to consult with the two other PUC commissioners about the second decision because she believed she had the necessary authorization for it under the PUC’s initial February 15, 2021 order.
Seemingly agitated, Judge Jones then asked how Walker knew keeping the $9,000 cap in place for an additional period was authorized if the PUC had not met again to discuss the matter. Walker responded that she made the decision on her own, and said that it complied with the PUC’s existing February 15, 2021 order because some industrial users remained without power—a situation she considered a form of load shed.
However, Walker also testified separately that it was ERCOT CEO Bill Magness who made the “ultimate” decision to keep the price at the $9,000 cap for an extended period. This apparent contradiction drew the bankruptcy judge’s ire.
“Why would he be making a decision?” the judge asked with irritation. “He had to be following an order. Everything you said makes zero sense. It also makes me really question your veracity.”
Walker also said that when she met with ERCOT officials on February 17, 2021 to keep the cap in place, she was under instructions from Gov. Greg Abbott to do everything possible to keep the state from returning to blackout conditions.
D’Andrea Under Fire
Later during the same day’s court proceedings, the bankruptcy judge had a similarly terse exchange with former PUC commissioner D’Andrea.
At one point during pointed questioning, the former commissioner laughed nervously as he attempted a response. Jones then cut him off, asking, “is something funny about this?” When D’Andrea attempted to respond again, the judge interjected again. “It doesn’t matter what you think,” he told D’Andrea. “Your job is to tell the truth under oath. What’s funny? According to you people died. Is that funny?”
The judge then turned from D’Andrea entirely, and instead addressed a courtroom attorney. “You need to control your witness and make sure he understands the meaning of an oath,” the judge said.
Former CEO Bill Magness Testifies
During testimony a day earlier, former ERCOT CEO Magness said that given the opportunity, he would have made the same decisions again. Magness, like former PUC commissioners Walker and D’Andrea, lost his job as a result of his actions during the outages.
Mr. Magness explained that even as power plants were coming back online on February 17, 2021, the system was far from secure. Some power plants still remained idle because of the cold or gas supply issues, he said, and there remained a concern that if power prices were allowed to fall, then large power users might start coming back online and deplete crucial power reserves.
“We were still seeing 40,000 megawatts of outages,” said Magness. “At the peak we had 52,000 megawatts but 40,000 is still a lot…We saw the potential for load shed coming again.”
Magness also said that after so many hours of power outages, there remained a risk of more cascading problems—especially if water plants that relied on backup generation were to run out of fuel if rotating blackouts resumed.
But Lino Mendiola, an attorney representing Brazos, called the decision to maintain prices at an elevated level “an attempted remedy that didn’t solve any of the problems caused by the winter storm.”
The outcome of the trial, or any resolution reached in mediation, will determine how Brazos moves forward in its bankruptcy. Brazos has said it cannot develop a reorganization plan until it knows exactly how much it owes ERCOT. Instead of $1.9 billion, Brazos claims it owes around $770 million.
Shortly before pausing the proceedings for mediation on March 3, Jones said that the parties should “sit in a room and understand what the options are.” U.S. Bankruptcy Judge Marvin Isgur, also based in Houston, will oversee the mediation.
The case is In re Brazos Electric Power Cooperative Inc, U.S. Bankruptcy Court, Southern District of Texas, No. 21-30725.