ERCOT’S MOTION FOR PROTECTIVE ORDER IN RESPONSE TO …

ERCOT’S MOTION FOR PROTECTIVE ORDER 1

IN THE UNITED STATES BANKRUPTCY COURT FOR THE SOUTHERN DISTRICT OF TEXAS

HOUSTON DIVISION In re: BRAZOS ELECTRIC POWER COOPERATIVE, INC., Debtor.

§ § § § § §

Chapter 11

Case No. 21-30725 (DRJ)

ERCOT’S MOTION FOR PROTECTIVE ORDER IN RESPONSE TO

NOTICE OF THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS OF RULE 2004 EXAMINATION AND DOCUMENT PRODUCTION REQUESTS

This motion seeks an order that may adversely affect you. If you oppose the motion, you should immediately contact the moving party to resolve the dispute. If you and the moving party cannot agree, you must file a response and send a copy to the moving party. You must file and serve your response within 21 days of the date this was served on you. Your response must state why the motion should not be granted. If you do not file a timely response, the relief may be granted without further notice to you. If you oppose the motion and have not reached an agreement, you must attend the hearing. Unless the parties agree otherwise, the court may consider evidence at the hearing and may decide the motion at the hearing. Represented parties should act through their attorney.

TO THE HONORABLE DAVID R. JONES, CHIEF UNITED STATES BANKRUPTCY JUDGE:

Electric Reliability Council of Texas, Inc. (“ERCOT”) hereby files this Motion for

Protective Order in Response to (the “Motion”) Notice of the Official Committee of Unsecured

Creditors of Rule 2004 Examination and Document Production Requests to ERCOT (ECF No.

682, the “2004 Notice”), in support of which it would respectfully show as follows:

I. SUMMARY

1. The Committee served ERCOT with the 2004 Notice, seeking documents and

communications responsive to twenty-two requests for production. ERCOT acknowledges that

that Committee has come a long way from the first draft of the 2004 Notice it sent to ERCOT’s

Case 21-30725 Document 787 Filed in TXSB on 06/16/21 Page 1 of 25


counsel on May 4, 2021. The original draft contained double the requests. The Committee and

ERCOT negotiated in good faith, resulting in material progress. But despite these efforts, the 2004

Notice is still too broad. There remain numerous issues with scope, undue burden, and

confidentiality, among others. The 2004 Notice effectively attempts to investigate the “Black

Swan Winter Event” statewide, rather than honing in on “the acts, conduct, or property or … the

liabilities and financial condition of the debtor, or … any matter which may affect the

administration of the debtor’s estate . . . .” See FED. R. BANKR. P. 2004(b). Indeed, the biggest

impediment to resolving the 2004 Notice amicably is that the Committee has never identified the

claims it believes the Debtor has against ERCOT. Without that information, it is impossible to

tailor the requests for production to the extent necessary to comply with the applicable Federal

Rules. ERCOT therefore files this Motion asking the Court to intervene for that purpose.

II. BACKGROUND

2. In 1999, the Public Utility Regulatory Act (the “PURA”) was amended to require

the Public Utility Commission of Texas (the “PUC”) to certify an “independent organization” to,

among other roles, ensure “that electricity production and delivery are accurately accounted for

among the generators and wholesale buyers and sellers in the region.” TEX. UTIL. CODE §

39.151(a). The PUC designated ERCOT as the independent organization mandated by PURA. 16

TEX. ADMIN. CODE § 25.361(b). ERCOT’s unique role includes managing the flow of electric

power for the bulk power system in the ERCOT Region to more than 26 million Texas end-use

customers. ERCOT also performs financial settlement for the competitive wholesale bulk power

market, and administers retail switching for nearly 8 million premises.

3. ERCOT is a Texas non-profit corporation that acts as an arm of state government.

It is subject to the “complete authority” of the PUC, with oversight from the Texas legislature. See



TEX. UTIL. CODE § 39.151(d). ERCOT’s members represent seven market segments: (a)

consumers, (b) cooperatives, (c) independent generators, (d) independent power markets, (e)

independent retail electric providers, (f) investor-owned utilities, and (g) municipals. ERCOT

does not own, operate, or have enforcement authority over any power generation facilities or any

electric transmission or distribution lines or substations. ERCOT does not sell or send bills for

retail electricity to residences or businesses. Nor does ERCOT control or operate electric service

at the distribution, local, neighborhood, or individual levels. And ERCOT does not establish

pricing or rates for retail electric customers and does not have any direct customer relationships.

ERCOT’s roles and responsibilities are statutorily prescribed by PURA.

4. In connection with its operation of the wholesale electricity market, ERCOT has a

statutory obligation to “ensure that electricity production and delivery are accurately accounted for

among the generators and wholesale buyers and sellers” in the ERCOT footprint. TEX. UTIL. CODE

§ 39.151(a)(4). ERCOT fulfills that obligation by accepting payments from buyers of electricity,

with ERCOT retaining a sufficient amount to cover costs. Id. at § 39.151(e). ERCOT essentially

serves as the clearinghouse for market transactions between electricity buyers and sellers, ensuring

that electricity production, scheduling, and downstream delivery are ultimately timely and

accurately accounted for and provided. ERCOT Protocols at § 1.2(1)(d).

5. The rules and policies governing the ERCOT wholesale market are set forth in the

ERCOT Nodal Protocols (the “ERCOT Protocols”).1 The ERCOT Protocols, which provide the

framework for the administration of the ERCOT market, have the force and effect of state law.

See PUC v. Constellation Energy Commodities Grp., 351 S.W.3d 588, 594-95 (Tex.App. – Austin,

1 The ERCOT Protocols are available at http://www.ercot.com/mktrules/nprotocols/current.


http://www.ercot.com/mktrules/nprotocols/current


pet. denied) (“ERCOT protocols are rules that provide the framework for the administration of the

Texas electricity market,” and as administrative rules, “have the force and effect of statutes”).

6. ERCOT and the Debtor are parties to a Standard Form Market Participant

Agreement, effective as of April 1, 2015 (the “SFMPA”). The SFMPA establishes the terms and

conditions by which ERCOT and the Debtor discharge their respective duties and responsibilities

under the ERCOT Protocols. Section 5 of the SFMPA specifically states that “[Debtor] shall

comply with and be bound by, all ERCOT Protocols.” SFMPA § 5.A.

7. The SFMPA also contains the following relevant provisions:

(2). Participant’s Remedies for Default.

(a) Unless otherwise specified in this Agreement or in the ERCOT Protocols, and subject to the provisions of Section 10: Dispute Resolution of this Agreement in the event of a Default by ERCOT, Participant’s remedies shall be limited to:

(i) Immediate termination of this Agreement upon written notice to ERCOT;

(ii) Monetary recovery in accordance with the Settlement procedures set forth in the ERCOT Protocols; and (iii) Specific performance.

(b) However, in the event of a material breach by ERCOT of any of its representations, warranties or covenants, Participant’s sole remedy shall be immediate termination of this Agreement upon written notice to ERCOT.

(3) A Default or breach of this Agreement by a Party shall not relieve either Party of the obligation to comply with the ERCOT Protocols.

C. Force Majeure.

(1) If, due to a Force Majeure Event, either Party is in breach of this Agreement with respect to any obligation hereunder, such Party shall take reasonable steps, consistent with Good Utility Practice, to remedy such breach. If either Party is unable to fulfill any obligation by reason of a Force Majeure Event, it shall give notice and the full particulars of the obligations affected by such Force Majeure Event to the other Party in writing or by telephone (if followed by written notice) as soon as reasonably practicable, but not later than fourteen (14)



calendar days, after such Party becomes aware of the event. A failure to give timely notice of the Force Majeure event shall constitute a waiver of the claim of Force Majeure Event. The Party experiencing the Force Majeure Event shall also provide notice, as soon as reasonably practicable, when the Force Majeure Event ends. (2) Notwithstanding the foregoing, a Force Majeure Event does not relieve a Party affected by a Force Majeure Event of its obligation to make payments or of any consequences of non-performance pursuant to the ERCOT Protocols or under this Agreement, except that the excuse from Default provided by subsection 8(A)(5) above is still effective.2

* * *

A. EXCEPT AS EXPRESSLY LIMITED IN THIS AGREEMENT OR THE ERCOT PROTOCOLS, ERCOT OR PARTICIPANT MAY SEEK FROM THE OTHER, THROUGH APPLICABLE DISPUTE RESOLUTION PROCEDURES SET FORTH IN THE ERCOT PROTOCOLS, ANY MONETARY DAMAGES OR OTHER REMEDY OTHERWISE ALLOWABLE UNDER TEXAS LAW, AS DAMAGES FOR DEFAULT OR BREACH OF THE OBLIGATIONS UNDER THIS AGREEMENT; PROVIDED, HOWEVER, THAT NEITHER PARTY IS LIABLE TO THE OTHER FOR ANY SPECIAL, INDIRECT, PUNITIVE OR CONSEQUENTIAL DAMAGES OR INJURY THAT MAY OCCUR, IN WHOLE OR IN PART, AS A RESULT OF A DEFAULT UNDER THIS AGREEMENT, A TORT, OR ANY OTHER CAUSE, WHETHER OR NOT A PARTY HAD KNOWLEDGE OF THE CIRCUMSTANCES THAT RESULTED IN THE SPECIAL, INDIRECT, PUNITIVE OR CONSEQUENTIAL DAMAGES OR INJURY, OR COULD HAVE FORESEEN THAT SUCH DAMAGES OR INJURY WOULD OCCUR.3 8. On March 1, 2021 (the “Petition Date”), the Debtor filed its voluntary petition for

relief under Chapter 11 of title 11 of the United States Code, §§ 101, et seq. (as amended, the

“Bankruptcy Code”), thereby initiating the above-captioned bankruptcy case (collectively, the

“Bankruptcy Case”). The Debtor is a debtor-in-possession pursuant to sections 1107 and 1108 of

the Bankruptcy Code. On March 15, 2021, the United States Trustee formed the Official

Committee of Unsecured Creditors (the “Committee”) in the Bankruptcy Case.

2 SFMPA pp. 7-8, § 8.B.(2) – 8.C. 3 SFMPA p. 9, § 9.A.



9. The Debtor is a generation and transmission electric cooperative, owned by sixteen

member-owner distribution cooperatives. Its member-owners are not debtors in bankruptcy, but

they control the Debtor through their positions on the Debtor’s board. Based on the Declaration

of Clifton Karnei in Support of Chapter 11 Petition and Emergency First-Day Motions (ECF No.

3, the “Karnei Declaration”), the Debtor blames its financial demise on the so-called “Black Swan

Winter Event” that took place in Texas beginning on February 13, 2021. Attached to the Karnei

Declaration as Exhibit B is a Notice of Force Majeure Event (the “Force Majeure Notice”) that the

Debtor transmitted to ERCOT on or about February 25, 2021. The Force Majeure Notice purports

to invoke Section 8(C) of the SFMPA, but the Debtor improperly withheld payment in violation

of SFMPA § 8(C)(2).

10. On May 6, 2021, the Bankruptcy Court signed and entered the Debtor’s and the

Committee’s Confidentiality Agreement and Stipulated Protective Order (ECF No. 521, the

“Protective Order”). ERCOT subsequently became a party to the Protective Order. On May 26,

2021, the Committee filed the 2004 Notice following ultimately unsuccessful—though

productive—negotiations with ERCOT over its scope. Although the Committee and ERCOT were

not able to resolve all their differences, the Committee did significantly limit the scope of the 2004

Notice before filing it. Unfortunately, the scope is still too broad, particularly because the

Committee has never articulated what alleged viable claims against ERCOT it purports to be

investigating. Without that information, it is impossible to narrow the scope of the 2004 Notice to

the confines of Rule 2004 and the applicable Federal Rules of Civil Procedure.



III. ARGUMENT AND AUTHORITIES

A. Legal standards

11. Whether, and the extent to which, a proposed Rule 2004 examination should be

allowed to proceed is a matter committed to the Court's sound discretion. Ernst & Young, LLP v.

Pritchard (In re Daisytek, Inc.), 323 B.R. 180, 186 (N.D. Tex. 2005). The party seeking a Rule

2004 examination has the burden of showing that the requested examination is being sought for

"good cause." See In re Express One Intern, Inc., 217 B.R. 215, 217 (Bankr. E.D. Tex. 1998)

(citing In re Eagle-Picher Industries, Inc., 169 B.R. 130, 134 (Bankr. S.D. Ohio 1994)).

12. Although the scope of a Rule 2004 examination is admittedly broader than the

discovery contemplated by Rule 26 of the Federal Rules of Civil Procedure, "[n]evertheless, its

scope is not limitless." Snyder v. Society Bank, 181 B.R. 40, 41-42 (S.D. Tex. 1994); In re

Buccaneer Res., LLC, No. 14-60041, 2015 Bankr. LEXIS 4203, *19 (Bankr. S.D. Tex. Dec. 10,

2015); see also In re Duratech Industries, 241 B.R. 283, 289 (E.D.N.Y. 1999); In re Palmquist,

1995 U.S. Dist. LEXIS 9464, *7-8 (W.D. Wash. 1995); In re Buick, 174 B.R. 299, 305 (Bankr. D.

Colo. 1994).

13. The limitations of Federal Rules of Civil Procedure 26 and 45 apply to a Rule 2004

examination. Buccaneer, 2015 Bankr. LEXIS 4203 at *19; see FED. R. BANKR. P. 2004(c) and

9016. Rule 26 provides in relevant part as follows:

(b) DISCOVERY SCOPE AND LIMITS.

(1) Scope in General. Unless otherwise limited by court order, the scope of discovery is as follows: Parties may obtain discovery regarding any nonprivileged matter that is relevant to any party's claim or defense and proportional to the needs of the case, considering the importance of the issues at stake in the action, the amount in controversy, the parties’ relative access to relevant information, the parties’ resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit. Information within this scope of discovery need not be admissible in evidence to be discoverable.



(2) Limitations on Frequency and Extent.

* * *

(C) When Required. On motion or on its own, the court must limit the frequency or extent of discovery otherwise allowed by these rules or by local rule if it determines that:

(i) the discovery sought is unreasonably cumulative or duplicative, or can be obtained from some other source that is more convenient, less burdensome, or less expensive;

(ii) the party seeking discovery has had ample opportunity to obtain the information by discovery in the action; or

(iii) the proposed discovery is outside the scope permitted by Rule 26(b)(1).

* * *

(c) PROTECTIVE ORDERS.

(1) In General. A party or any person from whom discovery is sought may move for a protective order in the court where the action is pending—or as an alternative on matters relating to a deposition, in the court for the district where the deposition will be taken. The motion must include a certification that the movant has in good faith conferred or attempted to confer with other affected parties in an effort to resolve the dispute without court action. The court may, for good cause, issue an order to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense, including one or more of the following:

(A) forbidding the disclosure or discovery;

(B) specifying terms, including time and place or the allocation of expenses, for the disclosure or discovery;

(C) prescribing a discovery method other than the one selected by the party seeking discovery;

(D) forbidding inquiry into certain matters, or limiting the scope of disclosure or discovery to certain matters;

(E) designating the persons who may be present while the discovery is conducted;

(F) requiring that a deposition be sealed and opened only on court order;



(G) requiring that a trade secret or other confidential research, development, or commercial information not be revealed or be revealed only in a specified way; and

(H) requiring that the parties simultaneously file specified documents or information in sealed envelopes, to be opened as the court directs.

FED. R. CIV. P. 26(b)-(c)(1); see also FED. R. CIV. P. 45(d).

14. The breadth of Rule 2004 examinations does not defeat the principled prerequisites

of relevance or reasonableness. See Inc. v. Katz (In re Metiom, Inc.), 318 B.R. 263 (S.D.N.Y.

2004) (good cause may be established by showing that the 2004 examination is necessary to

establish the claim of the party seeking the examination); Snyder v. Society Bank, 181 B.R. at 42

(Rule 2004 examination was properly denied where the proposed deposer fails to establish need

for the requested documents for purposes of a specific claim); In re Express One Int'l, 217 B.R.

215, 217 (Bankr. E.D. Tex. 1998) (2004 examination allowed to proceed only with respect to the

single issue of the extent of financial reserves raised to justify same); In re Symington, III, 209

B.R. 678, 684 (Bankr. D. Md. 1997) ("a Rule 2004 examination must be both relevant and

reasonable.") (citations omitted).

B. ERCOT’s objections and responses to the 2004 Notice.

15. A protective order is necessary for three reasons. First, the Committee has not

articulated any particular viable claim against ERCOT it purports to be investigating. Based on

the strict limitation-of-liability provisions in the SFMPA set forth above, the universe of viable

claims (and any damages arising therefrom) the Debtor may have against ERCOT is limited.

While the scope of Rule 2004 is admittedly broad, the foregoing authorities demonstrate it is not

limitless. Even on its face, a Rule 2004 examination “may relate only to the acts, conduct, or

property or to the liabilities and financial condition of the debtor ….” FED. R. BANKR. P. 2004(b)

(emphasis added).



16. It is therefore unclear why so many of the requests for production seek information

related to other, non-debtor market participants. Request No. 12, for example, seeks “documents

and communications concerning ERCOT’s consideration of measures or it its efforts or plans to

uplift unsettled portions of any invoices or charges from ERCOT to the Debtor or other market

participants ….” (emphasis added). Similarly, Request Nos. 6 and 15 seek documents and

communications related to Debtor Affiliates and Coop Members—the latter being broadly defined.

But Rule 2004 does not empower the Committee to investigate the state-wide consequences of the

Black Swan Winter Event. Its scope is more narrow than that.

17. Second, as currently drafted, the 2004 Notice calls for the review and potential

production of vast quantities of documents and communications. It would effectively require

ERCOT to review all documents and communications generated over the course of several months

in response to one of the most significant statewide events in the history of the Texas

Interconnection, which serves more than 26 million Texas customers, representing roughly 90

percent of Texas’s electric load. The burden to conduct such a review is extreme, both financially

and logistically. This is especially true considering the myriad state and federal inquiries and

voluminous litigation ERCOT is engaged in following the February winter weather event. Given

the limited nature of ERCOT’s potential liability, the Committee has failed to justify imposing

such a burden.

18. Third, there are significant confidentiality issues. ERCOT’s communications with

market participants are subject to the confidentiality provisions contained in the ERCOT Protocols,

which have the force and effect of state law. While ERCOT acknowledges that the Court has

entered the Protective Order, it is not clear that affected market participants were ever given notice

that their confidential communications might be disclosed, as required by the ERCOT Protocols.



Before the Court orders production of confidential communications, the counterparties to those

communication are entitled to notice and an opportunity to comment, at the very least. Until the

Committee elaborates on the claims it thinks the Debtor has to assert against ERCOT, there is no

justification for permitting carte blanche intrusion into non-parties’ otherwise protected

communications.

i. ERCOT’s objections and responses to the Committee’s Definitions.

19. ERCOT objects to the definition of “Brazos” or “Debtor” to the extent it includes

the Debtor’s “past and present officers, directors, employees, members, agents, representatives,

attorneys, consultants, advisors, or other Persons acting or purporting to act under its control or on

its behalf.” ERCOT does not have personal knowledge of the identities of all such individuals.

ERCOT will therefore implement this definition without the objectionable language.

20. ERCOT objects to the definition of “Coop Member” to the extent it includes, in

addition to the named Coops, “their past and present officers, directors, partners, employees,

members, owners and beneficiaries, agents, representatives, attorneys, consultants, advisors, or

other Persons acting or purporting to act under its control or on its behalf.” ERCOT does not have

personal knowledge of the identities of all such individuals. ERCOT will therefore implement this

definition without the objectionable language.

21. ERCOT objects to the definition of “Document” to the extent it includes

“electronically stored information on desktop and portable computers, remote computer servers

(i.e., ‘cloud-based’ software), data-storage devices such as external hard drives and USB ‘thumb’

drives, and portable electronic devices, including any cell phone, smartphone, or tablet computing

device; and all information stored in or constituting, without limitation, e-mails, text messages,

SMS messages, instant messages, social media posts, WhatsApp, Telegram, Wickr, or Bloomberg



chats, and/or communications sent or received via similar programs and applications.” ERCOT

has approximately 770 employees and an additional 60 contractors. It would be unduly

burdensome to require ERCOT to search the electronic devices of all its employees. ERCOT will

therefore implement this definition without the objectionable language.

22. ERCOT objects to the definition of “PUCT” to the extent it includes the PUCT’s

“past and present officers, directors, employees, members, agents, representatives, attorneys,

consultants, advisors, or other persons acting or purporting to act under its control or on its behalf.”

ERCOT does not have personal knowledge of the identities of all such individuals. ERCOT will

therefore implement this definition without the objectionable language.

ii. ERCOT’s objections and responses to the Committee’s Instructions.

23. ERCOT objects to Instruction No. 8 to the extent it purports to require production

of privileged materials in the possession of attorneys. ERCOT also objects to Instruction No. 8 to

the extent it purports to require production of materials in the possession of individuals whom

ERCOT does not control and/or whose identities are unknown. ERCOT further objects to

Instruction No. 8 because it does not reasonably limit the number of custodians of records whose

electronically stored information (“ESI”) ERCOT must search. ERCOT will disregard this

instruction to the extent it runs afoul of these objections, but ERCOT will reasonably cooperate

with the Committee to identify a more appropriate scope of inquiry.

24. ERCOT objects to Instruction No. 12 to the extent it purports to require production

of documents outside the scope of Rule 2004. ERCOT will not produce documents outside the

scope of Rule 2004.

25. ERCOT objects to Instruction No. 13 because it purports to require written

responses not otherwise contemplated by the applicable Federal Rules. ERCOT will comply with



all applicable Federal Rules, but neither Rule 2004 nor Rule 34 requires a party to provide the

information requested in Instruction No. 13. ERCOT will not provide the information requested

by Instruction No. 13.

iii. ERCOT’s objections and responses to the Committee’s Requests for Production.

26. REQUEST FOR PRODUCTION NO. 1. All documents and communications

concerning prices set by ERCOT for energy during Winter Storm Uri.

RESPONSE: ERCOT objects to this request. While the scope of Rule 2004 is broad, it is not limitless. Snyder, 181 B.R. T 41-42; Buccaneer, 2015 Bankr. LEXIS 4203 at *19. Under the plain language of the rule, the examination “may relate only to the acts, conduct, or property or to the liabilities and financial condition of the debtor, or to any matter which may affect the administration of the debtor's estate, or to the debtor's right to a discharge.” FED. R. BANKR. P. 2004(b). The Debtor’s claims against ERCOT are severely limited under the SFMPA and the ERCOT Protocols. For example, under the SFMPA, “a Force Majeure Event does not relieve a Party affected by a Force Majeure Event of its obligation to make payments or of any consequences of non-performance pursuant to the ERCOT Protocols or under this Agreement ….” Other than document and communications expressly relate to the Debtor, the Committee has not articulated how responsive documents fall within this limited scope. See Snyder, 181 B.R. at 42 (“Appellant offers no explanation of the need for the required documents in his cause of action.”). Furthermore, the limitations of Federal Rules of Civil Procedure 26 and 45 apply to a Rule 2004 examination. Buccaneer, 2015 Bankr. LEXIS 4203 at *19. Requiring ERCOT to produce documents outside the scope of Rule 2004 would be unduly burdensome. ERCOT will produce documents and communications concerning prices it charged the Debtor for energy during Winter Storm Uri (subject to its objections to the Committee’s definitions and instructions). ERCOT will, however, continue to work with the Committee to define a more appropriate scope of inquiry.


concerning ERCOT’s imposition of ancillary fees on the Debtor for electricity purchased or sold

during Winter Storm Uri.

RESPONSE: Subject to its objections to the Committee’s definitions and instructions, ERCOT will produce non-privileged responsive documents that are within its possession, custody, or control.




concerning actions PUCT directed ERCOT to take or not take during Winter Storm Uri.

RESPONSE: ERCOT objects to this request. While the scope of Rule 2004 is broad, it is not limitless. Snyder 181 B.R. at 41-42; Buccaneer, 2015 Bankr. LEXIS 4203 at *19. Under the plain language of the rule, the examination “may relate only to the acts, conduct, or property or to the liabilities and financial condition of the debtor, or to any matter which may affect the administration of the debtor's estate, or to the debtor's right to a discharge.” FED. R. BANKR. P. 2004(b). The Committee has not articulated how responsive documents fall within this limited scope. See Snyder, 181 B.R. at 42 (“Appellant offers no explanation of the need for the required documents in his cause of action.”). Furthermore, the limitations of Federal Rules of Civil Procedure 26 and 45 apply to a Rule 2004 examination. Buccaneer, 2015 Bankr. LEXIS 4203 at *19. Requiring ERCOT to produce documents outside the scope of Rule 2004 would be unduly burdensome. ERCOT will search for and produce documents and communications concerning actions the PUCT directed it to take specifically with respect to the Debtor, if any (subject to its objections to the Committee’s definitions and instructions). ERCOT will, however, continue to work with the Committee to define a more appropriate scope of inquiry.


concerning any determination made by Potomac Economics, Ltd., the Independent Market

Monitor for PUCT, with respect to the propriety of electricity prices or ancillary charges during

Winter Storm Uri.

RESPONSE: ERCOT objects to this request. While the scope of Rule 2004 is broad, it is not limitless. Snyder, 181 B.R. at 41-42; Buccaneer, 2015 Bankr. LEXIS 4203 at *19. Under the plain language of the rule, the examination “may relate only to the acts, conduct, or property or to the liabilities and financial condition of the debtor, or to any matter which may affect the administration of the debtor's estate, or to the debtor's right to a discharge.” FED. R. BANKR. P. 2004(b). The Debtor’s claims against ERCOT are severely limited under the SFMPA and the ERCOT Protocols. For example, under the SFMPA, “a Force Majeure Event does not relieve a Party affected by a Force Majeure Event of its obligation to make payments or of any consequences of non-performance pursuant to the ERCOT Protocols or under this Agreement ….” Other than documents specifically related to the Debtor, the Committee has not articulated how responsive documents fall within this limited scope. See Snyder, 181 B.R. at 42 (“Appellant offers no explanation of the need for the required documents in his cause of action.”). Furthermore, the limitations of Federal Rules of Civil Procedure 26 and 45 apply to a Rule 2004 examination. Buccaneer, 2015 Bankr. LEXIS 4203 at *19. Requiring ERCOT to produce documents outside the scope of Rule 2004 would be unduly burdensome. ERCOT will produce documents and communications concerning prices



it charged the Debtor for energy during Winter Storm Uri (subject to its objections to the Committee’s definitions and instructions). ERCOT will, however, continue to work with the Committee to define a more appropriate scope of inquiry.

30. REQUEST FOR PRODUCTION NO. 5. All communications concerning

shortages or failures in natural gas supply to the Debtor or any Debtor Affiliate during Winter

Storm Uri.

RESPONSE: ERCOT objects to this request. While the scope of Rule 2004 is broad, it is not limitless. Snyder, 181 B.R. at 41-42; Buccaneer, 2015 Bankr. LEXIS 4203 at *19. Under the plain language of the rule, the examination “may relate only to the acts, conduct, or property or to the liabilities and financial condition of the debtor, or to any matter which may affect the administration of the debtor's estate, or to the debtor's right to a discharge.” FED. R. BANKR. P. 2004(b). This scope does not extend to non-debtor Debtor Affiliates. Such communications with other market participants are also confidential, and ERCOT will not produce them absent an appropriate order from the Court or the consent of the impacted counterparties. Subject to this objection and its objections to the Committee’s definitions and instructions, ERCOT will produce non-privileged responsive documents that are within its possession, custody, or control.

31. REQUEST FOR PRODUCTION NO. 6. All communications during Winter

Storm Uri between or among ERCOT and the Debtor and/or any Debtor Affiliate or Coop Member

relating to power generation curtailment and load shedding during Winter Storm Uri.

RESPONSE: ERCOT objects to this request. While the scope of Rule 2004 is broad, it is not limitless. Snyder, 181 B.R. at 41-42; Buccaneer, 2015 Bankr. LEXIS 4203 at *19. Under the plain language of the rule, the examination “may relate only to the acts, conduct, or property or to the liabilities and financial condition of the debtor, or to any matter which may affect the administration of the debtor's estate, or to the debtor's right to a discharge.” FED. R. BANKR. P. 2004(b). This scope does not extend to non-debtor Debtor Affiliates and Coop Members. Such communications with other market participants are also confidential, and ERCOT will not produce them absent an appropriate order from the Court or the consent of the impacted counterparties. Subject to this objection and its objections to the Committee’s definitions and instructions, ERCOT will produce non-privileged responsive documents that are within its possession, custody, or control.

32. REQUEST FOR PRODUCTION NO. 7. Documents sufficient to show the

Debtor’s electricity generation commitments to the ERCOT market between February 10-20,

2021.



RESPONSE: ERCOT objects to this request. As an initial matter, the term “sufficient” in this context is vague and ambiguous. ERCOT has no way to know in advance what level of production the Committee will consider “sufficient.” Furthermore, the limitations of Federal Rules of Civil Procedure 26 and 45 apply to a Rule 2004 examination. Buccaneer, 2015 Bankr. LEXIS 4203 at *19-20. The requested documents are available from the Debtor, which has voluntarily subjected itself to the jurisdiction of the Bankruptcy Court. It will therefore impose an undue burden on ERCOT to search for, review, and produce documents responsive to this request unless they are unavailable from the Debtor. ERCOT objects to this request to the extent it seeks responsive documents in the possession, custody, or control of the Debtor.

33. REQUEST FOR PRODUCTION NO. 8. To the extent not available from the

Debtor, copies of all settlement invoices and bills presented by ERCOT to the Debtor related to

February 10-20, 2021 operating days, including, without limitation, all underlying or related DAM,

Initial, Final, and True-Up Statements from ERCOT to the Debtor corresponding to those dates.

RESPONSE: ERCOT objects to this request. This request is conditioned on responsive documents being unavailable from the Debtor, but the Committee does not state whether it has sought such documents from the Debtor. . ERCOT objects to this request to the extent it seeks responsive documents in the possession, custody, or control of the Debtor Furthermore, the limitations of Federal Rules of Civil Procedure 26 and 45 apply to a Rule 2004 examination. Buccaneer, 2015 Bankr. LEXIS 4203 at *19-20. The requested documents should be available from the Debtor, which has voluntarily subjected itself to the jurisdiction of the Bankruptcy Court. It will therefore impose an undue burden on ERCOT to search for, review, and produce documents responsive to this request unless they are unavailable from the Debtor. Subject to the foregoing objections, ERCOT will produce settlement invoices from February 10-20, 2021.

34. REQUEST FOR PRODUCTION NO. 9. To the extent not available from the

Debtor, all documents and communications concerning settlement invoices and bills or statements

and other charges presented by ERCOT to the Debtor for electricity in February 2021, including

any demand by ERCOT for payment of such invoices or charges.

RESPONSE: ERCOT objects to this request. This request is conditioned on responsive documents being unavailable from the Debtor, but the Committee does not state whether it has sought such documents from the Debtor. ERCOT objects to this request to the extent it seeks responsive documents in the possession, custody, or control of the Debtor. Furthermore, the limitations of Federal Rules of Civil Procedure 26 and 45 apply to a Rule 2004 examination. Buccaneer, 2015 Bankr. LEXIS 4203 at



*19-20. The requested documents should be available from the Debtor, which has voluntarily subjected itself to the jurisdiction of the Bankruptcy Court. It will therefore impose an undue burden on ERCOT to search for, review, and produce documents responsive to this request unless they are unavailable from the Debtor. .


concerning the Debtor’s February 25, 2021 Notice of Force Majeure Event letter to ERCOT.



concerning the Debtor’s abatement of payment of ERCOT invoices or other charges incurred

between February 10-20, 2021 or as a result of Winter Storm Uri.



concerning ERCOT’s consideration of measures or its efforts or plans to uplift unsettled portions

of any invoices or charges from ERCOT to the Debtor to other ERCOT market participants,

including documents and communications concerning actions PUCT directed ERCOT to take or

not take with respect to the settlement or uplift of invoices or charges for electricity purchased or

sold by the Debtor during Winter Storm Uri.

RESPONSE: ERCOT objects to this request. While the scope of Rule 2004 is broad, it is not limitless. Snyder 181 B.R. at 41-42; Buccaneer, 2015 Bankr. LEXIS 4203 at *19. Under the plain language of the rule, the examination “may relate only to the acts, conduct, or property or to the liabilities and financial condition of the debtor, or to any matter which may affect the administration of the debtor's estate, or to the debtor's right to a discharge.” FED. R. BANKR. P. 2004(b). The Committee has not articulated how responsive documents related to market participants other than the Debtor fall within this limited scope. See Snyder, 181 B.R. at 42 (“Appellant offers no explanation of the need for the required documents in his cause of action.”). Such communications are also confidential, and ERCOT will not produce them unless ordered to do so. Furthermore, the limitations of Federal Rules of Civil Procedure 26 and 45 apply to a



Rule 2004 examination. Buccaneer, 2015 Bankr. LEXIS 4203 at *19. Requiring ERCOT to produce documents outside the scope of Rule 2004 would be unduly burdensome. ERCOT will search for and produce documents and communications related to the Debtor, if any (subject to its objections to the Committee’s definitions and instructions). ERCOT will, however, continue to work with the Committee to define a more appropriate scope of inquiry.


concerning ERCOT’s assessments or determinations as to the Debtor’s collateral requirements to

participate in ERCOT’s Real-Time and/or Day-Ahead Markets in 2021, and/or concerning any

collateral actually posted by the Debtor with ERCOT or swept by ERCOT from the Debtor in

2021.


39. REQUEST FOR PRODUCTION NO. 14. Documents sufficient to show

ERCOT’s estimating and planning with respect to the amount of power that would be required

during Winter Storm Uri and/or constituting ERCOT’s emergency readiness and response plans

and procedures for Winter Storm Uri.

RESPONSE: ERCOT objects to this request. While the scope of Rule 2004 is broad, it is not limitless. Snyder, 181 B.R. at 41-42; Buccaneer, 2015 Bankr. LEXIS 4203 at *19. Under the plain language of the rule, the examination “may relate only to the acts, conduct, or property or to the liabilities and financial condition of the debtor, or to any matter which may affect the administration of the debtor's estate, or to the debtor's right to a discharge.” FED. R. BANKR. P. 2004(b). The Debtor’s claims against ERCOT are severely limited under the SFMPA and the ERCOT Protocols. The Committee has not articulated how responsive documents fall within this limited scope. See Snyder, 181 B.R. at 42 (“Appellant offers no explanation of the need for the required documents in his cause of action.”). Furthermore, the limitations of Federal Rules of Civil Procedure 26 and 45 apply to a Rule 2004 examination. Buccaneer, 2015 Bankr. LEXIS 4203 at *19. Requiring ERCOT to produce documents outside the scope of Rule 2004 would be unduly burdensome. ERCOT will, however, continue to work with the Committee to define a more appropriate scope of inquiry.




concerning ERCOT’s decisions or deliberations about maintaining or cutting power to the Debtor,

any Debtor Affiliate, and/or any Coop Member during Winter Storm Uri, including any

determinations made as to duration (e.g., rolling outages versus extended outages, etc.).

RESPONSE: ERCOT objects to this request. While the scope of Rule 2004 is broad, it is not limitless. Snyder, 181 B.R. at 41-42; Buccaneer, 2015 Bankr. LEXIS 4203 at *19. Under the plain language of the rule, the examination “may relate only to the acts, conduct, or property or to the liabilities and financial condition of the debtor, or to any matter which may affect the administration of the debtor's estate, or to the debtor's right to a discharge.” FED. R. BANKR. P. 2004(b). This scope does not extend to non-debtor Debtor Affiliates and Coop Members. Such communications with other market participants are also confidential, and ERCOT will not produce them absent an appropriate order from the Court or the consent of the impacted counterparties. Subject to this objection and its objections to the Committee’s definitions and instructions, ERCOT will produce non-privileged responsive documents that are within its possession, custody, or control.

41. REQUEST FOR PRODUCTION NO. 16. Non-public agendas, minutes,

transcripts, presentations or other board materials referring to the Debtor from or for any meeting

of ERCOT’s Board of Directors or its committees held between February 2021 and the present.

RESPONSE: ERCOT objects to this request. The Committee has not articulated why responsive documents up to “the present” should be discoverable. It is likely that all responsive documents prepared after the Petition Date are subject to the work product privilege. Subject to its objections to the Committee’s definitions and instructions, ERCOT will produce non-privileged responsive documents that are within its possession, custody, or control from between February 2021 and the Petition Date.


concerning any evaluation or review by ERCOT of the Emergency Operations Plan for 2021 that

the Debtor submitted to ERCOT in February 2021.





concerning Clifton Karnei’s resignation from ERCOT’s Board of Directors in February 2021

and/or whether any other ERCOT officer or board member resigned or was removed in connection

with Winter Storm Uri events.

RESPONSE: ERCOT objects to this request to the extent it seeks documents and communications concerning directors and officers other than Clifton Karnei. While the scope of Rule 2004 is broad, it is not limitless. Snyder, 181 B.R. at 41-42; Buccaneer, 2015 Bankr. LEXIS 4203 at *19. Under the plain language of the rule, the examination “may relate only to the acts, conduct, or property or to the liabilities and financial condition of the debtor, or to any matter which may affect the administration of the debtor's estate, or to the debtor's right to a discharge.” FED. R. BANKR. P. 2004(b). Mr. Karnei was the Debtor’s Chairman of the Board during Winter Storm Uri, so documents and communications related to him fall within the scope of Rule 2004. But the Committee has not articulated how responsive documents and communications related to other individuals fall within this limited scope. See Snyder, 181 B.R. at 42 (“Appellant offers no explanation of the need for the required documents in his cause of action.”). . ERCOT will, however, continue to work with the Committee to define a more appropriate scope of inquiry.


concerning ERCOT’s consideration of measures or its efforts or plans to improve or ensure

winterization compliance across the Texas power grid between February 2011 and the present,

including any actions taken or considered in response to the August 16, 2011 report issued by the

Federal Energy Regulatory Commission, titled “Report on Outages and Curtailments During the

Southwest Cold Weather Event of February 1-5, 2011.”

RESPONSE: ERCOT objects to this request. While the scope of Rule 2004 is broad, it is not limitless. Snyder, 181 B.R. at 41-42; Buccaneer, 2015 Bankr. LEXIS 4203 at *19. Under the plain language of the rule, the examination “may relate only to the acts, conduct, or property or to the liabilities and financial condition of the debtor, or to any matter which may affect the administration of the debtor's estate, or to the debtor's right to a discharge.” FED. R. BANKR. P. 2004(b). The Debtor’s claims against ERCOT are severely limited under the SFMPA and the ERCOT Protocols. The Committee has not articulated how responsive documents fall within this limited scope. See Snyder, 181 B.R. at 42 (“Appellant offers no explanation of the need for the required documents in his cause of action.”). Furthermore, the limitations of Federal Rules of Civil Procedure 26 and 45 apply to a Rule 2004 examination. Buccaneer, 2015 Bankr. LEXIS 4203 at



*19. Requiring ERCOT to produce documents outside the scope of Rule 2004 would be unduly burdensome. ERCOT will, however, continue to work with the Committee to define a more appropriate scope of inquiry.

45. REQUEST FOR PRODUCTION NO. 20. All documents and communication

concerning annual reviews or audits conducted or commissioned between 2011 and the present of

the Debtor’s equipment, facilities, and/or transmission lines to assess protection against or the

impact on systems of cold weather events.

RESPONSE: ERCOT objects to this request. While the scope of Rule 2004 is broad, it is not limitless. Snyder, 181 B.R. at 41-42; Buccaneer, 2015 Bankr. LEXIS 4203 at *19. Under the plain language of the rule, the examination “may relate only to the acts, conduct, or property or to the liabilities and financial condition of the debtor, or to any matter which may affect the administration of the debtor's estate, or to the debtor's right to a discharge.” FED. R. BANKR. P. 2004(b). The Debtor’s claims against ERCOT are severely limited under the Standard Form Market Participate Agreement and the ERCOT Protocols. The Committee has not articulated how responsive documents fall within this limited scope. See Snyder, 181 B.R. at 42 (“Appellant offers no explanation of the need for the required documents in his cause of action.”). Furthermore, the limitations of Federal Rules of Civil Procedure 26 and 45 apply to a Rule 2004 examination. Buccaneer, 2015 Bankr. LEXIS 4203 at *19. Requiring ERCOT to produce documents outside the scope of Rule 2004 would be unduly burdensome. ERCOT will, however, continue to work with the Committee to define a more appropriate scope of inquiry.


concerning any drills or training programs conducted by ERCOT between 2011 and the present

that involved the Debtor and/or its and any Debtor Affiliate’s plant personnel.

RESPONSE: ERCOT objects to this request. While the scope of Rule 2004 is broad, it is not limitless. Snyder, 181 B.R. at 41-42; Buccaneer, 2015 Bankr. LEXIS 4203 at *19. Under the plain language of the rule, the examination “may relate only to the acts, conduct, or property or to the liabilities and financial condition of the debtor, or to any matter which may affect the administration of the debtor's estate, or to the debtor's right to a discharge.” FED. R. BANKR. P. 2004(b). The Debtor’s claims against ERCOT are severely limited under the Standard Form Market Participate Agreement and the ERCOT Protocols. The Committee has not articulated how responsive documents fall within this limited scope. See Snyder, 181 B.R. at 42 (“Appellant offers no explanation of the need for the required documents in his cause of action.”). Furthermore, the limitations of Federal Rules of Civil Procedure 26 and 45 apply to a Rule 2004 examination. Buccaneer, 2015 Bankr. LEXIS 4203 at *19. Requiring ERCOT to



produce documents outside the scope of Rule 2004 would be unduly burdensome. ERCOT will, however, continue to work with the Committee to define a more appropriate scope of inquiry.


concerning preventive maintenance programs or policies implemented between 2011 and the

present to protect the Debtor’s equipment, facilities, and/or transmission lines against cold weather

events.

RESPONSE: ERCOT objects to this request. While the scope of Rule 2004 is broad, it is not limitless. Snyder, 181 B.R. at 41-42; Buccaneer, 2015 Bankr. LEXIS 4203 at *19. Under the plain language of the rule, the examination “may relate only to the acts, conduct, or property or to the liabilities and financial condition of the debtor, or to any matter which may affect the administration of the debtor's estate, or to the debtor's right to a discharge.” FED. R. BANKR. P. 2004(b). The Debtor’s claims against ERCOT are severely limited under the Standard Form Market Participate Agreement and the ERCOT Protocols. The Committee has not articulated how responsive documents fall within this limited scope. See Snyder, 181 B.R. at 42 (“Appellant offers no explanation of the need for the required documents in his cause of action.”). Furthermore, the limitations of Federal Rules of Civil Procedure 26 and 45 apply to a Rule 2004 examination. Buccaneer, 2015 Bankr. LEXIS 4203 at *19. Requiring ERCOT to produce documents outside the scope of Rule 2004 would be unduly burdensome. ERCOT will, however, continue to work with the Committee to define a more appropriate scope of inquiry.

IV. COSTS

48. ERCOT requests reimbursement of its reasonable costs and expenses, including

attorneys’ fees, incurred responding to the Committee’s 2004 Notice. “[N]on-parties ordered to

produce subpoenaed documents must be protected from significant expenses resulting from

compliance.” Gutierrez v. Benavides, No. 5:12-CV-18, 2013 U.S. Dist. LEXIS 204273, *5 (S.D.

Tex. Oct. 4, 2013) (citing Fed. R. Civ. P. 45). “This is because nonparty witnesses are powerless

to control the scope of litigation and discovery, and should not be forced to subsidize and

unreasonable share of the costs of a litigation to which they are not a party.” Id. “In such cases, a



court must thus examine the burden imposed in terms of the expense and inconvenience required

for compliance.” Id.

49. “Rule 45’s mandatory cost-shifting provisions promote the most efficient use of

resources in the discovery process.” Linder v. Calero-Portocarrero, 183 F.R.D. 314, 322 (D.D.C.

1998). “When nonparties are forced to pay the costs of discovery, the requesting party has no

incentive to deter it from engaging in fishing expeditions for marginally relevant material.” Id. at

322-23. “Requesters forced to internalize the costs of discovery will be more inclined to make

narrowly-tailored requests reflecting a reasonable balance between the likely relevance of the

evidence that will be discovered and the costs of compliance. Id. at 323.

50. “‘Undue burden can be found when a subpoena is facially overbroad.’” Id. at 320

(quoting Williams v. City of Dallas, 178 F.R.D. 103, 109 (N.D. Tex. 1998)). “Whether a subpoena

presents an undue burden depends on the following factors: (1) the relevance of the information

requested; (2) the requesting party's need for the documents; (3) the breadth of the document

request; (4) the time period covered by the request; (5) the particularity with which the requested

documents are described; and (6) the burden imposed.” Gutierrez v. Benavides, 2013 U.S. Dist.

LEXIS 204273 at *4 (citing Wiwa v. Royal Dutch Petroleum Co., 392 F.3d 812, 818 (5th Cir.

2004)).

51. As discussed in the objections above, many of the Committee’s requests seek

documents and communications of dubious relevance to the Debtor’s bankruptcy. Additionally,

the Committee has not articulated why it needs many of the requested documents and

communications — i.e., it has not articulated viable claims for which responsive information

would prove relevant. Given ERCOT’s role in the Texas electricity market, the requests are



necessarily broad. As a result, the burden imposed on ERCOT is significant. Rule 45 therefore

mandates cost shifting in ERCOT’s favor.

V. PRAYER

WHEREFORE, PREMISES CONSIDERED, ERCOT respectfully requests that the Court

enter an order (A) granting this Motion; (B) sustaining the objections to the 2004 Notice set forth

herein; (C) limiting ERCOT’s obligation to search for and produce documents in response to the

2004 Notice to the proper scope of a Rule 2004 exam and limited to viable claims articulated by

the Committee; (D) awarding ERCOT all reasonable costs and expenses it incurs searching for

and producing responsive documents; and (E) providing ERCOT such other and further relief to

which it is entitled at law or in equity.

Dated: June 16, 2021 MUNSCH HARDT KOPF & HARR, P.C. By: /s/ Jamil N. Alibhai

Kevin M. Lippman Texas Bar No. 00784479 [email protected] Deborah Perry Texas Bar No. 24002755 [email protected] Jamil N. Alibhai Texas Bar No. 00793248 [email protected] Julian P. Vasek Texas Bar No. 24070790 [email protected] 3800 Ross Tower 500 N. Akard Street Dallas, Texas 75201-6659 Telephone: (214) 855-7500 Facsimile: (214) 855-7584

ATTORNEYS FOR THE ELECTRIC RELIABILITY COUNCIL OF TEXAS, INC.


mailto:[email protected]





CERTIFICATE OF SERVICE

I certify that on June 16, 2021, I caused a copy of the foregoing document to be served by the Electronic Case Filing System for United States Bankruptcy Court for the Southern District of Texas.

/s/ Julian P. Vasek Julian P. Vasek

4818-5842-4047v.4 012761.00004


IN THE UNITED STATES BANKRUPTCY COURT FOR THE SOUTHERN DISTRICT OF TEXAS

HOUSTON DIVISION In re: BRAZOS ELECTRIC POWER COOPERATIVE, INC., Debtor.

§ § § § § §

Chapter 11

Case No. 21-30725 (DRJ)

ORDER GRANTING ERCOT’S MOTION FOR PROTECTIVE ORDER IN RESPONSE

TO NOTICE OF THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS OF RULE 2004 EXAMINATION AND DOCUMENT PRODUCTION REQUESTS

Came on for consideration the Motion for Protective Order in Response to Notice of the

Official Committee of Unsecured Creditors of Rule 2004 Examination and Document Production Requests to ERCOT (the “Motion”), filed by Electric Reliability Council of Texas, Inc. (“ERCOT”) on June 16, 2021. Finding that service and notice of the Motion were proper and sufficient; having considered the relief requested in the Motion; and having found and concluded that good cause exists to grant the relief requested therein, it is hereby—

ORDERED that the Motion is GRANTED; it is further—

ORDERED that ERCOT’s objections to the Notice of the Official Committee of Unsecured Creditors of Rule 2004 Examination and Document Production Requests to ERCOT (ECF No. 682, the “2004 Notice”) are SUSTAINED; it is further—

ORDERED that the Confidentiality Agreement and Stipulated Protective Order (ECF No. 521) applies to and governs ERCOT’s production in response to the 2004 Notice; and it is further—

ORDERED that ERCOT is entitled to recover from the estate all reasonable costs and expenses, including attorneys’ fees, that it incurs in connection with responding to and producing documents in connection with the 2004 Notice, and the Debtor1 shall pay such costs and expenses immediately upon presentment by ERCOT to the Debtor and the Committee of each applicable invoice.

Dated _______________________, 2021.

DAVID R. JONES CHIEF U.S. BANKRUPTCY JUDGE

1 Terms not defined herein have the meaning attributed to them in the Motion.

4851-5908-7855v.2 012761.00004

Case 21-30725 Document 787-1 Filed in TXSB on 06/16/21 Page 1 of 1