(Reuters) - A judge overseeing the bankruptcy of the largest electric co-op in Texas on Wednesday shut down certain arguments that the state's electric grid operator was looking to make in a legal brawl with the co-op over a nearly $2 billion bill stemming from a historic winter storm last year.

U.S. Bankruptcy Judge David Jones in Houston issued his ruling ahead of a February trial over the $1.9 billion claim the Electric Reliability Council of Texas filed in Brazos Electric Power Cooperative Inc's Chapter 11 case. The judge held that some of the arguments ERCOT tried to raise to defend its claim weren't relevant to the immediate issue.

ERCOT said on Wednesday that it does not comment on pending litigation.

Brazos filed for bankruptcy in March 2021 after being hit with the energy bill from ERCOT. The bill for the seven-day storm is nearly three times the co-op’s total power cost from 2020, which was $774 million, according to Brazos. For several days during the storm, ERCOT set electricity prices at $9,000 per megawatt hour, around 500 times the usual rate.

In August, the co-op filed a lawsuit as part of its bankruptcy objecting to ERCOT’s $1.9 billion claim and aiming to substantially reduce the amount, arguing that the charges are "exorbitant and excessive." ERCOT, in response, said Brazos purchased energy it knew it couldn’t afford and failed to comply with agreements under their market participation contract.

Additionally, ERCOT said Brazos was partly at fault for not properly preparing its facilities for severe winter weather.

But Jones held that those issues “have nothing to do with the proceeding." A trial on the dispute is set to begin on Feb. 21.

Additionally, a hearing on ERCOT’s motion for a ruling in its favor on several other aspects of the dispute, including its argument that it could not “re-price the wholesale market to benefit Brazos,” is scheduled for Jan. 21 before Jones.

In October, Jones rejected ERCOT’s contention that the dispute over the bill should be outside of bankruptcy court. ERCOT has appealed that ruling.

The case is In re Brazos Electric Power Cooperative Inc, U.S. Bankruptcy Court, Southern District of Texas, No. 21-30725.

For Brazos: Louis Strubeck and Nick Hendrix of O'Melveny & Myers; Jason Boland, Paul Trahan and Steve Peirce of Norton Rose Fulbright; and Lino Mendiola, Michael Boldt and Jim Silliman of Eversheds Sutherland (US)

For ERCOT: Kevin Lippman, Deborah Perry, Jamil Alibhai and Ross Parker of Munsch Hardt Kopf & Harr

Read more:

Brazos' $2 billion bill lawsuit survives ERCOT effort to dismiss

Brazos Electric seeks bankruptcy court ruling on winter storm energy prices

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