NOTICE DATE: September 25, 2026

NOTICE TYPE: M-A092526-01 Legal

SHORT DESCRIPTION: Notice of Stipulation and Agreed Order Resolving Distribution Amount and Dismissal of Appeal in Entrust Energy, Inc. bankruptcy case and expected ERCOT recovery on its claims.

INTENDED AUDIENCE: All Market Participants

LONG DESCRIPTION: On March 30, 2021, Entrust Energy, Inc. and certain of its affiliates (collectively, "Entrust") filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code ("Bankruptcy Code") in the U.S. Bankruptcy Court for the Southern District of Texas.  See Case No. 21-31070 (Jointly Administered).  In response, ERCOT filed two proofs of claim in the Entrust cases in the total amount of approximately $297 million (the "Claims").  The Claims arise from Entrust's failure to pay for power purchases from ERCOT during Winter Storm Uri.  On November 10, 2021, Entrust filed a liquidation plan under Chapter 11 of the Bankruptcy Code (the "Plan"), which the bankruptcy court confirmed on December 20, 2021.  Under the Plan, the Entrust Liquidating Trust ("Trust") was created.  The Trust is responsible for the collection and liquidation of Trust assets, which includes causes of action, and resolving claims and distributing assets.  Anna Phillips was designated as the Liquidating Trustee ("Trustee") of the Trust and charged with administering the Trust.

Following her appointment, the Trustee initiated an adversary proceeding against ERCOT in which she objected to ERCOT's Claims and asserted certain affirmative claims against ERCOT.  See Adv. Proc. No. 22-03018.  The affirmative claims included allegations that ERCOT's mass transition of Entrust's retail customers during Winter Storm Uri was an unconstitutional taking and that ERCOT was grossly negligent in ensuring the reliability of the grid.  ERCOT was successful in obtaining the dismissal of the Trustee's claims in the adversary proceeding.  The Trustee appealed the order dismissing certain of her claims against ERCOT and the appeal remains pending in the U.S. District Court for the Southern District of Texas.  See Case No. 4:26-cv-02504.

Also, as part of her administration of the Trust, the Trustee initiated an adversary proceeding against Shell Energy North America (US) L.P. ("Shell"), seeking damages arising from Shell's alleged wrongful termination of energy supply contracts on the eve of Winter Storm Uri, which allegedly forced Entrust to buy replacement energy at real-time prices, which, in turn, forced Entrust into bankruptcy and liquidation.  See Adv. Proc. No. 21-03930.   

The Trustee and Shell recently entered into a settlement agreement, which requires in part that Shell pay the Trust $99 million (in addition to the $10.2 million previously paid by Shell to the Trust).  On September 1, 2026, the bankruptcy court approved the settlement.  As Entrust's largest unsecured creditor, ERCOT is entitled to the largest pro rata distribution of the cash to be distributed by the Trust to creditors. 

As reflected by the Stipulation and Agreed Order Resolving Distribution Amount and Dismissal of Appeal entered by the bankruptcy court on September 24, 2026 ("Stipulation"), ERCOT and the Trustee have resolved all matters in dispute between them, including the distribution ERCOT will be entitled to receive in connection with its Claims.  A copy of the Stipulation is attached to this Market Notice.  Under the terms of the Stipulation:

• ERCOT's Claims will be allowed in their as-filed amounts;
• ERCOT's aggregate distribution from the Trust will be reduced by $600,000.00, which will result in an estimated distribution to ERCOT of approximately $85 million; and
• the adversary proceeding and pending appeal initiated by the Trustee against ERCOT will be dismissed by agreement. 

ERCOT expects to receive its distribution from the Trust before the end of 2026.  Pursuant to the Debt Obligation Order adopted by the Public Utility Commission of Texas in Docket No. 52321, ERCOT will use the distribution to pay portions of the default charges over the life of Series 2025 M bonds.  Once additional analysis is complete, a subsequent Market Notice will provide details on how the distribution will be applied to future default charges under the Subchapter M bonds.

CONTACT: If you have any questions, please contact your ERCOT Account Manager. You may also call the general ERCOT Client Services phone number at (512) 248-3900 or contact ERCOT Client Services via email at ClientServices@ercot.com.

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