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In re Escalera Res. Co.

In re Escalera Res. Co.

United States Bankruptcy Court for the District of Colorado

February 10, 2017, Decided

Bankruptcy Case No. 15-22395 TBM, Chapter 11

Opinion

 [*339]  OPINION AND ORDER ON APPLICATION FOR ALLOWANCE OF ADMINISTRATIVE EXPENSE CLAIM (ELECTRICAL ENERGY) UNDER 11 U.S.C. § 503(b)(9)

I. Introduction.

Electrical energy. Since Thales of Miletus (circa 585 B.C.) made his initial observations on the generation of static electricity by rubbing a piece of ilektron against fur, intellectuals have puzzled over the physics of the phenomenon. Great scientists like Alessandro Volta, André-Marie Ampère, James Prescott [**2]  Joule, Michael Faraday, George Ohm, James Watt, Thomas Edison, and Nikola Tesla provided the foundation for development of the modern electric industry including the manufacture, transmission, distribution, and measurement of electrical energy. And, now, electrical energy is virtually indispensable for modern living and work.

This case presents an interesting question touching on the nature of electrical energy and connecting it with bankruptcy. Chapter 11 debtor, Escalera Resources Co. (the "Debtor"), produces coal bed methane gas from its wells in Wyoming. Its operations rely on substantial quantities of electrical energy. PacifiCorp d/b/a Rocky Mountain Power ("PacifiCorp") is a public utility. It supplied the Debtor with metered electrical energy both before and after the Debtor sought protection under the Bankruptcy Code.1

] In 2005, as part of comprehensive changes to the Bankruptcy Code, Congress enhanced certain creditors' rights by enacting Section 503(b)(9). That new provision created an administrative expense priority for "the value of any goods received by the debtor within 20 days before the date of commencement of a case." So, creditors that supplied goods right before a bankruptcy jump to [**3]  the front of the line for distributions. Right or wrong from a policy perspective, that is what Congress decided. Now, the Court must decide whether the electrical energy supplied by PacifiCorp in the days leading up to the Debtor's bankruptcy constitutes "goods" entitled to priority status under the Bankruptcy Code. The exercise requires some basic understanding of the nature of electrical energy; but this is not a science test. The main focus of the inquiry is on the plain meaning of the term "goods."

II. Procedural Background.

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563 B.R. 336 *; 2017 Bankr. LEXIS 391 **; 91 U.C.C. Rep. Serv. 2d (Callaghan) 998

In re: Escalera Resources Co., Debtor.

CORE TERMS

electric energy, electricity, meter, customer, commodities, administrative expense, energy, supplied, bankruptcy court, measured, constitutes, courts, Invoices, movable, cases, consumed, wires, dictionaries, natural gas, decisions, sales contract, regulations, purposes, tangible, confirm, treaty, electrical current, public utility, manufactured, transmission

Bankruptcy Law, Unsecured Priority Claims, Administrative Expenses, Miscellaneous Expenses, Governments, Legislation, Interpretation, Commercial Law (UCC), Subject Matter, Goods, Definition of Goods, Energy & Utilities Law, Utility Companies, Buying & Selling of Power, Business & Corporate Compliance, Energy & Utilities Law, Electric Power Industry, Federal Power Act, Electricity Distribution & Transmission, Natural Gas Industry, Distribution & Sale, Administrative Powers, Utility Services, Estate Property, Avoidance, Limitations on Trustee Powers, Types of Claims, Administrative Expenses