Montana Bankruptcy Court Confirms Electricity Is a “Good” Under the Bankruptcy Code

The United States Bankruptcy Court for the District of Montana in connection with In re Southern Montana Electric Generation and Transmission Cooperative, Inc. held that electricity was a “good” for purposes of section 503(b)(9) of the Bankruptcy Code. That means that anyone sells electricity to a person who later goes bankrupt is entitled to a high-priority administrative expense claim for the value of the electricity delivered in the 20 days prior to the bankruptcy.

The decision was not a surprise. It falls squarely within a line of cases concluding that electricity is a “good” for purposes of the Bankruptcy Code and the Uniform Commercial Code. It is, however, a useful reminder that electricity suppliers may be entitled to a priority claim for part of the amount owed by a bankrupt debtor.

To protect a section 503(b)(9) administrative expense claim, it is often necessary to do something more than merely file an ordinary proof of claim in the case. Sometimes courts issue procedures orders that specify additional filing obligations to protect section 503(b)(9) claims.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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