Sontchi, J.
Before the Court is a request for an administrative expense claim under section 503(b)(9) of the Bankruptcy Code. The movant, Westfield Gas & Electric Light Department ("Westfield"), a utility provider, seeks an administrative expense for the electricity and natural gas it provided to the debtors (the "Debtors") in the 20-days prior to the Debtors' bankruptcy.
Section 503(b)(9) claims are only available to vendors of "goods" and not to
However, it is undisputed that natural gas is a good. As such, the Court is called upon to determine whether all of the costs associated with the sale and delivery of natural gas are entitled to administrative priority. In making that determination, the Court must apply either (i) the "predominate purpose" test in which the Court looks to the "primary" purpose of the transaction to decide whether the utility provided goods or services—if the primary purpose of the transaction is to provide goods then Westfield would have an administrative priority claim for all of the billed items; and if the primary purpose was to provide services, Westfield would not have an administrative claim; or (ii) the "apportionment" test in which the amount attributable to the goods is provided administrative priority status and the amount attributable to services is not. This Court adopts the apportionment test. As such, the Court will examine each portion of the bill to determine whether the line item was for a good or a service. The Court will then consider whether Westfield has provided sufficient evidence of the value of its claim and whether the Court, in its discretion, should order the immediate payment of the claim.
At the end of the day, the Court will grant Westfield an administrative expense claim, pursuant to section 503(b)(9), in the amount of $78.08 for the value of the natural gas (with sufficient detail) supplied to the Debtors in the 20-days prior to the Petition Date. However, the Court will not require immediate payment of the claim.
The Court has jurisdiction over the motions pursuant to 28 U.S.C. §§ 157 and 1334. Venue is proper in this District pursuant to 28 U.S.C. §§ 1408 and 1409. This is a "core" proceeding as that term is defined in 28 U.S.C. § 157(b). This Court has the judicial power to enter a final order.
On June 10, 2013 (the "Petition Date"), each of the Debtors filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code. The Debtors continue to operate their businesses and manage their properties as debtors in possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code.
On August 21, 2013, the Debtors filed a motion seeking to sell all of the Debtors' assets through three separate asset purchase agreements.
In the meantime, on August 28, 2013, Westfield filed the instant motion, seeking allowance and payment of an administrative claim under section 503(b)(9) in the amount of $93,262.55 for electricity and natural gas supplied to the Debtors.
Westfield is a municipal lighting plant created by Massachusetts law.
Service Period Invoice Date Amount Due 3/28/2013 to 4/29/2013 5/8/2013 $137,921.36 4/29/2013 to 5/28/2013 6/7/2013 $127,181.22 5/28/2013 to 6/10/2013 6/17/2013 $81,044.27Total $346,146.85
In the 20-day period prior to the Petition Date (May 22, 2013 to June 10, 2013), Westfield alleges that it supplied 631,483 KWH of electric and 591 CCF of natural gas to the Debtors. The total charges in the 20-day period are alleged to be $93,262.55. In support of its Motion, Westfield submitted the Banas Declaration.
Electric KWH : Peak 111,586; Off Peak 57,000Charges Supply Charge $6,755.24 Peak Transmission $2,305.37 Peak Distribution $2,250.69 Off Peak Distribution $538.65 __________ Total Charges $11,849.95
Natural Gas CCF : 463Charges Supply Charge $282.43 Transportation CCF $125.52 Distribution CCF $116.91 _______ Total Charges $524.86
Although, these amounts may be included in the bill attached to the Banas Declaration as Exhibit B, there is no further explanation or calculation for how these amounts were derived. Second, Westfield submitted the bill for May 28, 2013 to June 10, 2013, attached to the Banas Declaration as Exhibit C; this bill contains meter readings and quantities consumed during this period. As no additional information concerning these charges was provided, the Court looked to Westfield's website for additional information. Westfield describes its charges as follows:
Electric Rate Definitions
Charges Description 9
Customer Charge The Customer Charge is a monthly fixed charge which applies to all
customers. It is designed to recover costs related to metering, meter
reading, billing and other administrative costs.
Transmission Charge The Transmission Charge is a variable charge that recovers the cost
to transport electricity from remote generating facilities where it is
produced, to the WG&E service territory.
Distribution Charge The Distribution Charge is a variable charge that recovers the cost
of delivering electric power over WG&E's local distribution systems
to the customer's location.
Demand Charge The Demand Charge is a variable charge that recovers a portion of
the cost of WG&E's local infrastructure that is needed to meet the
customer's peak electricity needs.
Electric Supply Charge The Electric Supply Charge is a variable charge that recovers the cost
of electricity purchased for our customers.
Editor's Note: The preceding image contains the reference for footnote: 9
Natural Gas Rate Definitions Charges Description 10 Customer Charge TheCustomer Charge is a monthly fixed charge which applies to all customers. It is designed to recover costs related to metering, meter reading, billing and other administrative costs. Transportation Charge TheTransportation Charge is a variable Charge that recovers the cost of delivering natural gas over WG&E's local distribution system to the customer location. Distribution Charge TheDistribution Charge is a variable charge that recovers environmental response costs incurred due to changing regulatory requirements and adjustments necessitated by unforeseen occurrences such as unreasonable weather. Gas Supply Charge TheGas Supply Charge is a variable charge that recovers the cost of natural gas purchased for our customers.Editor's Note: The preceding image contains the reference for footnote: 10
In general, the Debtors do not dispute that Westfield delivered electricity and natural gas to the Debtors in the ordinary course of the business within the 20-day period. The initial dispute centers on whether electricity and natural gas are goods. The details of the billings is relevant to the Court's application of the apportionment test.
Facing the Court are essentially three issues: (i) whether electricity and natural gas are "goods" under section 503(b)(9); (ii) are the details of the bills adequate under the apportionment test to establish the amount of any allowed section 503(b)(9) claim; and (iii) should the Court require immediate payment of any section 503(b)(9) claim.
Section 503 of the Bankruptcy Code provides:
"The language of the statute provides for the allowance of an administrative claim provided the claimant establishes: (1) the
An administrative priority claim under section 503(b)(9) is limited to the provision of goods.
As claimant, Westfield, bears the burden of establishing that its claim qualifies for administrative priority status.
In this case, the Debtors have argued that the electricity provided by Westfield does not constitute a good within the meaning of section 503(b)(9) and, therefore, that portion of Westfield's claim is not entitled to administrative priority status. The Court agrees. There does not appear to be a dispute concerning whether natural gas is a good—it is specifically enumerated as such under the U.C.C.
There is a split among courts regarding whether electricity is a good under section 503(b)(9) and/or section 2-105 of the U.C.C. As such, this Court will summarize the key cases on both sides of the issue.
In order for electricity to be a good under the U.C.C. and, thus, section 503(b)(9), it must be a "thing," which is "moveable at the time of identification to the contract for sale."
The court then discussed the movement of electricity:
Finally, the court noted that electric current moves through a network of transmission and distribution systems before reaching the customer
Having set the ground work, the Erving Industries court began its application of the governing standard by asserting electricity is a "thing."
The court then argued that electricity is "moveable" as it travels through transmission lines from its creation at the power plant, windmill, solar panel, etc. to the ultimate user. Moreover, electricity is "identifiable" as it is measured on a meter when it is delivered to the customer. The more perplexing question, however, is whether electricity is moveable at the time it is identified to the contract, i.e., when it passes through the meter? The Erving Industries court said "yes" because "electricity does not reach a customer's meter and simultaneous cease to exist. Instead, it passes through the meter."
The Erving Industries court went on to address a related issue, i.e., are goods under section 503(b)(9) limited to those that can be stockpiled and, as such, reclaimed under section 546(c) of the Bankruptcy Code.
In GFI Wisconsin, Inc. v. Reedsburg Utility Com'n,
Notwithstanding that the sole evidence before the court on the issue appeared to support a finding that electricity is not a good, the bankruptcy court ruled otherwise. It "found that the electricity at issue was movable when it entered the meter and moved from the power source to
The district court affirmed the bankruptcy court's decision, albeit on slightly different grounds. The district court started by taking a step back from a complex inquiry into the physical nature of electricity, which "requires an understanding of the nature of electrons and a grasp of quantum physics and special relativity."
The proper inquiry the court held is the consideration of "the general movability of electricity, common perceptions of electricity and the exchange of electricity as a commodity in the marketplace."
The court concluded that "electricity is movable, tangible and consumable, that it has physical properties, that it is bought and sold in the marketplace and thus, that it qualifies as a good for purposes of the [U.C.C.] and the Bankruptcy Code.... [E]lectricity begins flowing through power lines when a circuit is formed and continues moving at least until it is metered. The metering satisfies the identification requirement of the [U.C.C.] and the movement is sufficient to satisfy the movability requirement, even if it reaches the speed of light."
The GFI Wisconsin court also addressed two related issues. First, the debtor argued that section 366 of the Bankruptcy Code, which is entitled "Utility service" and provides for the provision of "utility services" after a debtor has filed for bankruptcy, leads to the conclusion that "an interpretation of `goods' under [section] 503(b)(9) that includes utility services would be inconsistent with the use of the word `services' in [section] 366."
Second, the GFI Wisconsin court, like the court in Erving Industries, rejected the argument that the goods must be reclaimable under 546(c) to qualify for administrative expense treatment under section 503(b)(9).
In sum, the GFI Wisconsin court, "taking into consideration the physical properties of electricity as noted by appellant's expert and the bankruptcy court, including the fact that electricity is movable, and the parties' agreement under which the energy usage and consumption were determined by meter readings, [concluded] that electricity is a good under the [U.C.C.] definition and also under the Bankruptcy Code."
Recently, in the case of In re Great Atlantic & Pacific Tea Co., Inc.,
The district court, however, did not decide the issue. Rather, it remanded the matter for an evidentiary hearing because the bankruptcy court's conclusions that electricity "`disappears into use at th[e] moment' it reaches the meter and is `simply a stream of electrical energy ... identified... at the point of delivery,' [were] insufficient" for appellate review.
The Great Atlantic & Pacific Tea Co. court indicated that it agreed with the Erving Industries court's holding that the determinative factor is whether the electricity is metered and consumed at the same time or, as logic dictates, there is a delay between identification and consumption. If the record on remand would support a finding that electricity is identified at the meter and thereafter consumed, the court stated that it would almost certainly find electricity to be a good.
The court went on to state that, if all else fails, it might look to the parties' business relationship to determine whether the electricity in the case before the court is a good.
Thus, the court indicated that if the nature of electricity is not sufficiently uniform to support a rule applicable in all cases, it might look to the facts and circumstances of each case to decide whether electricity is a good.
Recently, in the case of In re PMC Marketing Corp.,
The court concluded that PREPA is a utility provider because: "(1) it is subject to governmental regulation as are traditional utilities; (2) PREPA does fit the ordinary definition of a utility as it does enjoy a `special relationship' with the Debtor (PREPA is the sole provider of electricity in Puerto Rico) and it does have a monopoly; and (3) PREPA is a government owned corporation of Puerto Rico."
In the case of In re Pilgrim's Pride Corp.,
First, the Electricity Provider asserted that electricity is a good because the United States Supreme Court has ruled that "electric energy thus produced, constitute[s] property."
Second, the Electricity Provider cited to a number of cases finding electricity to be a "product," which Black's Law Dictionary defines as "something that is distributed commercially for use or consumption."
Third, the Electricity Provider cited to a number of cases finding that electricity is a good. The court describes the holdings of those cases to be based on the conclusion that "once it passes the customer's meter, it can be measured and is in the stream of commerce."
It then turned to an analysis of the plain meaning of section 2-105(1) of the U.C.C.
The court further noted that a number of other courts have ruled that electricity is a good.
Where does this leave the Court? As discussed at length above, several courts have addressed the question of whether electricity is a good and they have reached disparate conclusions. Indeed, they have considered disparate factors. More specifically, each court has considered one or more of the following:
a. Is electricity moveable at the time it is identified by passing through the meter or is it consumed simultaneously with identification?
b. Is electricity "comparable" with other things that are goods under the U.C.C.?
c. Does section 546(c) governing reclamation of goods control whether electricity is a good or a service?
d. Does section 366 of the Bankruptcy Code governing "utility services" control whether electricity is a good or a service?
e. Should the nature of the parties' relationship, e.g., is the claimant acting as a "public utility," determine whether electricity is a good or a service?
f. Should section 503(b)(9) be strictly construed because it provides an otherwise unsecured creditor with an administrative expense claim and, if so, to what extent?
The Erving Industries court started its analysis with the text of the U.C.C.— goods means all things, which are movable at the time of identification to the contract for sale.
The court based its conclusion that electricity is a good on the fact that electricity is not identified on the meter and consumed by the customer simultaneously. "Logic dictates" that some period of time, however imperceptible, must pass between the measurement of the electricity at the meter and its use. Thus, the court held, it is that infinitesimal period of time between identification and use that makes electricity a good.
The GFI Wisconsin and the Great Atlantic & Pacific Tea Co. courts both agreed with the Erving Industries court's approach. In GFI Wisconsin, the court held that "[t]he metering [of electricity] satisfies the identification requirement of the [U.C.C.] and the movement is sufficient
There are two problems with these cases. First, it is not necessarily true that there is a period, infinitesimal or not, between identification and use.
We start with the proposition that every element of the definition of a good matters, including that it must be movable at the time of identification. The inclusion of movability as an element in the definition of a good goes back to the inception of the term almost 1,000 years ago.
Thus, in order for electricity to be a good, there must be a period between when electricity is identifiable and consumed. But, in order to do justice to the term as it has developed over 1,000 years, the period between identification and consumption must be meaningful. This is not the case with electricity.
The speed at which electricity travels is actually the speed of the electromagnetic wave, not the movement of electrons. This measurement is known as the velocity of propagation, wave propagation speed or velocity factor ("VF"). It is the speed at which a wave front (of an acoustic signal, for example, or an electromagnetic signal, a radio signal, a light pulse in a fiber channel or a change of the electrical voltage on a copper wire) passes through the medium of transmission, relative to the speed of light. In a vacuum, electricity travels at the speed of light and so the VF is 1.0 or 100%. In electrical cables, the velocity factor mainly depends on the insulating
The speed of light is 299,792.458 kilometers per second or approximately 186,000 miles per second. Assuming electricity is travelling through coaxial cable at two-thirds, or 67% the speed of light, the electricity will travel one kilometer in 4.978 microseconds or, put more starkly, 0.000004978 seconds.
Having decided the issue on the plain meaning of the statute, the Court need not proceed further. Nonetheless, the Court considers below the other approaches that courts have identified as relevant to determining whether electricity is a good. All of these factors are either neutral or support the Court's holding that electricity is not a good.
Several courts have decided whether electricity is a good based, in part, on its comparability to other things that are goods under the U.C.C. For example, the GFI Wisconsin court held that "determining whether a particular thing qualifies as a good and deserves administrative priority should be a straightforward assessment, taking into consideration the nature and common understanding of the thing, but also considering its similarities to goods that fall undisputedly under the [U.C.C.] and would receive administrative priority under [section] 503(b)(9)."
This Court disagrees with the GFI Wisconsin court—electricity is different from water and natural gas for purposes of whether it is a good under section 503(b)(9). For a start, both are clearly goods under the plain meaning of the U.C.C. As for water, section 2-107 of the U.C.C. provides that a "contract for the sale of minerals or the like (including oil and gas) or a structure or its materials to be removed from realty is a contract for the sale of goods within this Article."
But the differences between electricity, on the one hand, and water and natural gas, on the other, is not limited to the definitions in the U.C.C. Unlike electricity, both water and natural gas can be identified well before consumption. Water that passes through a meter may be stored either in a tank or in the pipes for an indefinite period of time. Indeed, that water could be bled from the tanks and pipes, transferred to another location and used or sold. Theoretically, it could even be returned to the water company. The same is true of natural gas. Natural gas can be stored in a tank for an indefinite period before being transported, used, sold or returned to the gas company.
This is simply not the case with electricity. While electricity can be stored in a number of ways, its storage is fundamentally different from storage of water or natural gas. Most commonly, storage of electricity involves using the electric current to charge a battery.
While water and natural gas stored in a tank are still water and natural gas, electricity stored in a battery is no longer electricity. It has become potential energy stored in materials or chemicals that will produce electricity when they react with each other. While the battery itself is a good, the electricity used to charge it and that will flow from it is not.
While the Court looks to the U.C.C. to define goods under section 503(b)(9), it cannot ignore the fact that there is an ongoing bankruptcy where other provisions of the Bankruptcy Code may influence or control the Court's conclusion. The first of these is section 546(c) of the Bankruptcy Code governing the reclamation of goods. The question is whether goods under section 503(b)(9) are limited to those that can be stockpiled and, as such, reclaimed under section 546(c) of the Bankruptcy Code. If so, by definition, electricity is a service not a good because it cannot be reclaimed under section 546(c).
The Erving Industries and GFI Wisconsin courts both rejected the argument that the goods must be reclaimable under 546(c) to qualify for administrative expense
Sections 503(b)(9) and 546(c) have a special kinship. Congress amended section 546(c) and added section 503(b)(9) to the Bankruptcy Code as part of section 1227 of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, entitled "Reclamation," which would seem to support that the sections should be treated in concert.
Section 546(c) serves as a limitation on the trustee's avoiding powers. It provides that those powers are subject to the right of a seller of goods to reclaim those goods if:
The statute further provides that the reclamation right is subject to the "prior rights of a holder of a security interest in such goods or the proceeds thereof." Finally, and perhaps most importantly, the statute provides that if the seller of goods fails to provide notice in the manner described above, the seller still may assert the rights contained in section 503(b)(9).
To argue that section 546(c) defines the limit of what constitutes a good under section 503(b)(9) or the Bankruptcy Code as a whole turns the statute on its head. Section 546(c) provides a seller of goods with a choice. The seller can pursue a narrowly tailored in rem remedy by reclaiming the goods it sold to the debtor and, if the seller complies with the statute,
In the alternative, the seller can assert an administrative expense claim for the value of the goods transferred to the debtor in the 20 days prior to the bankruptcy case. This alternative eliminates the need to meet all the elements of the reclamation test, avoids the expense of reclamation and gets around any security interest in the goods.
As the statute is written, section 546(c) establishes a narrowly tailored in rem remedy for reclamation of goods sold to the debtor that is subject to a number of contingencies and defenses. The broader, "default" provision is section 503(b)(9) of the Bankruptcy Code. Goods under section 503(b)(9) cannot and are not defined by the exception to the rule. While certain goods are subject to reclamation, other non-reclaimable goods are also entitled to an administrative expense claim.
The other Bankruptcy Code provision that may influence or control the Court's conclusion as to what constitutes a good is section 366 of the Code, entitled "Utility service." The question here is the flip side of the issue as to whether goods
The GFI Wisconsin court answered the question in the negative, finding that section 503(b)(9) addresses the sale of goods pre-petition while section 366 addresses the provision of utility services post-petition. The court stated that the terms are not mutually exclusive. "A utility provider may provide both goods and services within the meaning of each section. In sum, the rights afforded by [section] 503(b)(9) to a seller of goods are not dependent either explicitly or implicitly upon the availability of other remedies under the Code for the seller."
This Court agrees. Section 366 of the Bankruptcy Code cannot control whether something is a good under the U.C.C. and, by extension, section 503(b)(9). Indeed, there are things such as natural gas that are specifically identified in the U.C.C. as goods but which are services under section 366. The filing of a bankruptcy petition does not change the nature of what the utility is selling. Electricity is electricity. Its qualification for administrative expense treatment under section 503(b)(9) is a completely separate issue from its treatment under section 366 of the Bankruptcy Code. Thus, as with section 546(c), section 366 is irrelevant for purposes of determining whether electricity is a good under section 503(b)(9).
The PMC Marketing Corp. court approached the question whether electricity is a good from a different angle. It held that the relationship between the debtor and Puerto Rico Electric Power Authority (PREPA), which was clearly one between a customer and a utility, was governed as a service by section 366 of the Code. As a service under section 366, the court held that electricity could not be a good under section 503(b)(9). In addition, the Great Atlantic & Pacific Tea Co. court held that if the record after remand was insufficient to support a rule applicable in all cases, individualized assessment of the parties' business arrangements may be necessary to determine whether the electricity sold in a given case is a good.
But, consider that electricity can be bought and sold at a wholesale level.
The Pilgrim's Pride court held that finding electricity is a service and not a good under section 503(b)(9) is consistent with public policy under the Bankruptcy Code that "provisions of the Code granting claims priority are to be narrowly construed." In addition, the Great Atlantic & Pacific Tea Co. court noted that the lower court had made its determination that electricity is not a good based, in part, on the principle that administrative priorities should be construed narrowly.
The Court disagrees that section 503(b)(9) should be strictly construed. Neither should it be loosely construed. The court should simply apply the law as written and not put a judicially created obstacle in the path of an administrative expense claimant.
Electricity is not a good under section 503(b)(9) of the Bankruptcy Code. In order for something to be a good under the U.C.C. and, thus, section 503(b)(9) of Bankruptcy Code, it must be movable at the time of identification to the contract for sale. Electricity is identified as it passes through a meter but it is almost immediately consumed. Indeed, the delay between identification and use is measured in microseconds. In order to do justice to the definition of a good, however, the separation of identification and consumption must be meaningful and, in the case of electricity, that infinitesimal "gap" is too short to establish that electricity is moveable at the time of identification. It is not and, as such, electricity is not a good.
The failure of electricity to meet the definition of a good resolves the matter. No further inquiry is necessary. Nonetheless, a consideration of the factors that have been considered by other courts further support this Court's finding that electricity is not a good. For example, a comparison of electricity with things that are goods under the U.C.C., i.e., natural gas and water, leads to an identical result. In addition, neither section 546(c) nor section 366 of the Bankruptcy Code are relevant to the Court's inquiry. They are, in effect, neutral. Also, the relationship of the parties to a transaction concerning electricity does not determine whether electricity is a good. That rises or falls on the nature of electricity, in and of itself, and not on the relationship of the parties that may be buying or selling it. Finally, the Court did not nor should it strictly construe whether electricity is a good simply because it would give rise to an administrative expense claim.
The electricity provided by Westfield is not a good and, as such, Westfield does not qualify for an administrative expense claim under section 503(b)(9) claim with regard to its electricity claim.
The U.C.C. specifically includes "natural gas" as a "good" in § 2-107(1):
As such, Westfield has satisfied this prong of section 503(b)(9).
As the U.C.C. governs the sale of goods and not the sale of services, courts have been faced with so-called "hybrid" transactions that involve both goods and services. Westfield urges this Court to adopt the "predominate purpose" test to determine if a transaction is for goods or services. Under this approach, if the transaction involves predominately goods, then section 503(b)(9) would be applicable to the whole claim. On the contrary, if the transaction involves primarily services, section 503(b)(9) would not be applicable. The Debtors, on the other hand, assert that the Court should apply the "apportionment" test where the Court considers each element of the bill item by item and then awards an administrative expense claim for that portion of the transaction relating to the sale of goods.
In applying the U.C.C., most courts follow the "predominate purpose" test.
In addition, at least one bankruptcy court has adopted the "predominate purpose" test in the section 503(b)(9) context.
Thus, the issue before the Court is to determine which portions of Westfield's bill apply to the good at issue, i.e., natural gas. As set forth above, Westfield's natural gas bills are broken down into several categories: (i) the customer charge, (ii) the transportation charge, (iii) the distribution charge, and (iv) the gas supply charge. Based on Westfield's explanations of each charge,
But, that is not the end of the inquiry. Next the Court must determine whether the gas supply charges are sufficiently supported by the record. As noted above, there are two different billing cycles involved:
Service Period Total Charges Days within the 20-day Amount being for Natural Window sought for Gas "Supply Charge" 7 April 29 to May 28, 2013 $1,154.73 $282.43 (May 22, 2013 to May 28, 2013) 13 May 28 to June 10, 2013 $78.08 $78.08 (May 29, 2013 to June 10, 2013)
Recall that Westfield had to cobble together two bills to support its claim. The first bill was for the period of April 29 to May 28, 2013. The bills provide meter readings for the beginning (April 29) and ending (May 28) days of the entire service period; however, meter readings were not provided for the beginning of the section 503(b)(9) period, i.e., May 22, 2013. Further, there is no information provided concerning how Westfield calculated the May 22 to May 28 gas supply charge. Thus, Westfield has not met its burden in "proving the value of the goods" supplied between May 22, 2013 to May 28, 2013
The bill for the 13-day period from May 29th until the petition date of June 10th provides meter readings for the beginning and end of the period. Thus, it contains sufficient detail regarding the value of the natural gas provided to the Debtors. Westfield has met its burden as to the
The last issue presented in Westfield's motion is the timing of the payment. In general, courts have discretion to determine when an administrative expense claim will be paid.
Here, the only argument that Westfield makes in support of immediate payment is the possibility that the Debtors will not be able to pay the section 503(b)(9) claims in full. Westfield has not presented any other argument or evidence to support the necessity of immediate payment.
Every element of the definition of "good" matters, including that it must be "movable at the time of identification." In order to do justice to the definition of a good, the separation of identification and consumption must be meaningful and, in the case of electricity, that "gap" is too short to meet the definition of the term. While the foregoing is sufficient to decide the issue, a comparison of electricity with things that are goods under the U.C.C. leads to an identical result. In addition, the fact that the debtor is in bankruptcy raises the question of whether Bankruptcy Code section 546(c) (reclamation) and section 366 (utility services) are relevant to the Court's inquiry. Ultimately, they are not relevant and do not control whether electricity is or is not a good. Whether electricity is a good should rise and fall on the nature of electricity, in and of itself, and not the relationship of the parties to a transaction involving electricity. But,
Applying the plain meaning of section 2-105(1) of the U.C.C. supported by the factors identified above, the Court concludes that electricity is not a good under section 503(b)(9) of the Bankruptcy Code.
As to the natural gas provided by Westfield—the Court finds that natural gas is a good. However, the Court rejects the "predominate purpose" test and will award Westfield an administrative priority claim under the "apportionment" test for the value of the natural gas provided, but not the associated services. In that regard, the Court will grant Westfield an administrative priority claim in the amount of $78.08 for the value of natural gas provided to the Debtors in the 20-days prior to the Petition Date that had sufficient support in the record. The Court, however, will not order immediate payment of this administrative expense claim, as Westfield has not established the "necessity of payment," or any other evidence, to support the need for immediate payment aside from the general concern that all administrative claims will not be paid in full.
An order will be issued.
There are no written opinions on this topic within the Third Circuit. There is, however, a transcript ruling from 2011 in which Judge Walsh "considered" this issue. In re NEC Holdings Corp., 10-11890, D.I. 1205 (Transcript of hearing on Mar. 30, 2011). Judge Walsh stated, without analysis, that he was "prepared to hold that electricity is a good;" however, he then continued the hearing as to the amount of the administrative priority claim because the utility had not "proven the value of the goods supplied within the twenty-day period." Id. at 28:9-10. As such, the ruling was dicta. Moreover, Judge Walsh's comments were made on the record at a hearing and, by definition, are not precedential.
