Is ERCOT shielded from lawsuits? Legal debate reaches Texas Supreme Court
A long-standing contention by the Electric Reliability Council of Texas that it is shielded from lawsuits because of governmental immunity came under legal attack Monday during arguments before the state Supreme Court in two cases with far-reaching implications for the entity that manages the power grid.
If a determination is made that ERCOT lacks such immunity, "chaos" would ensue, said Wallace Jefferson, an attorney representing ERCOT in one of them.
The Public Utility Commission of Texas "can't both have complete authority over everything that ERCOT does and 254 counties — state courts — have authority" as well, Jefferson told the Supreme Court justices.
But lawyers arguing against the notion that ERCOT has legal immunity said it's a private, nonprofit entity that is only partially under the control of the utility commission, meaning it's not an arm of state government and automatically protected from lawsuits.
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ERCOT's "operational functions are not really subject to the direct control of the PUC," attorney Harriet O'Neill said. The utility commission "has the power to regulate ERCOT, (but) it does not control what ERCOT does when it turns the knobs on the grid and operates the grid.”
Only one of the cases heard Monday — brought by CPS Energy, San Antonio's municipal electric utility — stems from the disastrous blackouts during the winter freeze in February 2021. CPS has contended that ERCOT kept wholesale power prices too high for too long during the freeze, resulting in billions of dollars in overcharges to CPS and other Texas utilities.
The other case was first brought against ERCOT in 2016 by a developer of power plants, Panda Power Generation Infrastructure Fund. Panda has contended that it invested in power plants in the state based on ERCOT projections for electricity demand that later proved to be inaccurate.
In both cases, the attorneys attempting to prevent ERCOT from successfully invoking legal immunity said the state Legislature has never conferred governmental status on ERCOT despite having plenty of opportunities to do so.
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In addition, CPS said in its legal filings that ERCOT "itself has claimed not to be a governmental unit during certain times, while claiming the opposite during others."
ERCOT has used such "two-faced" assertions to its advantage, CPS said, by "claiming it was not a public entity (and thus subject to the state's Public Information Act) when the public requested records to investigate ERCOT’s actions during the deadly storm (in February 2021), and now claiming that it is when faced with the consequences of its multi-billion dollar mistake."
ERCOT is regulated by the utility commission, but its operations are overseen by a board of directors selected mainly by a committee appointed by state leaders. The selection process was revamped in the aftermath of the February 2021 grid disaster in an effort to make the board more accountable.
Despite the changes to how the board is installed, however, the Legislature "did nothing — even though they did that — to indicate they intended for ERCOT to be a part of the government," said O'Neill, who represents CPS Energy.
But Jefferson, representing ERCOT in the Panda case, said ERCOT was created to further "the public interest in a reliable grid," with the state controlling its bylaws and the means by which it charges participants in the state's power market so that it can carry out its duties.
"Yes, it is so-called private, but in every other aspect — its board, its budget, its bylaws, its assets — those are all state-controlled," Jefferson said. "It is a public entity that is serving a public interest."
He said there are mechanisms in place for complaints against ERCOT to be pursued through the utility commission, instead of by legal action against it.
"ERCOT is immune (from lawsuits) just as DPS (the Texas Department of Public Safety) is immune, just as the (Texas Supreme) Court is immune," Jefferson said.
Both Jefferson and O'Neill are former members of the state's Supreme Court.
There is no deadline for when the court will rule on the cases.
Extensive and prolonged blackouts during that February 2021 grid disaster contributed to hundreds of deaths and billions of dollars in property damage statewide.
This article originally appeared on Austin American-Statesman: Texas Supreme Court to decide whether ERCOT can or can't be sued
