The Supreme Court of Texas on Friday ruled that the Electric Reliability Council of Texas, the operator of the Texas electric grid, is a government agency and is protected under sovereign immunity against civil lawsuits.
The 5-4 ruling from the highest court in the state, is likely to clear the nonprofit from lawsuits filed by thousands of Texans for deaths, injuries and damages from the deadly winter storm in 2021, legal experts say according to the Houston Chronicle.
The narrow decision from the all-Republican court, found that because ERCOT governed by the Texas Public Utility Commission is a nonprofit private corporation, it “performs a ‘uniquely governmental’ function as part of a ‘larger governmental system,’ it is an organ of government.”
“ERCOT is not a government contractor; it is an ‘essential organization’ certified by the (Public Utility Commission) pursuant to statute, and its argument for immunity is as an arm of the state, not derivative of the state,” Chief Justice Nathan Hecht wrote in his 40-page opinion.
The four dissenting judges say that the decision undermines “public trust.”
“The public’s trust is undermined when the judiciary extends sovereign immunity, contrary to history and tradition, to what is undeniably not sovereign: purely private entities,” Justices Jeffrey Boyd and John Devine wrote in a 53-page dissenting opinion.
Despite the decision protecting ERCOT from civil lawsuits for its role in the unprecedented winter storm in February 2021 that led to hundreds of deaths and immobilized Texans for days. Lawsuits against the individual energy companies will move forward, lawyers said on Friday according to the Houston Chronicle.
Any damage claims must be brought before the PUC, the agency that governs ERCOT, as administrative proceedings, justices said in their opinion.
In the dissenting opinion, judges agreed that ERCOT is an agency created and governed by the state and the PCU has jurisdiction over disputes with the agency. However, they wrote that the Texas legislators never granted ERCOT sovereign immunity.
Since “Texas law has not vested the private corporation ERCOT with the nature of an arm of the state, we respectfully disagree that sovereign immunity should broadly prohibit courts from exercising jurisdiction over claims against it,” wrote Boyd and Devine, who were joined by two other justices.
“Until today, however, this court had never extended sovereign immunity to a purely private entity — one neither created nor chartered by the government — even when that entity performs some governmental functions.”
“The public expects and trusts that those injured can claim the protection of the laws and that those responsible — to the extent responsibility exists — will be held accountable: the government through the political process and at the ballot box and private entities in court,” Boyd wrote. “But by granting sovereign immunity to a purely private entity that has not been designated as part of the government and without requiring a demonstration of the government’s actual control over the complained-of conduct, the court undermines this public trust.”
The decision from the court involved two normally unrelated cases.
Unrelated to the 2021 winter storm, the first case is a six-year, multibillion dollar legal battle brought by a Dallas-based Panda Power.
The organization claims that ERCOT provided them with false market data in 2011 and 2012, which led them to invest $2.2 billion to build three new power plants that did not generate the revenue ERCOT had predicted.
Panda in the lawsuit claims that ERCOT committed fraud, negligent misrepresentation and breach of fiduciary duty and has demanded hundreds of millions in compensation damages.
The second case is directly tied to the Winter Storm Uri and has San Antonio’s CPS Energy standing against ERCOT.
The Texas Public Utility Commission ordered ERCOT to set electricity prices at the highest permissible — $9,000 per megawatt hour —- to conserve scarce resources during the storm. The CPS lawsuit alleges that EROCT improperly maintained scarcity pricing even after the crisis had passed resulting in billions of dollars in overcharges statewide.
For both cases, ERCOT argued that because it is a division of state government, it thus has immunity from lawsuits related to its official actions.
The San Antonio Court of Appeals dismissed CPS’s case, stating that the energy company should have taken its claims to the PUC through an administrative process instead of taking it to court first. The Fourth Court of Appeals justices did not address ERCOT’s immunity argument.
The Dallas Court of Appeals rejected ERCOT’s claim of immunity directly in the Panda litigation case.
The decision from the Texas Supreme Court reversed the Dallas Court of Appeals and upholds the decision from the San Antonio Court of Appeals.