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ERCOT Vows to Appeal Dallas Court Ruling Against Immunity

Featured, Government

View of high-power voltage lines during a sunset. | Image by Yelantsevv

A Texas appellate court decision that strips the Electric Reliability Council of Texas (ERCOT) of its claim to immunity will likely result in an increase in the price of electricity if the ruling is upheld by the Texas Supreme Court, according to an energy expert.

“The bills of ERCOT are paid by consumers of electricity in Texas,” said Bill Peacock, Policy Director for The Energy Alliance. “That’s the primary source of funding for ERCOT through fees, and if ERCOT gets sued for damages and loses, then more than likely the result will be Texas consumers have to pay more for their electricity.”

Panda Power Generation sued ERCOT, alleging that they used its reports, press releases, presentations, and sponsored media interviews to broadcast false market information statewide, which led Panda to invest $2.2 billion in building three new power plants.

“As a direct result of the misrepresentations, it now sells power at a fraction of the price for which it would have sold power had ERCOT’s representations been true,” Panda’s complaint states.

Initially, the 15th Judicial District Court in Grayson County ruled in favor of ERCOT and dismissed Panda’s complaint on April 24, 2018. However, on February 23, the Fifth District Court of Appeals in Dallas reversed the lower court’s decision in favor of Panda Power Generation.

“While ERCOT is subject to statutory restrictions and requirements that do not generally apply to non-governmental organizations, those restrictions and requirements do not change ERCOT’s fundamental nature as a private organization,” wrote Justice Erin A. Nowell in the 5th Circuit Court of Appeal decision. “It is heavily regulated, but those regulations do not confer governmental-entity status. Likewise, although ERCOT argues it serves a public purpose, doing so does not ipso facto equate to status as a governmental entity for immunity purposes.”

However, the appellate court’s decision was not unanimous. Judge David Schenck dissented.

In his February 24 opposing opinion, Schenck disagreed with his 5th Circuit Court of Appeals colleagues because of the Public Utility Commission (PUC)’s oversight of ERCOT’s performance.

“Giving due regard to the PUC’s position in this case and finding it to be well taken, I would conclude the trial court properly dismissed Panda’s claims against ERCOT because the PUC has exclusive original jurisdiction over Panda’s complaints,” Schenck wrote. “Because I would conclude that the original panel opinion was not clearly erroneous, the majority’s decision undermines the constitutional-avoidance doctrine, and the PUC has exclusive jurisdiction over Panda’s complaints, I dissent.”

Like Schenck, Bill Peacock, Policy Director for The Energy Alliance, questions the 5th Circuit Court of Appeals’ decision.

“ERCOT is an entity that is wholly under the authority of the State of Texas,” Peacock told The Dallas Express. “It doesn’t make sense to me that the state’s sovereign immunity doesn’t apply to ERCOT just like it does to the Public Utility Commission. This lawsuit is just another example of what our state leaders have done to Texas consumers with the cost that state leaders have imposed related to the blackout.”

As previously reported, winter storm Uri’s freezing temperatures last year left some 4.5 million Texas homes without electricity, 111 people dead, and still more property owners with significant losses.

Although the appellate court’s decision in Panda Power Generation v. ERCOT is not directly related to the 2021 blackout, the outcome is poised to impact similar claims made by plaintiffs who lost family members or experienced property damage.

“ERCOT arbitrarily raised the price of electricity from the market price of about $2,000 per megawatt-hour to $9,000 and, as a result, Texans paid more for electricity in that one week than they had in the previous two years combined,” Peacock said in an interview. “It seems like the big losers from the malfeasance of Texas policy officials in managing the grid, particularly their undying affection for renewal energy, is not just the cost to the people who lost family members but the cost to consumers all across the state of Texas.”

Regarding the landmark decision, ERCOT media relations told The Dallas Express in an email that ERCOT intends to appeal the Dallas Court of Appeals opinion to the Texas Supreme Court.

“The question really comes down to whether the partisan Texas Supreme Court is going to put the interest of big business over the interest of everyday Texas citizens, over a hundred of whom froze to death in their chairs in barbaric conditions because of a lack of power for almost two weeks,” said Majed Nachawati, a trial lawyer with the Fears Nachawati law firm in Dallas.

The Fears Nachawati law firm represents dozens of Texas plaintiffs impacted by the blackout in litigation dubbed In Re Winter Storm Uri.

“Ann Saucer, who’s my law partner, is the co-liaison of the Texas consolidated litigation relating to the Texas freeze,” Nachawati told The Dallas Express. “Right now, we’re happy with Fifth District Court of Appeals decision to deny ERCOT immunity because it sets a good precedent. The Fifth Court of Appeals got it right. It was a brilliant opinion. However, I’m not optimistic that the Republican Texas Supreme Court will do the right thing, but I am hopeful that they will.”

Currently, In Re Winter Storm URI is pending before Judge Sylvia Matthews in Harris County.

“It’s just starting the discovery case management,” Nachawati said in an interview. “An order has just been issued, and we’re going through discovery right now. The immunity issue is the common issue with Panda v. ERCOT. Even though it was a different case that Panda immunity holding applies to our case In Re Winter Storm Uri.

If the Texas Supreme Court upholds the Dallas appellate court’s decision that ERCOT does not have immunity, Arlington attorney Warren Norred predicts the grid operator will file for bankruptcy.

“Generally speaking, you’re not going to get a ruling that says the government owes a lot of money to a lot of people because it misbehaved because that is the nature of government, and if that does happen, there will be something that stops it like bankruptcy or reversal on appeal,” Norred added.

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