Texas Supreme Court to Decide ERCOT Liability


Electric towers covered by snow | Image by Wirestock Creators/Shutterstock

The Texas Supreme Court heard arguments Monday in two separate lawsuits against the Electric Reliability Council of Texas (ERCOT), the organization that operates the state’s power grid.

The two lawsuits against ERCOT were filed in the aftermath of the historic winter storm in February 2021 that strained the grid, bringing it to the brink of completely shutting down.

Millions of Texans lost power at one point or another, some for days on end, and more than 200 died in the cold, as previously reported in The Dallas Express.

Since the storm, dozens of lawsuits have been filed against the power grid operator, many of which come down to whether ERCOT has governmental immunity against lawsuits.

Any final court decision will ultimately have far-reaching consequences for how the state’s electric grid is regulated.

In the two lawsuits heard Monday, ERCOT’s attorneys argued that the organization was immune from the challenges in court because it constitutes a division of the government under the jurisdiction of the Public Utilities Commission (PUC).

If the court rules that ERCOT lacks such immunity, “chaos” would ensue, claimed Wallace Jefferson, an attorney representing ERCOT.

“ERCOT is unlike anything we’ve seen,” said Jefferson. “Yes, it’s so-called ‘private,’ but in every other aspect, its board, its budget, its bylaws, and its assets … are all state-controlled.”

Jefferson added that a ruling against ERCOT would make its job of providing electricity to the Texas power system more difficult.

Lawyers arguing against ERCOT having legal immunity claimed it is a private, non-profit entity that is only partially under the control of the PUC, meaning it is not a division of the state government and not shielded from lawsuits.

Harriet O’Neill, an attorney for the plaintiff, San Antonio-based CPS Energy, argued that just because ERCOT is heavily regulated and serves a public purpose does not mean it has government status.

O’Neill said ERCOT is “a private entity that’s not created or chartered by the government, funded by taxpayer dollars, or performing a uniquely governmental function.”

Elliot Clark, another attorney representing the grid operator, argued ERCOT is indirectly funded by taxpayer dollars and is consequently a governmental agency immune to lawsuits.

“Certainly, the Legislature authorized private university police departments, but it did not mandate them or fund them. The opposite is true of ERCOT,” he said.

Some court justices questioned whether taxpayer funding is a prerequisite for determining if an entity is a governmental agency.

“It certainly wasn’t initially a governmental entity by nature, pre-1999,” Justice Jeff Boyd said. “But at what point does [ERCOT] be transformed into a governmental entity by nature?”

Justice Debra Lehrmann argued there was a “big difference” in classifying ERCOT as a government agency since it was not directly funded through appropriated taxpayer dollars.

If the state Supreme Court finds that ERCOT can be sued, the dozens of lawsuits filed after the storm will be allowed to proceed in Texas courts.

Some of those include wrongful death lawsuits filed by grieving families who lost loved ones during the freeze.

More than 100 insurance companies filed one suit regarding the estimated $130 billion in losses they suffered from the storm damage.

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