A state appellate court in San Antonio has dismissed claims by that city’s public utility against ERCOT, the operator of the Texas electric grid, over extraordinary pricing of electricity during last February’s catastrophic winter storm.
A three-justice panel of the Fourth Court of Appeals said those claims by CPS Energy, San Antonio’s municipally owned electric utility, should be pursued first before the Public Utility Commission of Texas, and not through litigation.
The case ultimately has significance beyond San Antonio because a key question both sides have raised – and a question not addressed by the appellate court’s Monday ruling – is whether ERCOT, the Electric Reliability Council of Texas, has sovereign immunity from lawsuits as a governmental entity. That question, with implications in dozens of lawsuits arising from the February blizzard known as Winter Storm Uri, is all but certain to land at the Texas Supreme Court.
The San Antonio appellate court sidestepped, at least for now, the issue of sovereign immunity. In dismissing CPS’s suit against ERCOT, which alleged, among other things, breach of contract, negligence and breach of fiduciary duty, the court said CPS should pursue its claims not through the courts, at least initially, but rather before the PUC.
“We note that nothing in our opinion and judgment prohibits CPS from re-filing its claims against ERCOT after it has exhausted its administrative remedies before the PUC,” wrote Justice Beth Watkins, speaking for the panel.
CPS claims in its lawsuit that after the PUC ordered ERCOT to set electricity prices at the highest permissible rate — $9,000 per megawatt hour – in order to conserve scarce power during the storm, ERCOT improperly maintained that scarcity pricing after the power crisis had passed, resulting in billions of dollars in overcharges statewide. ERCOT’s top-of-the-scale pricing has been cited as one of the causes, if not the sole cause, for several bankruptcy filings by electric providers in Texas.
Representing ERCOT before the San Antonio appellate court were, among others, Nicholas Bacarisse and Wallace B. Jefferson, a former chief justice of the Texas Supreme Court, both of Alexander Dubose & Jefferson of Austin.
Among others. Emma Hand, a partner in the Washington, D.C., office of Dentons, represented CPS.
In an unrelated, pre-Uri case, which involved a 2016 complaint against ERCOT by Panda Power Generation Infrastructure Fund, the issue of sovereign immunity for ERCOT made its way to the Texas Supreme Court last March. The high court sent the case back to the Dallas Court of Appeals without deciding the immunity question.
That 5-4 decision was sharply criticized by Chief Justice Nathan Hecht.
In his dissent, Hecht wrote: “After Winter Storm Uri … the public … wants to know whether ERCOT can be sued. Will ERCOT be immune to claims against it for failing to prevent the power outages across Texas that not only crippled millions of users but resulted in water outages [a result of frozen and burst pipes] that were at least as bad, if not worse? The answer to the immunity issue in this case has become perhaps more important to the public than even to the parties.
“The parties want to know. The public wants to know. The court refuses to answer.”