If it looks like a duck, swims like a duck and quacks like a duck, then it probably is a duck.
Or maybe not.
In the case of ERCOT — actually, in scores of damage cases pending against ERCOT since last February’s crippling winter storm — the “duckness” question is this: Is the Electric Reliability Council of Texas, the legislatively created entity that operates the Texas electric grid, a state governmental agency protected from litigation under the doctrine of sovereign immunity?
ERCOT says it is. Those suing ERCOT say it is not.
In separate, unrelated cases pending before two state appellate courts — the Fourth Court of Appeals in San Antonio and the Fifth Court of Appeals in Dallas — the question of sovereign immunity is central to the claims of plaintiffs against ERCOT at trial. Both appellate courts heard oral arguments recently – the Dallas court on Oct. 26, the San Antonio court on Nov. 16.
Neither has issued a ruling. And whatever they decide is almost surely headed to the state Supreme Court, which punted last year on the question of sovereign immunity, to the displeasure of Chief Justice Nathan Hecht.
In the San Antonio case, CPS Energy, that city’s municipally owned utility, sued ERCOT, complaining that the grid operator charged San Antonio exorbitantly high, illegal rates for scarce electricity during Winter Storm Uri, the February blizzard that left millions of Texans without power, many for days on end.
ERCOT filed a plea to the jurisdiction in Bexar County, claiming that any disputes against ERCOT fall within the purview of the Travis County courts and the Public Utility Commission of Texas – and that, in any case, the agency has sovereign immunity.
To establish immunity from suits, argued ERCOT lawyer Nicholas Bacarisse of Alexander Dubose & Jefferson of Austin, there must be a showing of legislative intent for ERCOT to operate with “the nature, purposes, and powers of an arm of the state government. ERCOT has all three.”
Not so, countered CPS’s lawyer, Emma Hand, a partner in the Washington, D.C., office of Dentons.
“ERCOT,” she said, “has a pattern of picking and choosing when it wants to be designated as a governmental unit. It has claimed to be a governmental unit for purposes of seeking sovereign immunity, but then claimed not to be a governmental unit to avoid responding to public records requests and to avoid interlocutory appeals.”
The courts, she said, and not the halls of government in Austin, are the place for claims against the grid operator to be decided.
Similar arguments played out three weeks earlier and 250 miles away in Dallas in a suit against ERCOT that predated Winter Storm Uri but has taken on added significance, given the mountain of pending litigation that followed the storm. The Dallas case involves a 2016 complaint against ERCOT by Panda Power Generation Infrastructure Fund, which contends that it needlessly invested $2.2 billion in building three new power plants, two in Temple and one in Sherman, based on faulty and misleading projections by ERCOT of future electric needs in the state.
The Panda case has already been to the state Supreme Court, which in March sent it back to the Dallas appellate court without deciding the key question of whether ERCOT enjoys sovereign immunity.
That 5-4 decision by the high court was a rare defeat for Chief Justice Hecht, the longest-serving Supreme Court justice in Texas history, who is, far more often than not, in the majority when the court issues a ruling.
In a scathing 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.”
Completely unknown, according to legal experts, is Hecht’s actual position on the ultimate question of whether ERCOT has sovereign immunity. Or for that matter, any of the eight other justices.
In arguing the case for ERCOT’s sovereign immunity before the Dallas Court of Appeals last month, Wallace Jefferson, a name partner in Alexander Dubose & Jefferson and a former Texas Supreme Court chief justice, said his client “is governed directly by the state, it is funded by the state, it is uniquely accountable to the state, and it exercises the state’s sovereign powers.”
Ben Mesches of Haynes and Boone in Dallas, representing Panda, argued that the Texas Legislature earlier this year – after Winter Storm Uri – had every opportunity to expressly afford sovereign immunity to ERCOT and did not do so.
“It did not designate ERCOT as a government entity,” Mesches told the appellate court. “It did not supply ERCOT with tax dollars and subject it to the legislative appropriations process, and it did not grant ERCOT immunity. … The Legislature knows how to do all of these things. It did none.”
He said a judicial finding that ERCOT is immune to suits “would close the courthouse doors to plaintiffs injured by ERCOT’s misconduct.”