EHS Administration, Regulatory Developments

Texas ERCOT Granted Sovereign Immunity

In June 2023, the Texas Supreme Court narrowly ruled that the Electric Reliability Council of Texas (ERCOT) is protected by sovereign immunity laws, which generally protect government entities from civil lawsuits.

In a 5 to 4 ruling, the all-Republican Court found that ERCOT, which manages most of Texas’s power grid, qualifies for sovereign immunity because it “provides an essential governmental service,” Chief Justice Nathan Hecht wrote in the majority opinion.

“While the Legislature has not expressly stated a desire that ERCOT be immune from suit … the ‘the governing statutory authority’—PURA (Public Utility Regulatory Act) —nevertheless ‘demonstrates legislative intent to grant [ERCOT] the nature, purposes, and powers of an arm of the State government,’” the majority opinion says. “ERCOT operates under the direct control and oversight of the PUC (Public Utility Commission), it performs the governmental function of utilities regulation, and it possesses the power to adopt and enforce rules pursuant to that role. In addition, recognizing immunity satisfies the ‘political, pecuniary, and pragmatic policies’ underlying immunity because it prevents the disruption of key governmental services, protects public funds, and respects separation of powers principles. Thus, ERCOT is immune from suit.”

In February 2021, a frigid winter storm strained the Texas power grid so severely that ERCOT shut off power to millions of businesses and homes in an effort to prevent the total collapse of the grid.

According to The Texas Tribune, “More than 200 people died. Experts estimated afterward that financial losses totaled between $80 billion and $130 billion, including physical damage and missed economic opportunity.”

And, according to the Houston Chronicle, lawyers say suits against the individual power companies will continue to move forward.

However, any damage claims against ERCOT must first be brought by an administrative proceeding before the PUC, notes the majority opinion.

“The four dissenting justices decried the ruling, saying that granting ERCOT immunity from civil lawsuits ‘undermines public trust,’” the Houston Chronical adds. “Justices Jeffrey Boyd and John Devine, in a 53-page dissenting opinion, agreed that ERCOT is an agency created and governed by the state and that the PUC has original jurisdiction over disputes with ERCOT. But 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.’”

In light of the Court’s ruling, any parties seeking damages form ERCOT must go through the PUC adjudication process. 

“The PUC provides corrective remedies for claimants; but it is not authorized to award monetary damages,” Cooper & Scully P.C. says. “This creates somewhat of an all-or-nothing paradigm for claimants seeking monetary remedies.”

The Texas Tribune article continues, “Majed Nachawati, whose firm is representing other plaintiffs in the related cases said, ‘The Texas Supreme Court’s decision is disappointing to say the least. People lost their lives and the only recourse to the citizens of Texas is to be able to go through the judicial process, and the judicial system, to try to remedy or right the wrong that occurred in this case. And if you can’t count on our judiciary to protect its citizens, I think we’re in a lot of trouble.’”

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