Will Texas Plaintiffs’ Claims Against State Energy Provider Be Lights Out?

Lauren Green

A mid-February 2021 winter storm left dozens of Texans dead, millions without power, and nearly 15 million with water issues. The hazardous weather also disrupted medical care and caused widespread property damage.[1] As a result, Texas lawmakers have lobbed criticism at the Public Utility Commission of Texas (“PUC”), the Electric Reliability Council of Texas (“ERCOT”), and the agencies’ board members.[2] On March 3, 2021, ERCOT’s board of directors announced it will terminate its president and CEO.[3] As of this post, seven ERCOT board members have resigned and the sole remaining commissioner of the PUC resigned on March 17, 2021.[4]

Despite Texas lawmakers pointing fingers, ERCOT is ultimately subject to oversight by the PUC and the Texas Legislature.[5] Additionally, Governor Greg Abbott appointed the commissioners of the PUC.[6] The winter storm “exposed problems lawmakers failed to address in previous legislative sessions and showed the vulnerabilities of the state’s natural gas system.”[7] As such, ERCOT is facing a mountain of litigation filed on behalf of Texans.[8] This post discusses those lawsuits and the hurdles plaintiffs may face.

The main hurdle these plaintiffs face is sovereign immunity. In Texas, sovereign immunity deprives a court of subject matter jurisdiction unless the state consents to suit by statute or by legislative resolution.[9] Legislative consent for suit or any other sovereign immunity waiver must be “by clear and unambiguous language.”[10] Because the PUC is a state administrative agency,[11] the agency and its board are likely entitled to sovereign and qualified immunity, and thus shielded from liability in most, if not all, cases related to the winter storm. Since ERCOT is a private corporation, it generally would not be entitled to sovereign immunity.  

However, in September 2020, the Supreme Court of Texas heard oral arguments to determine whether ERCOT can claim governmental immunity despite being organized as a private corporation.[12] While that lawsuit pertains to fraud and breach of fiduciary duty,[13] the Texas Supreme Court’s decision on the immunity issue determines Texans’ ability to bring lawsuits against the energy provider. The Supreme Court is facing pressure to render a decision in light of the lawsuits from the aftermath of the winter storm—a potentially positive development for plaintiffs. Further, there is no guarantee the Texas Supreme Court will affirm the appellate court.

The Texas Court of Appeals for the Fifth District upheld ERCOT’s claim to sovereign immunity.[14] ERCOT’s argument for immunity is that despite the fact that it is not an official government agency, it is a critical part of the electric industry. Further, the Texas Legislature has  “decreed that the PUC, not the courts, decides when and how much money ERCOT spends, how it operates, and whether it has underperformed or abused its power.”[15] ERCOT argued that if the corporation has to divert funds to pay judgments, the Texas Legislature’s mission to protect the electric market and its consumers would be thwarted, leaving Texas and its power grid without central management.[16]

If the Texas Supreme Court decides to uphold ERCOT’s sovereign immunity, the plaintiff’s claims are not doomed. Statutes and regulations may restrict that immunity, allowing the lawsuits to go forward.[17]  However, if that immunity is not restricted, plaintiffs may still bring lawsuits against other parties like utility companies, power plants, and windmill manufacturers.[18] Torts attorneys expect lawsuits against ERCOT in the thousands and there is potential for class actions.[19] Lawyers also expect to see a wide array of claims including wrongful death, severe personal injury, property damage such as busted water pipes, and business interruption cases.[20] While the Supreme Court affirming ERCOT’s immunity is not ideal for plaintiffs, the ruling would not put an end to litigation related to the storm. These lawsuits will continue to develop in the coming months, and Texas attorneys and litigants should pay close attention to the state’s high court.

[1] Mitchell Ferman, Winter storm could cost Texas more money than any disaster in state history, Texas Tribune (Feb. 25, 2021, 4:00 AM), https://www.texastribune.org/2021/02/25/texas-winter-storm-cost-budget; Clark Mindock, ERCOT Hit With $100M Suit Over Outage Related Death, Law360 (Mar. 1, 2021, 9:49 AM), https://www.law360.com/articles/1357330/ercot-hit-with-100m-suit-over-outage-related-death.

[2] Mitchell Ferman, Another ERCOT board member resigns as lawmakers criticize power grid operator for massive electricity outages, Texas Tribune (Feb. 26, 2021, 1:00 PM), https://www.texastribune.org/2021/02/26/ercot-resignation-power-outages.

[3] ERCOT Chief Canned In Wake Of Texas Winter Storm Outages, Law360 (Mar. 3, 2021, 11:50 PM), https://www.law360.com/texas/articles/1361248/ercot-chief-canned-in-wake-of-texas-winter-storm-outages?nl_pk=d4d1b6d1-e90e-457b-b8c8-3714b4237afa&utm_source=newsletter&utm_medium=email&utm_campaign=texas.

[4] Erin Douglas and Patrick Svitek, Public Utility Commission chair resigns after Texas officials criticize management of power outages, Texas Tribune (Mar. 1, 2021, 5:34 AM), https://www.texastribune.org/2021/03/01/texas-power-outages-public-utility-commission-resigns/; Katie Buehler, Remaining Texas Utility Commissioner Resigns Amid Criticism, Law360 (Mar. 17, 2021, 9:16 PM), https://www.law360.com/texas/articles/1365977/remaining-texas-utility-commissioner-resigns-amid-criticism?nl_pk=d4d1b6d1-e90e-457b-b8c8-3714b4237afa&utm_source=newsletter&utm_medium=email&utm_campaign=texas..

[5] News Release, ERCOT Board of Directors elects new Chair and Vice-Chair (Feb. 9, 2021), http://www.ercot.com/news/releases/show/224860.

[6] Douglas and Svitek, supra note 4.

[7] Ferman, supra note 1.

[8] Mindock, supra note 1.

[9] Texas Dep’t of Parks & Wildlife v. Miranda, 133 S.W.3d 217, 223 (Tex. 2004); Missouri Pac. R. Co. v. Brownsville Nav. Dist., 453 S.W.2d 812, 814 (Tex. 1970).

[10] Univ. of Tex. Med. Branch at Galveston v. York, 871 S.W.2d 175, 177 (Tex. 1994); Duhart v. State, 610 S.W.2d 740, 742 (Tex. 1980).

[11]  See Tex. Admin. Code, Title 16, Part. II. This is also why plaintiffs’ lawsuits against individual lawmakers would typically fail; lawmakers are entitled to official/qualified immunity when acting within the scope of their lawmaking capacities. See Joshua A. Skinner et al., Governmental Immunity, Individual Rights & Responsibilities Program 6 (June 10, 2010).

[12] Katie Buehler, Texas Justices Question Grid Operator’s Immunity Status, Law360 (Sept. 15, 2020, 7:58 PM), https://www.law360.com/articles/1309857/texas-justices-question-grid-operator-s-immunity-status.

[13] Paul Takahashi, Texas Supreme Court to decide if ERCOT is immune from storm lawsuits, Houston Chronicle (Feb. 22, 2021, 11:05 AM), https://www.houstonchronicle.com/business/energy/article/Texas-Supreme-Court-to-decide-whether-ERCOT-is-15968323.php.

[14] Elec. Reliability Council of Tex., Inc. v. Panda Power Generation Infrastructure Fund, LLC, 552 S.W.3d 297, 319 (Tex.App.—Dallas 2018).

[15] Id. at 314.

[16] Id.

[17] Y. Peter Kang, ERCOT Ruling Won’t Stop Suits Over Texas Power Outages, Law360 (Feb. 26, 2021, 5:20 PM), https://www.law360.com/texas/articles/1359223/ercot-ruling-won-t-stop-suits-over-texas-power-outages.

[18] Id.

[19] Kang, supra note 17.

[20] Id.

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