AUSTIN (Nexstar) — The Supreme Court of Texas heard oral arguments Monday in a case that could affect how the state’s electric grid is regulated in the future.
The question before justices was whether or not the board which oversees the Electric Reliability Council of Texas is part of the state government. The case originates from two lawsuits against ERCOT in the aftermath of the 2021 February winter freeze, when the grid came minutes away from completely shutting down and hundreds of Texans died in the cold.
Since the 2021 storm, dozens of lawsuits have been filed against the power grid operator, but so far, there have been questions about whether ERCOT could be immune from the challenges in court. One plaintiff, San Antonio-based CPS Energy, accuses grid operators of being responsible for the high electric prices during power blackouts.
In both lawsuits, ERCOT attorneys have said that ERCOT has sovereign immunity and cannot be sued, arguing it is a division of the government — falling under the jurisdiction of the Public Utilities Commission.
“ERCOT is unlike anything we’ve seen,” said Wallace Jefferson, an attorney representing ERCOT. “Yes, it’s so-called ‘private,’ but in every other aspect its board, its budget, its bylaws, and its assets…are all state-controlled.”
Harriet O’Neill, an attorney representing CPS Energy, argued just because ERCOT is heavily regulated and serving a public purpose it “does not confer government status on a private entity that’s not created or chartered by the government, funded by taxpayer dollars or performing a uniquely governmental function.”
During oral arguments, some justices questioned whether taxpayer funding is a prerequisite for determining if an entity is technically 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 said there is a “big difference” in classifying ERCOT as a government agency, since it is not funded through appropriated taxpayer dollars.
Elliot Clark, an attorney representing the grid regulators, argued ERCOT is indirectly a result of taxpayer funding — and therefore should be considered 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.
Previous court rulings on the matter
A year after the storm, a Dallas appellate court ruled that ERCOT would not be protected by sovereign immunity — the protection afforded to government entities to prevent them from being sued while carrying out governmental functions.
In her opinion for the Fifth Court of Appeals, Justice Erin Nowell wrote while the Public Utility Commission of Texas maintains some authority over ERCOT, “ERCOT is a purely private entity that is not created or chartered by the government, maintains some autonomy, is operated and overseen by its CEO and board of directors, and does not receive any tax revenue.”
If the high court finds that ERCOT can be sued, then the dozens of lawsuits filed after the storm will be allowed to proceed in the courts. Some of those include wrongful death lawsuits filed by grieving families who lost loved ones during the freeze, and one lawsuit filed by more than 100 insurance companies over losses from the storm damage. However, attorneys representing the group said it will make operators’ jobs of flowing electricity to the Texas power system more difficult.
KXAN Investigator Avery Travis contributed to this report.