Texas Supreme Court Rules That ERCOT Is Entitled To Sovereign Immunity

Panda CDR Case Dismissed; Dismissal Of CPS Energy Uri Claims Affirmed

June 23, 2023

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Copyright 2010-23 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

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The Supreme Court of Texas ("Court") issued an order which answers the questions below in the following manner:

(1) Is ERCOT a governmental unit as defined in the Texas Tort Claims Act and thereby entitled to pursue an interlocutory appeal from the denial of a plea to the jurisdiction? - Yes

(2) Does the Public Utility Commission of Texas have exclusive jurisdiction over the parties’ claims against ERCOT [claims from CPS Energy concerning Uri, and claims from various Panda companies alleging ERCOT misled investors with prior CDRs showing shortfalls]? - Yes

(3) Is ERCOT entitled to sovereign immunity? - Yes

"The answer to all three questions is yes," the Court said

In No. 22-0056, the CPS proceeding, the Court affirmed the court of appeals’ judgment dismissing the claims against ERCOT. In No. 22-0196, the Panda case, the Court reversed the court of appeals’ judgment and rendered judgment dismissing the claims against ERCOT

The Court held that, "Because ERCOT performs a 'uniquely governmental' function as part of a 'larger governmental system', it is an organ of government."

"[A]lthough ERCOT is a private, nonprofit corporation, its 'status' as the ISO for the Texas power region and its 'authority' to act in that capacity derive directly from PURA," the Court said

"[PURA] Section 39.151 grants the PUC extensive and ultimate authority over an ISO," the Court said

"As to both Panda and CPS, we conclude that the issues underlying their claims come within the scope of the PUC’s exclusive jurisdiction," the Court said

The Court noted that, "an agency’s exclusive jurisdiction does not prevent an aggrieved party from pursuing damages or other relief in the trial court after the agency has exercised its exclusive jurisdiction over the relevant issues."

"While the Legislature has not expressly stated a desire that ERCOT be immune from suit, as it did in Amex Properties, the 'the governing statutory authority' -- PURA -- nevertheless 'demonstrates legislative intent to grant [ERCOT] the 'nature, purposes, and powers’ of an ‘arm of the State government,'' the Court said

"ERCOT operates under the direct control and oversight of the PUC, 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," the Court said

"The fact that ERCOT is organized as a membership-based nonprofit corporation does not make it any less an arm of the state," the Court said

The Court noted that that sovereign immunity would not bar CPS's constitutional claims.

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