Supreme Court of Texas hears arguments related to ERCOT sovereign immunity

AUSTIN, Texas — The Supreme Court of Texas will decide whether the Electric Reliability Council of Texas is immune from legal repercussions. The court of Texas heard two different but related arguments ahead of a decision on whether the nonprofit that runs the Texas energy grid is part of the state government.

ERCOT is facing legal ramifications for the high prices it maintained during the 2021 Winter Storm. The primary issues being argued before the justices are whether ERCOT is a governmental unit and whether they can be sued.

"ERCOT was and is a private, membership-based nonprofit corporation, before it was certified as the independent system operator, it performed the same functions that it does today," said attorney Harriet O'Neill, representing CPS Energy, "The functions did not suddenly become governmental when ERCOT became the ISO and its certification to perform them didn’t turn ERCOT into a part of state government."

That determination impacts whether ERCOT has governmental, or sovereign immunity from suit. ERCOT has previously maintained that it should have sovereign immunity. The justices pressed both sets of lawyers representing ERCOT and the petitioners.

"My first question was are their things that ERCOT does that the PUC cannot control, and I want to focus you on the word cannot," justice Jimmy Blacklock asked O'Neill.

"It has the power to regulate ERCOT, it does not control what ERCOT does when it turns the knobs on the grid and operates the grid," O'Neill responded.

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Justice Blacklock asked if PUC commissioners could give such orders and dictate to ERCOT on a granular level how to achieve better results. O'Neill responded by saying that's what happened previously with the pricing mechanism.

Another important factor brought up during the arguments is funding: Do taxpayer dollars fund this entity?

"It's not funded by the legislature, it's funded by the fees that are paid under the authorization of the scheme created by the legislature," said justice Jeff Boyd.

"By virtue of the legislature creating the system administration fee, it allowed for ERCOT to be funded," responded attorney Elliot Clark, representing ERCOT.

Justice Boyd clarified that it's not appropriated funds from tax dollars.

"That is a big difference, whether or not it is actually funded by appropriated dollars," said Justice Debra Lehrmann.

"I don't think this court has ever said that a regulatory fee means that an entity, that's how it's funded, should not be entitled to immunity," said Clark.

Arguments wrapped on Monday without a decision being announced, meaning there's more to come for the future of ERCOT.