ERCOT can’t be sued over power grid failures during 2021 winter storm, Texas Supreme Court rules

HOUSTON - The Supreme Court of Texas narrowly decided Friday that sovereign immunity, which largely shields government agencies from civil lawsuits, also protects the operator of the Texas electric grid.

The 5-4 opinion will likely free the nonprofit corporation from lawsuits filed by thousands of Texans for deaths, injuries and damages following the deadly 2021 winter storm, unless lawyers find another way forward.

The Electric Reliability Council of Texas, which manages the power supply for most of Texas, qualifies for immunity because it "provides an essential governmental service," Chief Justice Nathan Hecht wrote in the majority opinion. State law intended for ERCOT to have the power of an "arm of the State government," Hecht wrote. If anyone is going to hold ERCOT accountable for its actions, Hecht wrote, it should be state regulators or the Legislature, not the courts.

Freezing temperatures gripped the state during the 2021 winter storm, straining the power supply so much that ERCOT called for cutting power to millions of homes and businesses to prevent the grid’s collapse. 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.

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Thousands of residents accused ERCOT, power companies and distribution companies of failing to prepare for the freezing weather.

Lawyers expect the high court’s decision will allow ERCOT to be dismissed from the litigation, although it does not shield other defendants.

Attorney Mia Lorick, who represents some of those plaintiffs, said she sees only a slim possibility that lawyers could keep claims against ERCOT alive by arguing that their cases have differences that somehow skirt the sovereign immunity finding.

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."

Justices Jeff Boyd and John Devine, along with two others, disagreed that ERCOT has sovereign immunity. Purely private entities are clearly not sovereign, and making them so undermines the public trust, they wrote. The justices argued that "no statute designates ERCOT as a part of the government" and that courts should not be barred from hearing claims against it.

The ruling sprang from two cases filed against ERCOT. San Antonio’s municipally owned utility, CPS Energy, alleged that ERCOT mishandled the soaring price of power during the 2021 winter storm. And private equity investors at Panda Power Funds alleged that 10 years earlier ERCOT issued reports that misled them about how much power the grid needed.

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ERCOT spokespersons issued a statement saying that the organization was pleased with the decision. CPS Energy said in a statement that it was disappointed but thankful that four justices agreed with the utility as it sought relief for customers. The utility said the litigation still led to "critical discussions at the highest levels that are necessary to improve our power grid and energy market."

Disclosure: CPS Energy has been a financial supporter of The Texas Tribune, a nonprofit, nonpartisan news organization that is funded in part by donations from members, foundations and corporate sponsors. Financial supporters play no role in the Tribune’s journalism. Find a complete list of them here.

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