CPS Energy on Thursday appealed a recent court decision dismissing its lawsuit against the state’s grid operator.

In late December, a three-justice panel of the 4th Court of Appeals dismissed the suit CPS Energy filed against the Electric Reliability Council of Texas in the wake of February’s winter storm. The panel found that the municipally owned utility should have first exhausted its claims with the Public Utilities Commission, which oversees ERCOT, prior to filing suit. The panel also agreed with ERCOT’s claims that the grid operator is a “governmental unit,” which prevents it from being sued.

In its appeal to the Supreme Court of Texas, CPS Energy argues that ERCOT is not a governmental unit and that the courts, not the PUC, have jurisdiction over the claims in its lawsuit.

“Governmental unit” is “[a] moniker ERCOT has utilized as both a sword and a shield according to what suits its purpose at any given time,” wrote CPS Energy’s attorneys, pointing out that two other appellate courts have found that ERCOT is not a governmental entity, and that ERCOT itself has “admitted in the past” it is not.

They also argue that ERCOT “has admitted it did not follow” PUC orders, and so because the grid operator exceeded its constitutional authority, “there are no administrative remedies to exhaust,” meaning CPS Energy should be able to challenge the grid operator’s “wrongful conduct” in court.

“We must continue to do all that we can to reduce the burden on our customers and ensure ERCOT cannot take this path again,” CPS Energy said in a statement to the San Antonio Report Thursday evening.

The statement expressed disappointment that the 4th Court of Appeals dismissed its legal claim on procedural grounds “without addressing the merits of our case. 

“Given this decision overruled the trial court ruling, which was in our favor, and also departed from decisions previously made by other Texas Courts of Appeals regarding ERCOT, we believe our argument deserves its day in court.”

In its original lawsuit, CPS Energy argued that ERCOT presided over “one of the largest illegal wealth transfers in the history of Texas” for keeping wholesale electricity prices at $9,000 per megawatt-hour — power that typically trades at under $50 per megawatt-hour — for almost 72 hours. That was 32 hours longer than the PUC’s order allowed, CPS Energy argues, resulting in $16 billion in overcharges to CPS Energy and dozens of other utilities across the state.

CPS Energy racked up just over $1 billion in fuel charges during that timeframe. So far it has paid $418 million in what it has deemed “legitimate” charges and says it is still litigating $587 million it owes to gas suppliers.

ERCOT “admitted its wrongdoing,” CPS Energy stated in its appeal, continuing: “Although the Texas Attorney General confirmed, and ERCOT admitted it could have fixed the error, it did not. ERCOT instead decided to protect Wall Street investors and pass erroneous invoices on to still-viable market participants, including CPS Energy and its customers.”

Rather than re-price power “as it could have done,” ERCOT decided to impose the defaults of utilities that went under due to the overwhelming costs onto those left standing — including CPS Energy and its customers, its attorneys wrote.

To recover the $418 million it has already paid, CPS Energy has turned to its customers. Along with a 3.85% base rate hike, the San Antonio City Council last month approved a new fee customers will see on their bills for the next 25 years starting in March.

Yet even as the utility aims to keep its ERCOT lawsuit alive, it has also begun to quietly settle some of the 18 lawsuits it also filed against natural gas suppliers, as first reported in the San Antonio Express-News and confirmed Thursday by CPS Energy.

CPS Energy would not comment on any aspect of the settlement agreements it has reached with some natural gas providers but confirmed that seven remaining suits have been consolidated under one judge in Bexar County, representing $392 million in disputed natural gas costs.

CPS Energy’s Interim CEO Rudy Garza acknowledged in an interview with the Express-News earlier this month that as settlements are reached with the various gas companies the utility has sued, the new monthly fee will rise.

CPS Energy is a financial supporter of the San Antonio Report. For a full list of business members, click here.

Lindsey Carnett

Lindsey Carnett is the Science & Utilities reporter for the San Antonio Report.

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