Almost two years after Winter Storm Uri held Texas in its icy clutches, CPS Energy was back in court this week, arguing that its case against the state’s grid operator should be allowed to proceed.

At issue is whether the Electric Reliability Council of Texas is a government entity, and so is protected from lawsuits. If the high court rules that it is not, CPS Energy’s lawsuit can proceed. It is seeking to reduce the roughly $300 million it paid to the grid operator for electricity it purchased during the freeze at inflated prices.

A ruling that ERCOT is not a government entity would also, as one of ERCOT’s attorneys noted, open the floodgates to hundreds of other lawsuits from companies and individuals injured by high prices charged during and in the aftermath of the storm.

CPS Energy filed its lawsuit against ERCOT in March 2021 for allowing wholesale electricity prices — power that typically trades at under $50 per megawatt-hour — to rise to $9,000 per megawatt hour and stay there for 72 hours.

Those actions, which CPS Energy claims were illegal, meant the utility was forced to spend more than $1 billion on natural gas and purchased power from the market during that time.

CPS Energy customers are already locked in to pay roughly $418 million in what CPS Energy has deemed “legitimate” charges. Early last year the utility and San Antonio City Council approved a roughly $1.26 fee customers will see on their monthly bills for the next 25 years.

The utility fought gas suppliers in court over the remaining $587 million, accusing the companies of price-gouging. But it has quietly settled most of the 18 lawsuits it filed against the suppliers and has conceded that the amount customers will have to pay is likely to rise.

In December 2021, a three-justice panel of the 4th Court of Appeals dismissed CPS Energy’s suit against ERCOT, finding that the municipal 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 claim that the grid operator is a “governmental unit,” and so is protected by sovereign immunity and cannot be sued.

In a similar lawsuit brought by Panda Power Funds, a Dallas-area power generator, the Dallas-based 5th Court of Appeals ruled in favor of the company against ERCOT, which then appealed to the state Supreme Court, as did CPS Energy.

Because both cases hinge on the question of whether ERCOT is a government entity, the high court decided to hold oral arguments together.

During the hearing, attorneys for CPS Energy argued that ERCOT is a “private membership-based nonprofit corporation,” and so the courts, not the PUC, have jurisdiction.

“Despite many opportunities, including after the winter storm, the legislature has never conferred government status on ERCOT, which it knows how to do,” said Harriet O’Neill, a former Texas Supreme Court justice who is part of CPS Energy’s legal team. “This court should not step in to fill that policy void.”

CPS Energy has previously argued that ERCOT has used “governmental unit” as both “a sword and a shield according to what suits its purpose at any given time,” noting that two appellate courts have concluded ERCOT is not a governmental entity — including the Dallas Court of Appeals, in the Panda Power Funds case.

Represented by Elliot Clark, ERCOT continued to argue Monday it is a governmental unit because it “performs only governmental functions.”

Should the court side with CPS Energy, Clark said, “then all of those other market participants will abandon the regulatory process and go file suit in their hometown district courts. Quite literally chaos will follow.”

The Texas Supreme Court may file its decision at any time following Monday’s oral arguments.

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

Avatar photo

Lindsey Carnett

Lindsey Carnett covers the environment, science and utilities for the San Antonio Report.