The Texas Supreme Court ruled Friday that the Electric Reliability Council of Texas is a government entity and entitled to sovereign immunity, protecting it from being sued. The decision effectively dismisses CPS Energy’s lawsuit against Texas’ power grid operator over the deadly February 2021 winter storm.
CPS Energy sued ERCOT in March 2021 for allowing wholesale electricity prices to soar during Winter Storm Uri, costing the municipally owned utility $1 billion.
In a 5-4 ruling, the state’s high court found that ERCOT qualifies for immunity because it “is an organ of government” that performs a “‘uniquely governmental function’ as part of a ‘larger governmental system.'”
CPS Energy expressed disappointment in the Supreme Court’s ruling, saying in a prepared statement, “we recognize that the Court needed to weigh in on this previously unsettled issue and are gratified that four justices recognized our legal position as we seek relief for our customers in the aftermath of Winter Storm Uri.”
The statement added that as a result of its overall litigation strategy, the utility was able to reduce the costs passed on to its customers “by millions” and that it drove “critical discussions at the highest levels that are necessary to improve our power grid and energy market.”
Exactly how CPS Energy reduced costs passed on to customers or by how much was unclear from the statement. The utility did not immediately respond to a request for clarification.
CPS Energy’s lawsuit against ERCOT accused the grid operator of 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 during Winter Storm Uri.
Those actions were illegal, the suit claimed, and meant the utility was forced to spend more than $1 billion on natural gas and purchased power from the market during that time. In its lawsuit, CPS Energy alleged that ERCOT’s mishandling of power pricing during the storm led to the utility being short-changed $18 million.
“The case against ERCOT was a case about the process at this point,” CPS Energy spokeswoman Dominique Ramos said. “We had already recovered the back amounts owed to us by ERCOT.”
CPS Energy customers are currently on the hook for at least $418 million in what CPS Energy has deemed “legitimate” charges from the winter storm. Early last year, the utility and the San Antonio City Council approved a roughly $1.26 fee customers will see on their monthly bills for the next 25 years.
The utility has 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.
By how much is still unknown.
In December 2021, a three-justice panel of the Fourth 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. The panel also agreed with ERCOT’s claim that the grid operator is a governmental unit protected by sovereign immunity.
CPS Energy appealed the decision to the state Supreme Court in January 2022. The high court heard oral arguments from CPS Energy and ERCOT on the sovereign immunity matter earlier this year.
Friday’s ruling also will likely result in the dismissal of lawsuits filed by thousands of Texans for deaths, injuries and damages following the 2021 winter storm that killed more than 200 people across the state.
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