The Supreme Court of Texas agreed to hear arguments on two discrete cases on whether the Electric Reliability Council of Texas could be held legally liable for damages stemming from the February 2021 freeze that knocked out much of the electricity in the state, leading to food and water shortages and the deaths of hundreds.
Attorneys for ERCOT, which is in charge the power grid for about 90 percent of Texas, are arguing in court that the organization enjoys sovereign immunity from lawsuits as a state government entity under the purview of the Public Utilities Commission of Texas.
Lawyers for CPS Energy, a municipal utility serving the San Antonio area, and for Panda Energy Company, a private energy company, said ERCOT’s regulation by the PUC does not make it a part of the state government.
Like other electricity providers, CPS was hit with economic consequences when the price of energy hit record highs in February 2021.
ERCOT, organized as a membership-based 501(c)(4) nonprofit, was created as the first independent system operator in the U.S., and works with the Texas Reliability Entity, one of eight regional entities that report to the North American Electric Reliability Corporation.
ERCOT operates the Texas Interconnection, which as an intrastate power grid under the purposes of the Federal Power Act, is not subject to federal regulations. Texas’ power generation and delivery industries were deregulated from 1995 to 1999.
Texas saw blackouts triggered by severe cold weather and shortages from hot weather demand peaks, before. The 2011 Groundhog Day blizzard, for example, caused a wide-ranging failure of the state grid. However, Winter Storm Uri hit Texas hard, leaving 10 million people in the dark without electric heat.
February 15, 2021, ERCOT directed utilities to perform rolling blackouts when record-breaking cold temperatures froze critical portions of the region’s power infrastructure. This was in response to the freezing temperatures shutting down many of the power plants in the area, which removed about 34 GW of power generation from the grid.
By the next day, electricity shortfalls sent the price of electricity to as high as $9,000 per MWh, triggering economic problems for affected retail electricity providers. The same day, Gov. Greg Abbott said ERCOT’s reform would be a central legislative priority. A few days later, the lawsuits began.
In a January 2022 interview with T&D World, then-Interim President and CEO of ERCOT, Brad Jones, said that in the decades since the Texas grid has been deregulated, the emphasis has always been on providing affordable and clean energy, but not as much on reliability. The February storm requires Texas to invest in reliability, Jones said.
“As a state, we were able to quickly mobilize, pass two comprehensive laws and a half-dozen state regulatory proceedings before federal authorities even completed their analysis (the report was issued in November). If we did not have our unique regulatory position, we would have lost nearly an entire year to make much-needed changes,” Jones wrote to T&D World.