ERCOT could be immune from winter storm lawsuits

Investigations

AUSTIN (KXAN) — Lawsuits are mounting against the private firm that manages Texas’ statewide electric grid. One of those suits is seeking $100 million in damages in the death of a sixth grader in Conroe.

That 11-year-old boy, Cristian Pineda, was on lawmakers’ minds Thursday as they called Electric Reliability Council of Texas CEO Bill Magness and Public Utility Commission Chairwoman DeAnn Walker to the Capitol for 15-hour long hearings.

“Including the death of 11-year-old Christian Pineda,” Harris County Representative Ana Hernandez said in her opening statement. Hernandez paused for several seconds as some lawmakers turned to see why she’d stopped speaking in mid-sentence.

Conroe, TX sixth grader Cristian Pineda died after playing in the snow during the February 2021 winter storm. Pineda’s family is suing ERCOT and the local power utility, accusing them of causing the boy’s death after ERCOT’s order to utilities to curtail energy after the statewide power grid nearly collapsed. (Courtesy: Go Fund Me)

“Who died in his sleep after playing in the snow and returning to his unheated home,” Hernandez continued. Her voice cracked with emotion, clear evidence of why it took her so long to finish her sentence.

Harris County confirmed 32 storm-related deaths, and 15 of those died of hypothermia. Hernandez said in her opening statements, “the human toll is undeniable.”

“As a mother, a daughter and a Texan, I extend my most sincere condolences to those families for their loss and unimaginable pain they are certainly going through at this very moment,” Hernandez said.

“An 11-year-old spent the final moments of his life under a pile of blankets shivering,” Rep. Abel Herrero told the committee in his opening remarks Thursday.

“In a state that prides itself in being the biggest and best, we couldn’t even keep a young boy warm,” Herrero said.

As of this report, Harris County shows four separate lawsuits; three are wrongful death claims and one other is for property damage and personal injury.

Can’t touch ERCOT

In 2016, Panda Power sued ERCOT. The Dallas utility accused ERCOT of publishing “flawed or rigged” projections regarding demand for energy production. Panda Power spent $2.2 billion to build three plants “in reliance on ERCOT’s false representations of market data,” according to court filings.

Those plants are located in Sherman, Texas.

Texas Supreme Court filings show one Panda plant went bankrupt and the other two plants “are under financial stress.” Panda Power’s legal team asserted the utility company relied on ERCOT’s projections to justify investing in its ability to produce more power to support Texas’ power grid.

But, ERCOT’s “fraudulent scheme” drove the three power plants into financial crisis, the court filing shows.

Panda Power’s Feb. 29, 2016 lawsuit came to an end, temporarily, in 2018 when a lower court found ERCOT could not be sued. The court found ERCOT is entitled to protections known as sovereign immunity, which protects government entities from being sued for carrying out its governmental functions.

This image shows the inside of ERCOT’s control room located in Taylor, TX. The control room operators monitor energy levels inside Texas’ power grid around the clock. (Courtesy: ERCOT)

ERCOT is a private nonprofit but works under direct oversight by the Public Utility Commission of Texas, which creates rules and standards for Texas’ statewide power grid. ERCOT CEO Bill Magness has described his organization as the “traffic cop” of the state’s power grid, and the private power producers, wholesalers and retailers that operate within it.

The sovereign immunity ruling in the Panda Power case is currently under review by the Texas Supreme Court. The court could decide by the end of its current term, which ends in June, whether ERCOT is a private entity and not an extension of state government, protected from paying damages stemming from lawsuits.

“If there’s no sovereign immunity, the Texas Supreme Court comes back and says they’re not entitled to sovereign immunity, because the legislature did not give them that ability, then it’s unlimited in terms of what could happen, and a jury could make a determination on there,” Eric Cedillo, a clinical law professor at Southern Methodist University, told KXAN.

If ERCOT is not immune, there is no cap on damages. A wrongful death suit filed this week in Nueces County has asked for $100 million in damages.

Lawmakers spent 15 hours on Thursday interrogating Magness and PUC Chairwoman DeAnn Walker about what led to the days-long blackouts blamed for billions in property damage and deaths across the state.

Electric Reliability Council of Texas CEO Bill Magness spent more than 12 hours testifying before House and Senate committees on Feb. 25, 2021 as to why the state’s power grid forced four million Texans to spend days without power during the winter storm. (TX Senate live stream)

Do you consider yourself a government agency,” Houston Senator Carol Alvarado asked Magness.

“That issue is actually being litigated at the moment. and it’s a question of whether out status — when we are sued on market decisions — and the Supreme Court’s concept of sovereign immunity and where it applies and where it doesn’t for private entities. So, we’re not a government agency, we are a private Texas corporation,” Magness responded.

“We are a fully-regulated entity buy the Public Utility Commission, down to our budget and our finances. So, we are formally a private organization, we perform a public purpose and we follow a lot of regulations and public rules, so we’re sort of in the middle in some ways,” Magness said.  

The end-around

Even if ERCOT is found to fall under sovereign immunity protections, Cedillo said there are still avenues plaintiffs can use to recover damages. One is pursuing the Texas Tort Claims Act, which would cap monetary damages.

“That is a statute that allows the state of Texas and governmental units to be sued, but only for certain things. The plaintiffs could go after ERCOT in that even if they were considered a governmental unit, but it would be capped at about $250,000 per person,” Cedillo said.

That cap would include claims of wrongful death and limited to $50,000 “per occurrence,” Cedillo said.

The Texas Constitution could also provide another avenue to sue ERCOT, according to Cedillo, under Section 17 and generally known as the “taking clause.”

“A taking is basically when, the state let’s say for example, they wanted to build a highway, and your house was in the way. Well, they could take your house under eminent domain, and they’d have to pay you for that; for the loss of your home,” Cedillo said.

“What these plaintiffs maintain is that a taking occurred, because they were doing the rolling blackouts, they provided for the greater good and allowing the grid to stay up, but then they took from the damages that were incurred by many in the blackout, potentially the loss of life, they took from those folks to give to the greater good,” Cedillo explained.

Even though attempts to hold ERCOT accountable for what happened in the blackouts is still unsettled law, Cedillo said lawsuits already filed in Texas show attorneys going after the private utility companies that decided whose lights stayed on.

“That’s definitely what we’re seeing. You’re seeing individuals suing both the regional power companies, as well as ERCOT. If ERCOT isn’t there, a lot of these regional providers like ERCOT, like others that provide the energy to individuals. ERCOT maintains that it was those regional providers that decided who was going to get the rolling blackouts,” Cedillo told KXAN.

“Some people were in the dark for 40, 50, 60 hours at a time in just incredibly cold conditions, and that is what caused all the property damage, that is what caused the loss of life. So the actual regional providers; they were making decisions on who is getting power and who wasn’t and not subjecting it to the rolling blackouts like it should have been doing, that could be a real problem in terms of who they may be liable for.” Cedillo said.

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