Aspire Power Ventures, LP v. Public Utility Commission of Texas, Electric Reliability Council of Texas, Thomas Gleeson, Lori Cobos, Jimmy Glotfelty, Kathleen Jackson, and Courtney Hjaltman

ACCEPTED

15-24-00118-CV

FIFTEENTH COURT OF APPEALS

AUSTIN, TEXAS

12/18/2024 2:53 PM

No. 15-24-00118-CV CHRISTOPHER A. PRINE

____________________________________________________________________________________________________________________________________ CLERK

COURT OF APPEALS FOR THE FILED IN

15th COURT OF APPEALS

FIFTEENTH DISTRICT OF TEXAS AUSTIN, TEXAS

AUSTIN, TEXAS 12/18/2024 2:53:38 PM

____________________________________________________________________________________________________________________________________

CHRISTOPHER A. PRINE

Clerk

Aspire Power Ventures, LP,

Appellant,

v.

Public Utility Commission of Texas, Electric Reliability Council

of Texas, Thomas Gleeson, Lori Cobos, Jimmy Glotfelty,

Kathleen Jackson, and Courtney Hjaltman,

Appellees.

_________________________________________________________________

On Appeal from the 345th Judicial District Court

Travis County, Texas

Cause No. D-1-GN-24-003384

Hon. Catherine A. Mauzy, Presiding

____________________________________________________________________________________________________________________________________

APPELLANT’S BRIEF

____________________________________________________________________________________________________________________________________

Chrysta L. Castañeda Monica Latin

Texas Bar No. 15325625 Brent M. Rubin

chrysta@castaneda-firm.com Ken Carroll

Nicole Michael CARRINGTON, COLEMAN,

THE CASTAÑEDA FIRM SLOMAN & BLUMENTHAL, L.L.P.

325 N. St. Paul, Suite 2030 901 Main Street, Suite 5500

Dallas, Texas 75201 Dallas, Texas 75202

Phone: (214) 282-8579 Phone: (214) 855-3000

Fax: (214) 602-9187 Fax: (214) 580-2641

Attorneys for Appellant Aspire Power Ventures, LP

ORAL ARGUMENT REQUESTED

IDENTITY OF PARTIES AND COUNSEL

Pursuant to Tex. R. App. P. 38.1(a), below is a complete list of all

parties to the order being appealed and the names and addresses of all

trial and appellate counsel:

1. Trial Court

The Honorable Catherine A. Mauzy, Judge Presiding1

345th Judicial District Court

Travis County, Texas

1700 Guadalupe, 10th floor

Austin, TX 78701

2. Appellant and Counsel

Plaintiff–Appellant Counsel

Aspire Power Ventures, LP Chrysta L. Castañeda

Nicole Michael

THE CASTAÑEDA FIRM

325 N. St. Paul, Suite 2030

Dallas, Texas 75201

Monica Latin

Brent M. Rubin

Ken Carroll

CARRINGTON, COLEMAN,

SLOMAN & BLUMENTHAL, L.L.P.

901 Main Street, Suite 5500

Dallas, Texas 75202

1 Judge Mauzy is the judge of the 419th District Court of Travis County, Texas. She

sat as the presiding judge in the 345th District Court in this case, however,

pursuant to Travis County Local Rule 10.2. See Assignment by Presiding Judge,

June 11, 2024. Appx.34.

2

3. Appellees and Counsel

Defendants–Appellees Counsel

Public Utility Commission Ken Paxton,

of Texas, and Attorney General of Texas

Thomas Gleeson Brent Webster,

Lori Cobos First Ass’t Attorney General

Jimmy Glotfelty Ralph Molina,

Kathleen Jackson Deputy First Ass’t Attorney

Courtney Hjaltman, General

In their official James Lloyd,

capacities as Deputy Attorney General for

Chairman and Civil Litigation

Commissioners of Office of the Attorney Geneal

The Public Utility P.O. Box 12548

Commission of Texas Austin, TX 78711-2548

John R. Hulme,

Special Counsel

Amanda Atkinson Cagle,

Ass’t Attorney General

Jordan Pratt,

Ass’t Attorney General

Kellie E. Billings-Ray,

Chief, Environmental

Protection Division

Office of the Attorney General

P.O. Box 12548, MC-066

Austin, TX 78711-2548

Electric Reliability Elliot Clark

Council of Texas Elin Isenhower

WINSTEAD PC

600 W. 5th Street, Suite 900

Austin, TX 78701

3

TABLE OF CONTENTS

Page

Identity of Parties and Counsel ................................................................ 2

Table of Contents ...................................................................................... 4

Table of Authorities ................................................................................... 7

Record References ................................................................................... 12

Statement of the Case ............................................................................. 13

Statement Regarding Oral Argument .................................................... 14

Issue Presented ....................................................................................... 15

Introduction ............................................................................................. 16

Statement of Facts and Procedural History ........................................... 18

I. Factual Background ....................................................................... 18

A. The PUC and ERCOT ........................................................... 18

B. About Aspire Power Ventures............................................... 20

C. The mechanics of PUC and ERCOT rulemaking ................. 21

D. The ERCOT Contingency Reserve Service (ECRS) .............. 22

1. The PUC, itself, did not authorize ECRS as a new

ancillary service prior to ERCOT’s ECRS

rulemaking, as required by statute. ............................ 24

2. ECRS constitutes withholding of electricity,

contrary to PURA. ........................................................ 25

3. The ECRS rulemaking failed to meet the

requirements of the APA. ............................................ 27

II. Procedural History ......................................................................... 29

4

Summary of the Argument ..................................................................... 31

Standard of Review ................................................................................. 34

Argument ................................................................................................. 37

I. Government Code § 2001.038 waives sovereign or

governmental immunity for challenges to the validity of a

“rule,” as defined by the APA. ........................................................ 38

A. Challenges to rules adopted by the PUC itself fall

within § 2001.038. ................................................................. 40

B. The PUC delegated its authority to formulate and

adopt certain rules to ERCOT—providing the only

authority ERCOT had to adopt such rules. .......................... 42

C. When ERCOT adopted NPRRs under rulemaking

authority delegated by the PUC, it acted as and stood

in the shoes of the PUC and was subject to the same

requirements and limitations as the PUC—including

the APA generally and § 2001.038 specifically..................... 44

D. RWE does not undermine Aspire’s reliance on

§ 2001.038 as a waiver of sovereign immunity with

respect to its challenge to the ECRS Rules. ......................... 51

E. PURA’s directive that ERCOT be required to establish

a “formal process” for its PUC-delegated rulemaking

authority does not supplant the APA. .................................. 55

II. Aspire was not required to “exhaust administrative

remedies” before pursuing its challenge in the district court. ...... 59

III. In addition, and in the alternative, sovereign immunity does

not bar Aspire’s ultra vires claims against the PUC

Commissioners. .............................................................................. 60

Conclusion & Prayer for Relief ............................................................... 65

Certificate of Compliance ........................................................................ 67

5

Certificate of Service ............................................................................... 68

APPENDIX

Tab A: Order Granting PUC Parties’ Amended Plea to the

Jurisdiction, Appx.726

Tab B: Order Granting ERCOT Amended Plea to the

Jurisdiction, Appx.723

Tab C: Tex. Gov’t Code § 2001.003

Tab D: Tex. Gov’t Code § 2001.038

Tab E: Tex. Util. Code § 35.004

Tab F: Tex. Util. Code § 39.151

6

TABLE OF AUTHORITIES

Cases Page(s)

Aspire Power Ventures, L.P. v. PUC,

No. 03-24-00102-CV (Tex. App.—Austin) .......................................... 29

Aspire Power Ventures, L.P. v. PUC,

No. 15-24-00035-CV, 2024 WL 4293602 (Tex. App.—15th

Dist., Sept. 26, 2024, no pet.) .............................................................. 29

Bd. of Trustees of Ohio State Univ. v. Dept of Admin. Svcs.,

429 N.E.2d 428 (Ohio 1981) ................................................................ 47

City of Garland v. Byrd,

97 S.W.3d 601 (Tex. App.—Dallas 2002, pet. denied)........................ 46

City Pub. Serv. Bd. of San Antonio v. PUC,

9 S.W.3d 868 (Tex. App.—Austin 2000), aff’d, 53 S.W.3d

310 (Tex. 2001) .................................................................................... 41

CPS Energy v. Elec. Reliability Council of Tex.,

671 S.W.3d 605 (Tex. 2023) ................................................................ 19

DuPuy v. City of Waco,

396 S.W.2d 103 (Tex. 1965) ................................................................ 49

EBS Sols., Inc. v. Hegar,

601 S.W.3d 744 (Tex. 2020) .......................................................... 35, 36

Gonzalez v. Tex. Med. Bd.,

No. 03-22-00205-CV, 2023 WL 7134982 (Tex. App.—

Austin Oct. 31, 2023, pet. filed) .......................................................... 57

Hartzell v. S.O.,

672 S.W.3d 304 (Tex. 2023) ................................................................ 61

Herrera v. Mata,

No. 23-0457, 2024 WL 4996715

(Tex. Dec. 6, 2024) (per curiam) ....................................... 18, 35, 35, 62

7

Houston Belt & Terminal Ry. Co. v. City of Houston,

487 S.W.3d 154 (Tex. 2016) .......................................................... 34, 61

Lehmann v. Har-Con Corp.,

39 S.W.3d 191 (Tex. 2001) .................................................................. 31

Lindsay v. Sterling,

690 S.W.2d 560 (Tex. 1985) .......................................................... 46, 47

Mainland Sav. Ass’n v. Hoffbrau Steakhouse, Inc.,

659 S.W.2d 101 (Tex. App.—Houston [14th Dist.]

1983, no writ) ...................................................................................... 49

Mednick v. Tex. State Bd. Pub. Accountancy,

933 S.W.2d 336 (Tex. App.—Austin 1996, writ denied) .................... 47

Mosley v. Tex. Health & Human Services Comm’n,

593 S.W.3d 250 (Tex. 2019) ................................................................ 56

PUC v. AMA Commc’ns, LLC,

No. 03-21-00597-CV, 2022 WL 3220405 (Tex. App.—

Austin Aug. 10, 2022, no pet.) .................................................... passim

PUC v. RWE Renewables Americas, LLC,

691 S.W.3d 484 (Tex. 2024) ........................................................ passim

Sw. Bell Tel. Co. v. PUC,

888 S.W.2d 921 (Tex. App.—Austin 1994, writ denied) .............. 40, 62

Tex. Dep’t of Parks & Wildlife v. Miranda,

133 S.W.3d 217 (Tex. 2004) ................................................................ 36

Tex. Dep’t of Protective & Regulatory Services v. Mega Child

Care, Inc.,

145 S.W.3d 170 (Tex. 2004) ................................................................ 47

Tex. Dep’t of State Health Services v. Balquinta,

429 S.W.3d 726 (Tex. App.—Austin 2014, pet. dism’d) ............... 32, 39

8

Tex. Dep’t of State Health Services v. Sky Mktg. Corp.,

No. 03-21-00571-CV, 2023 WL 6299115 (Tex. App.—

Austin Sept. 28, 2023, pet. filed) ........................................................ 61

Tex. Tel. Ass’n v. PUC,

653 S.W.3d 227 (Tex. App.—Austin 2022, no pet.) .................... passim

Texas Dep’t of Transp. v. Sunset Transp., Inc.,

357 S.W.3d 691 (Tex. App.—Austin 2011, no pet.) ...................... 32, 39

Usher v. Cnty. of Monterey,

65 Cal. App. 4th 210, 76 Cal. Rptr. 2d 274 (1998), as

modified (June 23, 1998) .................................................................... 49

Watkins v. City of Santa Ana,

189 Cal. App. 3d 393, 234 Cal. Rptr. 406 (Ct. App. 1987) ................. 49

Statutes & Rules

Act of May 28, 2023, 88th Leg., R.S., H.B. 1500, § 15 ...................... 22, 43

Act of May 30, 2021, 87th Leg., R.S., ch. 426, § 3, 2021 Tex.

Gen. Laws 830, 831 ....................................................................... 22, 43

Act of May 27, 1999, 76th Leg., R.S., ch. 405 § 39, 1999 Tex.

Gen. Laws 2543, 2558 ......................................................................... 19

Tex. Gov’t Code § 411.180 ....................................................................... 57

Tex. Gov’t Code § 2001.001 ..................................................................... 56

Tex. Gov’t Code § 2001.003 ................................................... 37, 41, 42, 44

Tex. Gov’t Code § 2001.023 ............................................................... 27, 58

Tex. Gov’t Code § 2001.024 ............................................................... 27, 58

Tex. Gov’t Code § 2001.033 ............................................................... 27, 58

Tex. Gov’t Code § 2001.038 ............................................................ passim

Tex. Gov’t Code § 2001.221 ..................................................................... 58

9

Tex. Gov’t Code § 2001.227 ..................................................................... 58

Tex. Hum. Res. Code § 40.063 ................................................................ 57

Tex. Parks & Wild. Code § 32.006 .......................................................... 57

Tex. Util. Code § 35.004 .............................................................. 25, 63, 64

Tex. Util. Code § 39.001 ........................................................ 29, 33, 51, 53

Tex. Util. Code § 39.151 .................................................................. passim

Tex. Util. Code § 39.157 .............................................................. 25, 62, 63

Tex. Util. Code § 39.159 .......................................................................... 64

16 Tex. Admin. Code § 25.361 ................................................................. 19

16 Tex. Admin. Code § 25.362 ..................................................... 19, 21, 42

16 Tex. Admin. Code § 25.365 ................................................................. 26

16 Tex. Admin. Code § 25.501 ........................................................... 25, 62

16 Tex. Admin. Code § 25.503 ........................................................... 25, 63

Tex. R. App. P. 9.4 ................................................................................... 67

Tex. R. App. P. 34.5a ............................................................................... 12

Tex. R. App. P. 38.1(a) ............................................................................... 2

Tex. R. Civ. P. 91a ............................................................................. 13, 30

Travis County Local Rule 10.2 .................................................................. 2

Other Authorities

ABOUT THE PUC, available at

https://www.puc.texas.gov/agency/about/mission.aspx...................... 19

BLACK’S LAW DICTIONARY (12th ed. 2024) ............................................... 50

ERCOT Board Report, NPRR 1196 ........................................................ 24

10

ERCOT Market Notice, M-C100923-0330 General,

ERCOT Membership Application for 2024 Membership

Year - FINAL REMINDER

(Nov. 13, 2023), available at

https://www.ercot.com/services/comm/mkt_notices/M-

C100923-03 ......................................................................................... 28

https://www.ercot.com/files/docs/2023/12/11/13%20Independe

nt%20Market%20Monitor%20(IMM)%20Report.pdf ......................... 26

https://www.potomaceconomics.com/wp-

content/uploads/2024/05/2023-State-of-the-Market-

Report_Final_060624.pdf ................................................................... 26

https://www.potomaceconomics.com/wp-

content/uploads/2024/05/2023-State-of-the-Market-

Report_Final_060624.pdf ................................................................... 26

11

RECORD REFERENCES

Appendix in Lieu of The separate Appendix in Lieu of

Clerk’s Record Clerk’s Record, see Tex. R. App. P.

34.5a, is consecutively page-

numbered and will be cited by

“Appx” and page, e.g., Appx.726.

Reporter’s Record The Reporter’s Record (“RR”) will

be cited by volume and page, e.g.,

1RR.25.

12

STATEMENT OF THE CASE

Nature of the Plaintiff–Appellant Aspire Power Ventures, LP

Underlying filed suit challenging the validity of the rules

Case: establishing and amending the ERCOT

Contingency Reserve Service (“ECRS”),

promulgated by the Public Utility Commission of

Texas (the “PUC”) and the Electric Reliability

Council of Texas (“ERCOT”), to which the PUC

delegated certain of its rulemaking authority.

Trial Court: The Honorable Catherine A. Mauzy, Judge of the

419th Judicial District Court, Travis County,

Texas, sitting as the Presiding Judge for this

case in the 345th Judicial District Court, Travis

County, Texas.

Course of ERCOT and the PUC Defendants filed original

Proceedings Below: and amended pleas to the jurisdiction, asking

the trial court to dismiss Aspire’s claims based

sovereign or governmental immunity and

Aspire’s purported failure to exhaust

administrative remedies. Appx.74, 180, 304, 416.

ERCOT also filed, in the alternative, a motion to

dismiss under Tex. R. Civ. P. 91a and a plea in

abatement. Appx.74, 304, 325. After briefing and

a hearing, the trial court granted Defendants’

amended pleas to the jurisdiction and dismissed

the case. It did not reach ERCOT’s alternative

motion to dismiss and plea in abatement.

Order on Appeal: The trial court’s Orders Granting Defendants’

Amended Pleas to the Jurisdiction, dated

October 21, 2024. Appx.723, 726.

13

STATEMENT REGARDING ORAL ARGUMENT

Appellant Aspire Power Ventures requests oral argument. This

appeal turns on novel questions about (1) the Texas Legislature’s

waiver of sovereign or governmental immunity for challenges to the

validity of rules, like those establishing and amending ECRS,

promulgated by an entity acting under authority delegated to it by a

state agency, and (2) the interpretation and application of recent

decisions of the Supreme Court of Texas, including PUC v. RWE

Renewables Americas, LLC, 691 S.W.3d 484 (Tex. 2024). Aspire believes

the Court will benefit from oral argument on these issues.

14

ISSUE PRESENTED

Whether the trial court erred in concluding it lacked jurisdiction

over Plaintiff Aspire’s claims for ERCOT’s and the PUC’s failure to

follow the Administrative Procedure Act and for exceeding statutory

authority in establishing and amending the ECRS rules or protocols.

15

INTRODUCTION

The ERCOT Contingency Reserve Service (“ECRS”), which is the

focus of this case, artificially restrains the supply of electricity available

to Texans and suppresses competition in the Texas electricity markets.

Under ECRS, companies that generate electricity are paid to withhold

some of their existing generating capacity from the grid—to hold it in

“reserve”—even when electricity demand is at a peak, such as in hot

summer months. Because of ECRS, Texas consumers and other market

participants have paid inflated rates for electricity they wouldn’t have

had to pay under normal, competitive-market conditions.

What’s more, the administrative rules creating and modifying

ECRS were adopted and approved without compliance with the Texas

Administrative Procedure Act, which ensures that the public can

meaningfully participate in rulemaking and that rules don’t exceed

limits set by the Legislature. Here, ERCOT adopted the ECRS Rules

under authority purportedly delegated to it by the PUC. The PUC

would have had to comply with the APA if it adopted the ECRS Rules.

ERCOT therefore also had to follow the APA when standing in PUC’s

shoes as its delegee.

16

Because ERCOT adopted the ECRS Rules without following the

APA, Aspire, a participant in the Texas wholesale electricity market,

sued ERCOT as well as the PUC and its Commissioners, which

approved several of the ECRS Rules after ERCOT adopted them. In

addition to alleging that the ECRS Rules did not comply with the APA,

Aspire also alleged that ECRS contravenes the Public Utility

Regulatory Act.

ERCOT and the PUC responded with pleas to the jurisdiction,

arguing that Aspire’s claims were barred by sovereign immunity and by

Aspire’s alleged failure to exhaust administrative remedies before

bringing its claims to court. For those arguments, they relied almost

exclusively on the Supreme Court of Texas’s recent opinion in PUC v.

RWE Renewables Americas, LLC, 691 S.W.3d 484 (Tex. 2024).

But RWE does not bar Aspire’s claims in this case or the district

court’s jurisdiction over them. RWE did not deal with the primary

mechanism by which Aspire brought its claims to court, Texas

Government Code § 2001.038, which expressly (i) waives sovereign

immunity for claims like those asserted by Aspire, challenging the

validity of agency rules, and (ii) negates any requirement that

17

administrative remedies be exhausted before such a validity challenge

may be brought to court. Nor did RWE address Aspire’s second basis for

attacking the ECRS rules—i.e., that they are the product of ultra vires

conduct by the PUC Commissioners, with respect to which sovereign

immunity does not even arise. See Herrera v. Mata, No. 23-0457, 2024

WL 4996715, at *2 (Tex. Dec. 6, 2024) (per curiam).

Because the Legislature expressly waived sovereign immunity and

eliminated the requirement that administrative remedies be exhausted

for claims like those asserted by Aspire, and because sovereign

immunity does not apply to Aspire’s ultra vires claims, the orders of the

district court granting ERCOT’s and the PUC’s jurisdictional pleas

should be reversed and the case remanded to be resolved on the merits.

STATEMENT OF FACTS AND PROCEDURAL HISTORY

I. Factual Background

A. The PUC and ERCOT

In 1975, the Texas Legislature enacted the Public Utility

Regulatory Act (“PURA”) and created the PUC “to provide statewide

regulation of the rates and services of electric and telecommunications

18

utilities.”2 Then, “[i]n 1999, the Legislature restructured the electric

utility industry in Texas. It amended PURA to … establish[] a fully

competitive electric power industry.” CPS Energy v. Elec. Reliability

Council of Tex., 671 S.W.3d 605, 612 (Tex. 2023) (citing Act of May 27,

1999, 76th Leg., R.S., ch. 405 § 39, 1999 Tex. Gen. Laws 2543, 2558)3;

see Appx. 274 ¶ 17.

PURA § 39.151(a)—enacted as part of the 1999 restructuring—

required the PUC to “certify an independent organization” or

“independent system operator” (“ISO”) to perform certain functions

essential to the operation of the Texas electricity grid. The PUC

designated and certified ERCOT as that “independent organization” in

2001. See Tex. Admin. Code §§ 25.361, 25.362. As a certified

“independent organization” or ISO, ERCOT “is directly responsible and

accountable to the commission,” which “has complete authority to

oversee [its] operations as necessary to ensure the organization’s

accountability and to ensure that the organization adequately performs

2 ABOUT THE PUC, available at

https://www.puc.texas.gov/agency/about/mission.aspx.

3 PURA is codified in the Texas Utilities Code. The 1999 restructuring amendments

appear in Chapter 39 of that Code.

19

the organization’s functions and duties.” Tex. Util. Code § 39.151(d).

The PUC, in other words, acts through ERCOT.

B. About Aspire Power Ventures

Aspire is a Market Participant—specifically, a Qualified

Scheduling Entity (“QSE”)—that operates in several markets

administered by ERCOT. Aspire buys and sells wholesale electricity in

ERCOT’s real-time electricity market, serving as a conduit between

companies that generate electricity and companies that sell electricity

on a retail basis. Appx.277 ¶¶ 25-26.

QSEs like Aspire bear the risk of price fluctuations in the real-

time electricity market, because they contractually commit in advance

to buy and sell electricity at specific prices before the actual wholesale

market prices are determined through processes and procedures

implemented by ERCOT. Appx.277-78 ¶ 27. As a result, artificial

fluctuations in prices—administratively-created shifts that don’t reflect

normal drivers of the market like changes in weather, demand, and

generation—cause prices to deviate from otherwise reasonable

expectations. Id. Because they are unexpected and not the product of

20

the competitive market, these artificial fluctuations represent an

additional risk to QSEs like Aspire. Id.

C. The mechanics of PUC and ERCOT rulemaking

PURA § 39.151(d) directs that the PUC “shall adopt and enforce

rules relating to the reliability of the regional electrical network and

accounting for the production and delivery of electricity among

generators and all other market participants.” But § 39.151(d) also

provides that the PUC “may delegate those responsibilities to an

independent organization.” The PUC delegated that rulemaking

authority to ERCOT. PUC v. RWE Renewables Americas, LLC, 691

S.W.3d 484, 486 (Tex. 2024); 16 Tex. Admin. Code § 25.362(c).

So, Texas’s electricity market is governed in relevant part by

“Nodal Protocols,” rules promulgated by ERCOT, not in its own right,

but under the rulemaking authority delegated to it by the PUC. See

Tex. Util. Code § 39.151(d). Section 21 of ERCOT’s Nodal Protocols

details the process for adopting new protocols and revising existing

ones. Appx.275 ¶ 19. A request to modify a Nodal Protocol is called a

Nodal Protocol Revision Request or “NPRR.” Id.

21

Under a further amendment to PURA in June 2021, Nodal

Protocols “adopted” by ERCOT must then be “approved” by the PUC

through a separate order for those rules or “protocols” to take effect.

Tex. Util. Code § 39.151(g-6); see Act of May 30, 2021, 87th Leg., R.S.,

ch. 426, § 3, 2021 Tex. Gen. Laws 830, 831, amended by Act of May 28,

2023, 88th Leg., R.S., H.B. 1500, § 15. Before PURA was amended in

2021 to require PUC approval of NPRRs, however, those rules became

effective when adopted by ERCOT. RWE, 691 S.W.3d at 486-87.

D. The ERCOT Contingency Reserve Service (ECRS)

One product of ERCOT’s purported rulemaking authority is the

ERCOT Contingency Reserve Service or “ECRS.” In a nutshell, under

ECRS, ERCOT pays generators who participate in the program to

withhold part of their generating capacity as reserves unless and until

certain operational criteria are met. Appx.270 ¶ 2, 279 ¶ 30. ERCOT

contends ECRS “was developed to address certain reliability risks” in

the Texas electricity grid, Appx.313, see Appx.421—although, as

discussed below, it does not foster reliability in practice.

ECRS was created and adopted by ERCOT in February 2019 as a

new “ancillary service” through NPRR 863, ostensibly under

22

rulemaking authority delegated to ERCOT by the PUC. Appx.278-79

¶ 29. After almost five years of development, ECRS was finally

implemented in June 2023. Id. ¶¶ 28-29. Between the 2019 creation of

ECRS and the present, the PUC and ERCOT have modified it through

numerous ECRS-related NPRRs, as shown in Table 1 below (“ECRS

Rules”). See id. ¶ 29. Many of these ECRS Rules made substantive

modifications; others were adopted to “clean up” ERCOT protocol

language. Id.

TABLE 1

ERCOT NPRR PUC Approval Date

Orders Adopted

NPRR 863 – Creation of ECRS N/A4 Feb. 12, 2019

and Revisions to Responsive

Reserve

NPRR 992 – Updated Day- N/A Aug. 11, 2020

Ahead Liability for NPRR863

NPRR 1015 – Clarification of N/A Aug. 11, 2020

DAM implementation of

NPRR863 Phase 2

NPRR 1079 – Day-Ahead Approval Order Aug. 24, 2021

Market RRS/ECRS 48 Hour (PUC Project No.

Report Clarification (Aug. 10, 52307)

2021)

NPRR 1096 – Require Approval Order May 12, 2022

4 NPRR 863, NPRR 992, and NPRR 1015 were adopted by ERCOT before PURA

was amended in 2021 to require the PUC’s review and approval of NPRRs before

they would become effective. See supra at 22.

23

Sustained Two-Hour Capability (PUC Project No.

for ECRS and Four-Hour 52934)

Capability for Non-Spin (April

28, 2022)

NPRR 1148 – Language Approval Order Jan. 26, 2023

Cleanup Related to ECRS (Dec. (PUC Project

20, 2022) 54445)

NPRR 1178 – Expectations for Approval Order June 29, 2023

Resources Providing ECRS (PUC Project

(Jun. 20, 2023) 54445)

NPRR 1196 – Require Approval Order Feb. 1, 2024

Sustained Two-Hour Capability (PUC Project No.

for ECRS and Four-Hour 54445)

Capability for Non-Spin (Dec.

19, 2023)

NPRR 1213 – Allow DGRs and Approval Order Apr. 11, 2024

DESRs on Circuits Subject to (PUC Project No.

Load Shed to Provide ECRS 54445)

and Clarify Language

Regarding DGRs and DESRs

Providing Non-Spin (Feb. 27,

2024)

NPRR 1224 – ECRS Manual Rejection Order Aug. 5, 2024

Deployment Triggers (June 18, (PUC Project No.

2024) 54445)

1. The PUC, itself, did not authorize ECRS as a new

ancillary service prior to ERCOT’s ECRS

rulemaking, as required by statute.

By ERCOT’s own characterization, ECRS was a new type of

“ancillary service.” See, e.g., ERCOT Board Report, NPRR 1196 (“The

Protocols changes approved in NPRR 1149 included provisions that

would go into effect upon implementation of the new Ancillary Service,

24

ERCOT Contingency Reserve Service (ECRS).”); Appx.313; see Appx.283

¶¶ 39-41. PURA provides that ancillary services like ECRS must be

created “by rule” by the PUC itself. See Tex. Util. Code § 35.004(e).

PURA § 39.151(d) does not authorize the PUC to delegate that

particular rulemaking authority to an “independent organization” like

ERCOT.5 But ERCOT’s NPRR 863, which created ECRS, was never

adopted by the PUC, as a rule or otherwise, and necessarily exceeded

ERCOT’s authority when issued. Appx.283 ¶¶ 39-41. Further, all

subsequent ERCOT protocols modifying ECRS, and PUC approvals of

such protocols, rested on ERCOT’s initial, unauthorized creation of

ECRS. Id.

2. ECRS constitutes withholding of electricity,

contrary to PURA.

At its core, ERCOT’s ECRS program pays entities that generate

electricity to withhold generating capacity that could (and likely would)

otherwise be made available to the grid to meet the demands of the

market. See Appx.279-80 ¶ 30. But PURA identifies the withholding of

production as a prohibited market-power abuse. Tex. Util. Code

§ 39.157(a); 16 Tex. Admin. Code §§ 25.501(j), 25.503(a)(6), (d); see

5 See Argument, Part III, below.

25

Appx.279-80 ¶ 30. As noted, the PUC and ERCOT claim that ECRS is a

“critical reliability tool” developed to address certain reliability risks not

adequately covered by ERCOT’s other ancillary services. Appx.313, 421.

But ERCOT’s Independent Market Monitor (“IMM”) determined that

ECRS has actually “diminished reliability.”6 Appx.280 ¶ 32. As

explained in the IMM’s State of the Market Report published in May

2024, ECRS caused ERCOT to hold generating capacity back from the

real-time market even when it was needed to meet energy demand or

manage congestion.7 Appx.280 ¶ 32. The increased generating capacity

that ERCOT kept off the market via ECRS “substantially exceeded

levels that could be justified by reliability.”8 See Appx.288 ¶ 53. ECRS

caused artificial electricity shortages that produced massively inflated

costs for electricity sold on the wholesale market, totaling more than

$12 billion between June and November of 2023. Id.

6https://www.ercot.com/files/docs/2023/12/11/13%20Independent%20Market%20Mon

itor%20(IMM)%20Report.pdf (slide 6); see also 16 Tex. Admin. Code § 25.365

(prescribing the IMM’s role and responsibilities, which include evaluation of rules

and protocols that affect supply, demand, and the efficient functioning of the

ERCOT market.)

7https://www.potomaceconomics.com/wp-content/uploads/2024/05/2023-State-of-the-

Market-Report_Final_060624.pdf at pp. xix, 24.

8https://www.potomaceconomics.com/wp-content/uploads/2024/05/2023-State-of-the-

Market-Report_Final_060624.pdf, at p. 26.

26

3. The ECRS rulemaking failed to meet the

requirements of the APA.

Before 2021, as noted above, ERCOT could and did promulgate

NPRRs without specific prior authorization or subsequent approval by

the PUC. From June 2021 on, the PUC had to issue approval orders

before NPRRs, including the ECRS Rules, could take effect. But at no

point has the process complied with the requirements of the APA,

omitting, among other things:

• Posting of a notice of proposed rulemaking in the Texas

Register with at least 30 days’ notice to the public

• A notice of proposed rulemaking that meets all of the

requirements of the APA, including:

o A statement of the statutory or other authority under

which the rule is proposed to be adopted

o A fiscal note showing the name and title of the officer

or employee responsible for preparing or approving the

note and stating for each year of the first five years

that the rule will be in effect its impact on state and

local government

• A notice of agency adoption posted in the Texas Register that

complies with all of the requirements of the APA, including a

reasoned justification for the rule.

See Tex. Gov’t Code §§ 2001.023, 2001.024, 2001.033.

Moreover, the process used to adopt the ECRS Rules fell well

short of the public participation requirements set by the APA. See

Appx.285-87 ¶¶ 46-49. Most notably, the ERCOT process does not

27

permit all interested members of the public to participate, as the APA

requires. Id. Participation is limited to ERCOT Members and Market

Participants at multiple stages, and the barriers to become an ERCOT

Member or Market Participant, and therefore a part of the preferred

commenting class, are significant.9 Becoming a Market Participant

requires significant investment and is limited to those with particular

experience and expertise as a practical matter. See Appx.275-76 ¶ 21.10

In practice, these requirements mean that the “public,” and certainly

interested parties beyond ERCOT Members and Market Participants,

are excluded from participation.

9 A Market Participant is:

An Entity, other than ERCOT, that engages in any activity that is in whole

or in part the subject of these Protocols, regardless of whether that Entity has

signed an Agreement with ERCOT. Examples of such an Entity include but

are not limited to the following:

(a) Load Serving Entity (LSE);

(b) Qualified Scheduling Entity (QSE);

(c) Transmission and/or Distribution Service Provider (TDSP);

(d) Congestion Revenue Right (CRR) Account Holder;

(e) Resource Entity;

(f) Independent Market Information System Registered Entity (IMRE);

and

(g) Renewable Energy Credit (REC) Account Holder.

ERCOT Nodal Protocols § 2.1.

10 Even for residential consumers, ERCOT Membership costs $100 per year. See

ERCOT Market Notice, M-C100923-03 General, ERCOT Membership Application

for 2024 Membership Year - FINAL REMINDER (Nov. 13, 2023), available at

https://www.ercot.com/services/comm/mkt_notices/M-C100923-03.

28

II. Procedural History

Aspire originally challenged certain PUC orders approving ECRS

Rules in the Third District Court of Appeals. See Aspire Power Ventures,

L.P. v. PUC, No. 03-24-00102-CV (Tex. App.—Austin). Consistent with

then-existing case law from the Third Court, Aspire contended those

orders were “competition rules” subject to such direct appeal under

PURA § 39.001(e), (f). After Aspire filed that challenge, however, the

Supreme Court of Texas decided PUC v. RWE Renewables Americas,

LLC, 691 S.W.3d 484 (Tex. 2024). In RWE, the Court reversed the

authority Aspire relied on to file its direct appeal and held that PUC

orders approving rules or protocols adopted by ERCOT were not

“competition rules” subject to direct appeal under PURA § 39.001(e), (f).

Aspire’s direct-appeal challenge had been stayed by the Third District

Court of Appeals pending the Supreme Court’s disposition of RWE.

After the Supreme Court issued its decision in RWE, the Fifteenth

Court of Appeals—to which the case had been transferred—granted the

PUC’s motion to dismiss Aspire’s direct appeal, which Aspire did not

oppose. Aspire Power Ventures, L.P. v. PUC, No. 15-24-00035-CV, 2024

WL 4293602 (Tex. App.—15th Dist., Sept. 26, 2024, no pet.).

29

Meanwhile, Aspire had commenced an alternative challenge to the

ECRS Rules, seeking a declaratory judgment of their invalidity in the

District Court of Travis County under Texas Government Code

§ 2001.038(a)-(b). Aspire Power Ventures, L.P. v. PUC, et al., Cause No.

D-1-GN-24-003384 (345th District Court, Travis County, Texas); see

Appx.12. Originally, Aspire named only the PUC and its Commissioners

as defendants, id., but later, after the issuance of the RWE decision,

Aspire amended to add ERCOT, which had adopted the challenged

rules under the rulemaking authority delegated to ERCOT by the PUC,

Appx.43, 269.

In response, the PUC Parties (the PUC and its Commissioners)

and ERCOT filed pleas to the jurisdiction, asserting sovereign

immunity and failure to exhaust administrative remedies. Appx.74,

180, 304, 416. ERCOT also asserted, in the alternative, a motion to

dismiss under Tex. R. Civ. P. 91a and a plea in abatement. Appx.74,

304, 325. The trial court set the pleas to the jurisdiction and ERCOT’s

Rule 91a motion for hearing. 2RR.1, 26-29. The parties briefed the

jurisdictional and Rule 91a issues. Appx.304-502, 545-720. Aspire also

filed an agreed motion for the trial court to take judicial notice of

30

various items from the PUC’s and ERCOT’s public records pertaining to

the ECRS Rules in issue, Appx.505, which the trial court granted,

Appx.725.

The jurisdictional hearing proceeded as scheduled. See generally

3RR.1-99. On October 21, 2024, the trial court issued two orders,

granting the Amended Pleas to the Jurisdiction of both ERCOT and the

PUC Parties and dismissing all of Aspire’s claims, without articulating

its reasons for doing so.11 Appx.723, 726. The trial court’s October 21

orders finally disposed of all claims against all parties; those orders

therefore constituted final judgment. See Lehmann v. Har-Con Corp., 39

S.W.3d 191, 195 (Tex. 2001). Aspire timely filed its notice of appeal to

this Court on October 28, 2024. Appx.728.

SUMMARY OF THE ARGUMENT

ERCOT and the PUC Parties filed pleas to the jurisdiction in the

trial court, seeking dismissal of Aspire’s claims on two grounds: (1)

Aspire’s claims were barred by sovereign or governmental immunity,

and (2) Aspire did not exhaust its administrative remedies before

11 Because of its jurisdictional ruling and dismissal of Aspire’s claims, the trial court

did not reach ERCOT’s alternative Rule 91a motion to dismiss or plea in abatement.

See Appx.723, 726.

31

bringing its claims to court. The trial court granted those pleas to the

jurisdiction and dismissed without stating its reasons for doing so.

Appx.723, 726. No matter. Neither ground supports dismissal of

Aspire’s claims.

Aspire’s claims are not barred by sovereign or governmental

immunity. Section 2001.038(a) of the Texas Government Code—part of

the APA—expressly waives sovereign immunity for claims, like those

asserted by Aspire, that challenge the validity of a state agency rule.

Tex. Dep’t of State Health Services v. Balquinta, 429 S.W.3d 726, 744

(Tex. App.—Austin 2014, pet. dism’d); Texas Dep’t of Transp. v. Sunset

Transp., Inc., 357 S.W.3d 691, 700 (Tex. App.—Austin 2011, no pet.).

ERCOT and the PUC contend the statutory waiver in

§ 2001.038(a) doesn’t apply to Aspire’s claims. The ECRS Rules, they

argue, are not “state agency” “rules” within the meaning of the APA

generally and § 2001.038 specifically because ERCOT is not a “state

agency.” But they are wrong. Courts have repeatedly applied the APA

to rules promulgated by the PUC, which is a “state agency.” See, e.g.,

Tex. Tel. Ass’n v. PUC, 653 S.W.3d 227, 263-67 (Tex. App.—Austin

2022, no pet.) (declaratory judgment that PUC rules were void for lack

32

of APA compliance). And ERCOT adopted the ECRS Rules solely on the

basis of authority delegated to it by the PUC under PURA § 39.151(d).

In so doing, ERCOT stepped into the shoes of its delegor, the PUC,

subject to all the same requirements and restrictions that would have

applied to the PUC itself, had it alone adopted the ECRS Rules.

But, ERCOT and the PUC Parties contend, the Texas Supreme

Court in PUC v. RWE Renewables Americas, LLC, 691 S.W.3d 484 (Tex.

2024), recently held that PUC orders approving rules adopted by

ERCOT are not “rules” under the APA. RWE, however, was a much

narrower decision than Appellees portray it to be. The sole issue before

the Court was the jurisdiction of the court of appeals to entertain a

direct appeal of a “competition rule” under PURA § 39.001(e), a statute

and procedure not involved in this case. And in resolving that narrow

question, RWE dealt only with PUC “approval” orders in isolation;

ERCOT was not a party and its role in the “adoption” of rules was not

before the Supreme Court. Perhaps most important, Government Code

§ 2001.038 was not at issue in RWE and was not even mentioned. RWE

does not support ERCOT’s and the PUC’s attempt to evade review.

33

Section 2001.038(d) also explicitly negates any putative

requirement that a plaintiff like Aspire must first exhaust

administrative remedies before challenging the validity of an agency

rule in court, such as that mounted here by Aspire. See, e.g., Tex. Tel.

Ass’n, 653 S.W.3d at 264 n.17 (“there is no requirement to exhaust

administrative remedies before bringing a Section 2001.038(a)

challenge”).

Finally, Aspire alleges that the PUC Commissioners acted

contrary to PURA in authorizing or allowing ERCOT to adopt the ECRS

Rules—i.e., it alleges they acted ultra vires. And sovereign or

governmental immunity does not arise with respect to ultra vires

claims. Herrera v. Mata, No. 23-0457, 2024 WL 4996713, at *2 (Tex.

Dec. 6, 2024) (per curiam); Houston Belt & Terminal Ry. Co. v. City of

Houston, 487 S.W.3d 154, 161 (Tex. 2016).

Aspire, therefore, is entitled to reversal of the trial court’s orders

granting Appellees’ jurisdictional pleas and dismissing Aspire’s claims.

STANDARD OF REVIEW

This is an appeal from the trial court’s orders granting pleas to

the jurisdiction and dismissing Aspire’s claims on that basis. Appx.723,

34

726, 728. “As subject-matter jurisdiction is a question of law, [courts]

review a trial court’s ruling on a plea to the jurisdiction de novo.” EBS

Sols., Inc. v. Hegar, 601 S.W.3d 744, 749 (Tex. 2020) (citing Hous. Belt

& Terminal, 487 S.W.3d at 160); PUC v. AMA Commc’ns, LLC, No. 03-

21-00597-CV, 2022 WL 3220405, at *3 (Tex. App.—Austin Aug. 10,

2022, no pet.).

ERCOT’s and the PUC’s Amended Pleas to the Jurisdiction rested

on claims of sovereign immunity and Aspire’s alleged failure to exhaust

administrative remedies. Appx.306-07, 314-25; Appx.417-19, 422-33.

But sovereign or governmental immunity does not bar claims of ultra

vires conduct, such as those alleged by Aspire. See Herrera v. Mata, No.

23-0457, 2024 WL 4996715, at *2 (Tex. Dec. 6, 2024) (per curiam). And

the Legislature expressly waived immunity for challenges to the

validity of agency rules, like those at issue here, in Texas Government

Code § 2001.038.

In determining whether the State has waived sovereign

immunity, [courts] apply traditional principles of statutory

interpretation. … When [courts] interpret a statute, [their]

purpose is to give effect to the Legislature’s intent by looking

at its plain and ordinary meaning, ‘and then consider the

term’s usage in other statutes, court decisions, and similar

authorities.’ … [Courts] turn to extrinsic sources only if the

35

statute is ambiguous or if applying the statute’s plain

meaning would produce an absurd result.

EBS Sols., 601 S.W.3d at 749 (citations omitted).

Although all parties referred to items beyond the pleadings in

their briefing below, Defendants–Appellees explicitly stated that their

“plea[s] to the jurisdiction challenge[] the pleadings” of Plaintiff–

Appellant Aspire “as a matter of law.” Appx.317; Appx.417. “When a

plea to the jurisdiction challenges the pleadings”—as Appellees ERCOT

and the PUC Parties did here—courts “determine if the pleader has

alleged facts that affirmatively demonstrate the court’s jurisdiction to

hear the cause. … [Courts] construe the pleadings liberally in favor of

the plaintiffs and look to the pleader’s intent.” Tex. Dep’t of Parks &

Wildlife v. Miranda, 133 S.W.3d 217, 226 (Tex. 2004); PUC v. AMA

Commc’ns, 2022 WL 3220405, at *3 (“we construe the pleadings

liberally in the plaintiff’s favor, taking factual assertions as true”).12 In

fact, the Supreme Court has said a court should “grant a jurisdictional

plea challenging the pleadings only if the pleadings ‘affirmatively

12 “If a plea to the jurisdiction challenges the existence of jurisdictional facts,

[reviewing courts] consider relevant evidence submitted by the parties when

necessary to resolve the jurisdictional issues raised, as the trial court is required to

do.” Miranda, 133 S.W.3d at 227 (citing Bland ISD v. Blue, 34 S.W.3d 547, 555

(Tex.2000)). The trial court here made no findings of fact in granting Appellees’

Amended Pleas to the Jurisdiction. See Appx.723, 726.

36

negate’ jurisdiction.” Herrera, 2024 WL 4996715, at *2 (quoting Hous.

Belt & Terminal, 487 S.W.3d at 160).

ARGUMENT

ERCOT and the PUC Parties argued that the trial court lacked

jurisdiction (1) because of sovereign or governmental immunity and (2)

because Aspire did not exhaust its administrative remedies by timely

challenging the NPRRs through the PUC itself. See Appx.306-07, 314-

25; Appx.417-19, 422-33. But Texas Government Code § 2001.038 both

(1) waives sovereign or governmental immunity for claims like Aspire’s

that challenge “the validity … of a rule,” and (2) eliminates any

requirement for a plaintiff to exhaust administrative remedies for

declaratory judgment challenges to agency rules. Tex. Gov’t Code

§ 2001.038(a), (c), (d).

Whether § 2001.038 waives sovereign immunity here and also

negates any requirement to exhaust administrative remedies boils

down to whether the NPRR that created ECRS and the subsequent

NPRRs that modified it are “rules” within the meaning of the APA, Tex.

Gov’t Code § 2001.003(6). They are. The PUC is a state agency, see id.

§ 2001.003(7), and when it delegates its rulemaking authority to

37

ERCOT, ERCOT too must be treated as a state agency in making rules

through that delegated authority. RWE itself confirms that the NPRRs

are the product of the PUC’s rulemaking authority “delegated to

[ERCOT] by the PUC, as authorized by PURA.” RWE, 691 S.W.3d at

486. In addition, Aspire alleged that the adoption and modification of

ECRS was ultra vires—beyond the statutory authority of the PUC

Commissioners to accomplish, or to delegate to ERCOT and allow—and

as a matter of law ultra vires claims are not barred by sovereign or

governmental immunity. Herrera, 2024 WL 4996715, at *2. The trial

court’s dismissal of Aspire’s case for want of jurisdiction, therefore,

must be reversed.

I. Government Code § 2001.038 waives sovereign or

governmental immunity for challenges to the validity of a

“rule,” as defined by the APA.

Both ERCOT and the PUC Parties argued that the doctrine of

sovereign or governmental immunity bars the trial court’s jurisdiction

over Aspire’s challenge to the ECRS Rules. Appx.306, 318 (citing CPS

Energy v. ERCOT, 671 S.W.3d 605, 628 (Tex. 2023)); Appx.417-18

(citing Tex. Nat. Res. Conserv. Comm’n v. IT-Davy, 74 S.W.3d 849, 853

38

(Tex. 2002)). Both acknowledged, however, that sovereign immunity is

no bar if the Legislature has waived it by statute. Appx.318, 417-18.

Government Code § 2001.038 embodies just such a waiver. It says,

“The validity or applicability of a rule … may be determined in an

action for declaratory judgment if it is alleged that the rule or its

threatened application interferes with or impairs, or threatens to

interfere with or impair, a legal right or privilege of the plaintiff,” and it

requires that “[t]he state agency must be made a party to the action.”

Tex. Gov’t Code § 2001.038(a) & (c). This language in § 2001.038

expressly waives sovereign immunity for claims falling within its scope.

Tex. Dep’t of State Health Services v. Balquinta, 429 S.W.3d 726, 744

(Tex. App.—Austin 2014, pet. dism’d); Texas Dep’t of Transp. v. Sunset

Transp., Inc., 357 S.W.3d 691, 700 (Tex. App.—Austin 2011, no pet.).

But, relying on the Texas Supreme Court’s recent decision in PUC

v. RWE Renewables Americas, LLC, 691 S.W.3d 484 (Tex. 2024),

ERCOT and the PUC Parties have argued that § 2001.038’s waiver of

sovereign immunity doesn’t apply here because “neither ERCOT’s

[ECRS] Protocols, nor the PUCT’s orders approving the adoption of or

revisions to those Protocols, are ‘rules’ under the APA” generally, and

39

§ 2001.038 specifically. Appx.319; see Appx.422-24. That argument,

however, mischaracterizes the process by which ERCOT and the PUC

promulgated the ECRS Rules and reads the Supreme Court’s opinion in

RWE too expansively. See Appx.273-74 ¶¶ 15-16. Simply put, it is just

not right.

A. Challenges to rules adopted by the PUC itself fall

within § 2001.038.

“Rules” adopted by the PUC are subject to the APA, including

§ 2001.038. PUC rules have been found subject to and declared invalid

pursuant to § 2001.038 on multiple occasions. See, e.g., Tex. Tel. Ass’n v.

PUC, 653 S.W.3d 227, 263-67 (Tex. App.—Austin 2022, no pet.)

(declaratory judgment that PUC rules were void for lack of APA

compliance); see also PUC v. AMA Commc’ns, LLC, No. 03-21-00597-

CV, 2022 WL 3220405, at *4 (Tex. App.—Austin Aug. 10, 2022, no pet.)

(PUC decision constituted “rule for purposes of the APA, triggering

procedural and substantive requirements with which the PUC did not

comply”); Sw. Bell Tel. Co. v. PUC, 888 S.W.2d 921, 929 (Tex. App.—

Austin 1994, writ denied) (declaring PUC rules partially invalid under

§ 2001.038).

40

The APA defines a “rule” as “a state agency statement of general

applicability” that “implements, interprets, or prescribes law or policy”

or “describes the procedure or practice requirements of a state agency,”

including “the amendment or repeal of a prior rule.” Tex. Gov’t Code

§ 2001.003(6). The PUC is a “state agency.” Tex. Gov’t Code

§ 2001.003(7); see Tex. Tel. Ass’n v. PUC, 653 S.W.3d 227, 265 (Tex.

App.—Austin 2022, no pet.) (“The PUC Parties do not dispute that the

Contract Amendment is a ‘state agency statement.’”); City Pub. Serv.

Bd. of San Antonio v. PUC, 9 S.W.3d 868, 876 (Tex. App.—Austin 2000),

aff’d, 53 S.W.3d 310 (Tex. 2001) (addressing “a state agency, the PUC”).

And the ECRS Rules are “statements of general applicability” that

implement law or policy and describe the procedure for doing so. See

Appx.310, 312-14. The very statute the PUC relies on for the authority

to promulgate the ECRS protocols expressly says they are “rules.” See

Tex. Util. Code § 39.151(d) (“[t]he commission [PUC] shall adopt and

enforce rules relating to the reliability of the regional electrical

network” (emphasis added)).

So, if the PUC, acting alone, had formulated and adopted the

ECRS Rules, their substance and the process of their adoption would be

41

subject to the requirements of the APA and to challenge under

§ 2001.038. And it is the PUC’s own unquestioned status as a “state

agency,” together with the fact that the products of its rulemaking are

“rules” within the meaning of §§ 2001.003(6) and 2001.038, that is fatal

to ERCOT’s and the PUC’s sovereign immunity arguments.

B. The PUC delegated its authority to formulate and

adopt certain rules to ERCOT—providing the only

authority ERCOT had to adopt such rules.

PURA § 39.151(d) directed the PUC to “adopt and enforce rules

relating to the reliability of the regional electrical network.” (Emphasis

added.) But that statute goes on to provide that the PUC “may delegate

those responsibilities to an independent organization …. certified by the

commission [that] is directly responsible and accountable to the

commission.” Id. And so, instead of adopting the ECRS Rules entirely

on its own, the PUC purportedly “delegated” to ERCOT the authority to

adopt those rules pursuant to PURA § 39.151(d). See 16 Tex. Admin.

Code § 25.362(c); PUC v. RWE Renewables Americas, LLC, 691 S.W.3d

484, 486 (Tex. 2024).

Originally, this delegation of authority allowed ERCOT to

promulgate and adopt rules with immediate effect (subject to PUC’s

42

overarching authority, see Tex. Util. Code § 39.151(d)). In 2021,

however, the Legislature amended PURA to provide that “Protocols

adopted by an independent organization … under delegated authority

from the commission … may not take effect before receiving commission

approval.” Tex. Util. Code § 39.151(g-6); see Act of May 30, 2021, 87th

Leg., R.S., ch. 426, § 3, 2021 Tex. Gen. Laws 830, 831, amended by Act

of May 28, 2023, 88th Leg., R.S., H.B. 1500, § 15; see also Tex. Util.

Code § 39.151(g-6) (“a reference to a protocol includes a rule”).

Exercising the authority purportedly delegated to it by the PUC,

ERCOT adopted the protocol creating ECRS in 2019, before the

Legislature required PUC approval for such rules to take effect. NPRR

863, Creation of ERCOT Contingency Reserve Service and Revisions to

Responsive Reserve (Feb. 12, 2019).13 Most of the other ECRS Rules

amending or revising that original protocol or rule were promulgated

after PURA was amended in 2021 to require a joint process of ERCOT

adoption and PUC approval for the protocol or rule to take effect. See

Appx.278-79 ¶ 29 (listing ECRS Rules in issue).

13 The PUC had no authority to delegate rulemaking power to ERCOT for the

original creation of an “ancillary service.” See Part III, below.

43

But the PUC’s delegation of its rulemaking authority to ERCOT

changed nothing about the applicability of the APA generally, and

§ 2001.038 specifically, to the ECRS Rules or the process of their

promulgation under that PUC-delegated authority—including

§ 2001.038’s waiver of sovereign immunity. By statute, in exercising

that delegated rulemaking authority, ERCOT was and “is directly

responsible and accountable to the commission [the PUC, which] has

complete authority to oversee [ERCOT’s] operations as necessary to

ensure the organization’s accountability and to ensure that the

organization adequately performs the organization’s functions and

duties.” Tex. Util. Code § 39.151(d). So, it is the PUC’s nature and

authority that determine the applicability of the APA and § 2001.038.

C. When ERCOT adopted NPRRs under rulemaking

authority delegated by the PUC, it acted as and stood

in the shoes of the PUC and was subject to the same

requirements and limitations as the PUC—including

the APA generally and § 2001.038 specifically.

In the trial court, ERCOT argued that its “adoption and revision

of [ECRS] Protocols …does not constitute APA rulemaking” subject to

the APA and § 2001.038 because “ERCOT is not a ‘state agency’” as

defined in the APA. Appx.319-20; see Tex. Gov’t Code § 2001.003(6)

44

(defining “rule” for APA purposes as “a state agency statement of

general applicability” that “implements, interprets, or prescribes law or

policy” (emphasis added)); Tex. Gov’t Code § 2001.03(7) (“‘State agency’

means a state officer, board, commission, or department with statewide

jurisdiction that makes rules or determines contested cases.”). It is true

that, while ERCOT has been recognized as an “organ of [state]

government,” it is a “private, nonprofit corporation,” albeit one certified

by the PUC to perform certain state functions. CPS Energy v. ERCOT,

671 S.W.3d 605, 617 (Tex. 2023). But ERCOT goes astray by focusing on

whether it, in its own right, is a “state agency.”14 The applicability of

the APA is determined by the status and nature of the entity that

delegated to ERCOT the authority to adopt the ECRS Rules, i.e, the

PUC, which undeniably is a “state agency” under the APA.

When, as here, ERCOT (or any other entity) exercises authority

delegated to it by a “state agency” like the PUC, its conduct in doing so

14 ERCOT did not contest the fact that its ECRS Rules are “statements of general

applicability” that “implement … law or policy” under Tex. Gov’t Code

§ 2001.003(6). To the contrary, ERCOT confirmed that it is the “‘essential

organization’ statutorily charged with operating the State’s electric grid and

wholesale electricity markets—all while subject to the PUCT’s ‘complete

authority.’ … ERCOT is the entity that Texas tasked with regulating Texas’s

intrastate grid and wholesale electricity markets, subject to plenary control by the

PUCT.” Appx.309 (emphasis added).

45

is subject to the same constraints and requirements as those applicable

to the delegating agency. The delegee, ERCOT here, necessarily is

treated as that delegating agency would be, not in its own right as a

private corporation (with no authority to undertake the conduct at

issue). It “stands in the shoes” of the delegating entity, and “the power

being exercised is the same as that exercised by the” delegating entity.

See, e.g., City of Garland v. Byrd, 97 S.W.3d 601, 606 (Tex. App.—

Dallas 2002, pet. denied).

The Supreme Court of Texas made this clear in Lindsay v.

Sterling, 690 S.W.2d 560 (Tex. 1985). There, it held that when a

statewide agency delegated decisions to a person or entity that was not,

itself, a “state agency” having “statewide jurisdiction,” the actions of

that person or entity were nevertheless subject to the Administrative

Procedure and Texas Register Act, the forerunner of the current APA:

The major issue to be decided is whether in reviewing an

application for a wine and beer license the provisions of the

Administrative Procedure and Texas Register Act (APTRA)

are applicable to the proceedings before the county judge and

to the judicial review of the county judge’s denial of the

application. … Although section 3 of APTRA defines

“agency” as any state board, commission, department, or

officer having statewide jurisdiction, the county judge is

actually acting as part of the review process of the Texas

Alcoholic Beverage Commission, a statewide agency. …

46

Because the county judge’s decision constitutes a denial of a

license issued under the Texas Alcoholic Beverage

Commission, the hearing of the county judge and the judicial

review of that hearing are subject to the provisions of

APTRA.

Id. at 561-62. In other words, the actions of a delegee—like the county

judge in Lindsay or ERCOT here—are treated as the actions of the

delegor state agency. The Supreme Court’s holding in Lindsay v.

Sterling applies with full force to the current APA and to the

circumstances here.15 It controls the key jurisdictional issue in this

case.

And Lindsay is not an outlier. Multiple courts in other

jurisdictions have reached the same conclusion as the Texas Supreme

Court in Lindsay, analyzing other states’ counterparts to the Texas

APA. For example, the Supreme Court of Ohio was called upon to decide

whether the Ohio State University Board of Trustees’ adoption of rules

governing members of that state’s “classified civil service” were subject

to Ohio’s administrative procedure act. Bd. of Trustees of Ohio State

Univ. v. Dept of Admin. Svcs., 429 N.E.2d 428 (Ohio 1981). There, as in

15 Pertinent provisions of APTRA, including the definition of “state agency,” were

“codified without substantive changes in 1993” as the APA. Mednick v. Tex. State

Bd. Pub. Accountancy, 933 S.W.2d 336, 337 n.1 (Tex. App.—Austin 1996, writ

denied); see Tex. Dep’t of Protective & Regulatory Services v. Mega Child Care, Inc.,

145 S.W.3d 170, 172 (Tex. 2004).

47

Texas, the act “applies only to bodies fitting the [statutory] definition of

‘agency.’” Id. at 430. The court recognized that the “university is not an

‘agency’ within the meaning of” Ohio’s administrative procedure act. Id.

But the university adopted the rules in question under authority

delegated to it from Ohio’s Department of Administrative Services,

which is an “agency” as defined in Ohio’s administrative procedure act.

Id. at 431. The Ohio Supreme Court therefore held that, “[w]here, as

here, the university acts as an appendage of an agency within the

definition of [the administrative procedure act], it must comply with

the duties imposed on that agency just as the agency would be

bound.” Id. at 430 (emphasis added).

Multiple California courts have reached the same result. For

example, the court in Garner v. City of Riverside had to decide whether

a city’s personnel decisions were subject to that state’s administrative

procedure act. 170 Cal. App. 3d 510, 216 Cal. Rptr. 486 (Ct. App. 1985).

It held that, even though the city is not an “agency” in its own right, the

“petitioner [was] incorrect in asserting the decision of the city here was

made in its capacity as a local agency.” 170 Cal. App. 3d at 516. Instead,

the court held, the city “act[ed] as a delegate” of a statewide agency and

48

therefore was “subject to the Administrative Procedures Act for that

purpose just as is the [delegating statewide agency] itself when it

makes the same determination.” Id. Accord, e.g., Usher v. Cnty. of

Monterey, 65 Cal. App. 4th 210, 216, 76 Cal. Rptr. 2d 274, 278 (1998), as

modified (June 23, 1998); Watkins v. City of Santa Ana, 189 Cal. App.

3d 393, 397, 234 Cal. Rptr. 406, 408 (Ct. App. 1987).

Further, Texas courts have recognized, as a general legal

principle, that delegees must be held to the same constraints and

obligations as their delegors. See, e.g., Byrd, 97 S.W.3d at 606 (when

private hearing examiner conducts hearing in lieu of commission, “the

examiner is granted the same duties and powers as the commission

[and] stands in the shoes of the commission”); Mainland Sav. Ass’n v.

Hoffbrau Steakhouse, Inc., 659 S.W.2d 101, 102 (Tex. App.—Houston

[14th Dist.] 1983, no writ) (“assignee/delegatee … stands in [delegor’s]

place with respect to any benefits or obligations under the original

agreement”); cf. DuPuy v. City of Waco, 396 S.W.2d 103, 108 (Tex. 1965)

(“In the exercise of the power to take or appropriate private property for

public use, [entities] to which the power of eminent domain has been

49

delegated, are in the same position and are governed by the same rule”

as the state.).

All these holdings reflect the fundamental principle that a delegor

like the PUC here can delegate only the authority it has, subject to all

the same constraints to which it is subject. See BLACK’S LAW DICTIONARY

(12th ed. 2024) (defining “delegate,” in part, to mean “[t]o give part of

one’s power or work to someone”). Because the PUC is and would be

subject to and constrained by the APA (including § 2001.038) in

exercising rulemaking authority under PURA—e.g., if the PUC alone

had adopted the ECRS Rules—it could not delegate to ERCOT the

authority to exercise that power shorn of those same limitations and

requirements.16 In other words, the PUC could not delegate to ERCOT

authority greater than the PUC itself possessed. Like the PUC,

16 The Supreme Court of Texas in RWE relied heavily on “the Legislature’s

deliberate decision not to designate the PUC as the entity that ‘adopts’ ERCOT

protocols,” and its “distinct use of ‘adopt’ and ‘approve’” with respect to the

promulgation of ERCOT protocols under PURA § 39.151. RWE, 691 S.W.3d at 491,

492. Following suit, this Court “cannot ignore the Legislature’s deliberate decision,”

id., to authorize the PUC to “delegate” its own rulemaking authority to an

independent organization like ERCOT. Tex. Util. Code § 39.151(d). The Legislature

could have granted that authority directly to the independent organization. But it

didn’t. And by providing that ERCOT would obtain such authority only by

delegation, the Legislature effectively guaranteed that it would be subject to the

same requirements and limitations as it would have been if exercised by the

delegor, the PUC.

50

therefore, ERCOT was subject to the APA when it adopted rules based

on authority delegated to it by the PUC.

D. RWE does not undermine Aspire’s reliance on

§ 2001.038 as a waiver of sovereign immunity with

respect to its challenge to the ECRS Rules.

In the trial court, both ERCOT and the PUC Parties contended

that, even though (1) the ECRS Rules would have been subject to the

APA and to challenge under § 2001.038 if adopted by the PUC itself,

and (2) ERCOT “adopted” the ECRS Rules acting for, and solely by

authority delegated to it by, the PUC, Aspire’s jurisdictional arguments

nevertheless are foreclosed by the Texas Supreme Court’s recent

decision in PUC v. RWE Renewables Americas, LLC, 691 S.W.3d 484

(Tex. 2024). But RWE says no such thing.

The only issue before the Supreme Court in RWE was whether the

Third Court of Appeals had original jurisdiction under PURA

§ 39.001(e)-(f) of a direct appeal from a PUC order “approving” a rule

“adopted” by ERCOT. RWE, 691 S.W.3d at 485, 486, 488-89, 492. That

jurisdictional question turned on whether the PUC’s approval order was

a “competition rule” under § 39.001(e). Id. at 485-86. The PUC was the

only respondent; ERCOT was not a party. Id. at 485. The only order at

51

issue was the PUC approval order, not the underlying ERCOT rule. Id.

at 485, 486, 488-89, 492.

The Supreme Court held that the approval order issued by the

PUC was not itself a “competition rule,” or a “rule” of any sort under

APA § 2001.03(6). Id. at 492. And so, it dismissed the case for want of

jurisdiction, nothing more. Id. The Supreme Court in RWE did not

address the bases for jurisdiction upon which Aspire relies in this

case—APA § 2001.038 and ultra vires actions of the PUC

Commissioners—which were not at issue in RWE.

In the trial court, ERCOT went so far as to say that “RWE held …

that neither ERCOT’s Protocols, nor the PUCT’s orders approving the

adoption of or revisions to those Protocols, are ‘rules’ under the APA,”

which would include § 2001.038. Appx.319 (citing RWE, 691 S.W.3d at

492 (emphasis added)). That was false. ERCOT was not even a party to

RWE and the Court’s holding did not assess ERCOT’s adoption of or

revisions to its protocols. They were not at issue in that appeal. Instead,

the Court in RWE was clear in its holding about the narrow

jurisdictional issue it decided:

We hold that the PUC’s approval order is not a

“competition rule[] adopted by the commission” subject to the

52

judicial-review process for PUC [competition] rules. … [T]he

statutory requirement the PUC approve [ERCOT] adopted

protocols does not transform PUC approval orders into

PUC rules eligible for direct review by a court of

appeals [under Tex. Util. Code § 39.001(e)].

RWE, 691 S.W.3d at 486 (emphasis added; italics original); see also id.

at 492 (“we hold that the PUC’s order approving NPRR 1081 … was

not an agency-adopted ‘rule’ under the Administrative Procedure Act,”

so that “the court [of appeals] lacked jurisdiction over RWE’s

challenge to the PUC’s approval order” (emphasis added)). The

Supreme Court’s holding resulted from a painstaking linguistic analysis

of the difference between “adoption” (as used in the APA definition of an

agency “rule” and in PURA § 39.001(e)) and a PUC order “approving” an

ERCOT-adopted rule (as Tex. Util. Code § 39.151(g-6) now requires for

such a rule to take effect)—a distinction not at issue here. See RWE, 691

S.W.3d at 491-92. RWE, therefore, does not undermine Aspire’s

contention that § 2001.038 waives sovereign immunity for its district-

court challenge to the validity of the ECRS Rules adopted by ERCOT as

the PUC’s delegee.

While ERCOT overstated the scope of RWE, the PUC Parties

mischaracterized and improperly circumscribed Aspire’s challenge in an

53

attempt to shoehorn it into the narrow holding of RWE. Multiple times,

the PUC Parties argued that Aspire’s claims should be dismissed

because the Supreme Court concluded in RWE that “PUCT approval

orders are not agency rules.” See, e.g., Appx.422, 423, 424. But that is

an artificially constricted view of Aspire’s claims. Aspire does not

challenge the “PUCT approval orders” in isolation, as did the petitioner

in RWE. Instead, Aspire challenges the combined actions of ERCOT

and the PUC in promulgating the ECRS Rules.

After the Legislature amended PURA § 39.151(g-6) in 2021 to

require PUC approval of ERCOT-adopted rules or protocols, the

promulgation of rules “adopted” by ERCOT and “approved” by the PUC

necessarily must be evaluated as a combined, integrated process—not

broken down into its component parts, as the PUC has suggested.

“ERCOT and the PUC are uniquely situated as legislatively endorsed

joint participants in a complex regulatory scheme.” RWE, 691 S.W.3d

at 490 (emphasis added). After the 2021 amendments, no ERCOT-

adopted protocol can become effective without PUC approval; and,

obviously, the PUC cannot “approve” an ERCOT protocol unless it is

first created and “adopted” by ERCOT. Viewed properly as products of

54

an integrated process, therefore, the ECRS protocols are “agency rules”

subject to challenge under § 2001.038 and its waiver of sovereign

immunity, and to the APA as a whole.17 Cf. Tex. Tel. Ass’n v. PUC, 653

S.W.3d at 263-67 (ruling that PUC actions it characterized as

“guidelines” were in fact and in substance agency “rules” subject to the

requirements of the APA).

E. PURA’s directive that ERCOT be required to establish

a “formal process” for its PUC-delegated rulemaking

authority does not supplant the APA.

In its 2021 amendments to PURA, the Legislature directed that

independent organizations “certified” by the PUC, like ERCOT, had to

“establish and implement a formal process for adopting new protocols or

revisions to existing protocols.” Tex. Util. Code § 39.151(g-6). In the trial

court, ERCOT argued that statutorily required “formal process” was

meant to take the place of the APA, making it inapplicable to ERCOT

proceedings. See Appx.320-21. But PURA § 39.151(g-6) doesn’t say that,

and it is unreasonable to assume that’s what the Legislature intended.

17 ECRS Rules adopted by ERCOT before the statute was amended to require PUC

approval for them to take effect would, of course, be evaluated under the APA

simply at the ERCOT level, where it acted through authority delegated to it by the

PUC. But, as explained above, the “state agency” status of the delegor, the PUC,

controls and renders those earlier protocols “rules” under and subject to the APA.

55

The APA declares at its outset that, “It is the public policy of

the state through this chapter to: (1) provide minimum standards of

uniform practice and procedure for state agencies; [and] (2) provide for

public participation in the rulemaking process.” Tex. Gov’t Code

§ 2001.001 (emphasis added). Section 2001.001 “is a plain statement of

the APA’s general applicability to all state agencies and the processes

for judicial review of their decisions. The APA’s provisions to that effect,

which are myriad and voluminous, would be wasted ink if they did not

generally apply to all state agencies.” Mosley v. Tex. Health & Human

Services Comm’n, 593 S.W.3d 250, 258 (Tex. 2019). The Legislature’s

amorphous 2021 directive in Texas Utilities Code § 39.151(g-6) that

certified independent organizations like ERCOT must put in place some

wholly undefined “formal process” for adopting rules cannot be read to

supplant the “public policy of the state” “to provide minimum

standards of uniform practice and procedure” embodied in the APA.

First, as noted, nothing in the statutory language states or even

suggests that the “formal process” to be adopted by ERCOT would not

have to incorporate the requirements of the APA, tailored to ERCOT’s

specific situation. And that is fatal to ERCOT’s position.

56

Texas Utilities Code § 39.151(g-6) itself does not expressly

incorporate the APA or make it applicable to ERCOT proceedings. But

that doesn’t matter. “Absent an express statutory provision indicating

that the APA is inapplicable …, [courts] have no basis for concluding

that the APA does not apply …. ‘[I]t matters not that the [agency’s]

enabling statute does not expressly incorporate the APA’; what matters

is that ‘the enabling statute does not contradict the APA.’” Gonzalez v.

Tex. Med. Bd., No. 03-22-00205-CV, 2023 WL 7134982, at *7 (Tex.

App.—Austin Oct. 31, 2023, pet. filed) (quoting Heat Energy Advanced

Tech., Inc. v. West Dallas Coal. for Envtl. Justice, 962 S.W.2d 288, 291

n.1 (Tex. App.—Austin 1998, pet. denied)).

PURA § 39.151(g-6) does not exempt ERCOT’s processes from the

APA or state that the APA will not apply. The two statutes are not

mutually exclusive. And the Legislature certainly knew how to make

clear, expressly, when it did not want the APA to apply to any given

administrative process.18 The APA itself contains an explicit list of

18 See, e.g., Tex. Gov’t Code § 411.180(a) (hearing on any denial, revocation, or

suspension of handgun license “is not subject to Chapter 2001 (Administrative

Procedure Act)”); Tex. Hum. Res. Code § 40.063 (“Section 2001.038 and Subchapters

C through H, Chapter 2001, Government Code do not apply” to described categories

of medical benefit decisions); Tex. Parks & Wild. Code § 32.006 (provision entitled

57

administrative proceedings to which it does not apply. Tex. Gov’t Code

§§ 2001.221, 2001.227. That list of exemptions does not include

ERCOT/PUC rulemaking. Id.19

And interpreting the APA to apply here is important for practical

reasons, because the procedures employed by the PUC and ERCOT in

adopting the ECRS Rules fell far short of the “minimum standards” of

the APA, decreed to be the “public policy” of the State—standards that

are not difficult to meet. For example, neither the PUC nor ERCOT

posted any notice of proposed rulemaking for any of the ECRS Rules in

the Texas Register, much less a notice that met the timing and content

requirements of the APA. See Tex. Gov’t Code §§ 2001.023, 2001.024.

Nor did either post a notice of adoption in the Texas Register with all of

the information required by the APA, including a reasoned justification

for the rule. See Tex. Gov’t Code § 2001.033. Further, the ERCOT

process does not and did not allow for participation of all interested

“Nonapplicability of Chapter 2001, Government Code” states “provisions of the

Administrative Procedure Act … do not apply to this chapter”).

19 Again, ERCOT has argued the APA and its statements of public policy are

inapposite because it is not a “state agency.” But, as explained in Part I.C, above,

ERCOT could adopt the ECRS Rules only by exercising authority delegated to it by

the PUC. When exercising that delegated authority, then, ERCOT acts for and is

subject to the same constraints as the PUC, which is a state agency.

58

persons, a core requirement and purpose of the APA. Appx.285-87

¶¶ 46-49.

Given the numerous court decisions holding that the PUC is

subject to the APA in rulemaking, and the absence of an express

statement by the Legislature in § 39.151(g-6) that the “minimum

standards” of the APA were to be supplanted by an unspecified “formal

process” to be crafted by an entity like ERCOT, the rulemaking

activities of ERCOT and its supervising agency, the PUC, cannot escape

application of the APA.

II. Aspire was not required to “exhaust administrative

remedies” before pursuing its challenge in the district

court.

In the trial court, both ERCOT and the PUC Parties devoted

considerable attention to detailed descriptions of the internal

administrative processes within ERCOT and the PUC by which Aspire

allegedly might have challenged the ECRS protocols. See Appx.310-12,

314-17, 322-25, 424-28. They then argued that Aspire’s challenge in the

trial court was barred because Aspire did not first pursue and exhaust

those administrative remedies. See Appx.322-25, 424-28. But that is not

correct.

59

Government Code § 2001.038(d) provides that, “A court may

render a declaratory judgment [regarding the validity or invalidity of a

rule] without regard to whether the plaintiff requested the state agency

to rule on the validity or applicability of the rule in question.” Courts

have rightly interpreted that provision to mean that “there is no

requirement to exhaust administrative remedies before bringing

a Section 2001.038(a) challenge,” such as that mounted here by

Aspire. Tex. Tel. Ass’n v. PUC, 653 S.W.3d 227, 264 n.17 (Tex. App.—

Austin 2022, no pet.) (emphasis added); accord, e.g., PUC. v. AMA

Commc’ns, LLC, No. 03-21-00597-CV, 2022 WL 3220405, at *4 (Tex.

App.—Austin Aug. 10, 2022, no pet.).

III. In addition, and in the alternative, sovereign immunity

does not bar Aspire’s ultra vires claims against the PUC

Commissioners.

Apart from the statutory waiver of sovereign immunity in APA

§ 2001.038, sovereign immunity does not arise at all with respect to

Aspire’s claims that the PUC Commissioners acted ultra vires in

connection with the promulgation of the ECRS Rules. “[W]hile

governmental immunity provides broad protection to the state and its

officers, it does not bar a suit against a government officer for acting

60

outside his authority—i.e., an ultra vires suit.” Houston Belt &

Terminal Ry. Co. v. City of Houston, 487 S.W.3d 154, 161 (Tex. 2016);

accord Hartzell v. S.O., 672 S.W.3d 304, 311 (Tex. 2023) (citing City of

El Paso v. Heinrich, 284 S.W.3d 366, 372 (Tex. 2009)).

“To maintain an ultra vires suit, the claimant must ‘allege, and

ultimately prove, that [a governmental official] acted without legal

authority or failed to perform a purely ministerial act.’” Hartzell, 672

S.W.3d at 311 (quoting Heinrich, 284 S.W.3d at 372). Analysis focuses

on the allegations in the pleadings, and “[w]hether a claimant has

alleged a valid ultra vires claim is a question of law that [appellate

courts] review de novo.” Id. “When making this determination, [courts]

construe the pleadings liberally in the plaintiff’s favor, taking factual

assertions as true and looking to the plaintiff’s intent.” PUC v. AMA

Commc’ns, LLC, No. 03-21-00597-CV, 2022 WL 3220405, at *3 (Tex.

App.—Austin Aug. 10, 2022, no pet.); accord, e.g., Tex. Dep’t of State

Health Services v. Sky Mktg. Corp., No. 03-21-00571-CV, 2023 WL

6299115, at *11 (Tex. App.—Austin Sept. 28, 2023, pet. filed) (“At this

stage of the case, our inquiry concerns the trial court’s jurisdiction and

not the merits of the parties’ disputes[, c]onstruing the pleadings

61

liberally in favor of” the plaintiff.). More pointedly, a Texas court will

“grant a jurisdictional plea challenging the pleadings only if the

pleadings ‘affirmatively negate’ jurisdiction.” Herrera v. Mata, No. 23-

0457, 2024 WL 4996713, at *2 (Tex. Dec. 6, 2024) (per curiam) (quoting

Hous. Belt & Terminal, 487 S.W.3d at 160).

Aspire’s pleadings do not “affirmatively negate jurisdiction.”

Instead, Aspire alleged two ways in which the PUC Commissioners

acted beyond or contrary to their statutory authority—i.e., ultra vires.

See 1RR.30-31; Appx.290 ¶ 59.20

First, Aspire alleged that the ECRS Rules violate one of the

primary directives of PURA. The ECRS Rules provide for ERCOT to pay

generators of electrical power to withhold part of their generating

capacity as reserves, conduct that is barred under PURA. See Appx.279-

80 ¶ 30. PURA § 39.157(a) charges the PUC with preventing market

power abuses and expressly defines “withholding of production” as a

market-power abuse. See also 16 Tex. Admin. Code §§ 25.501(j),

20 In addition to forming the basis for independent ultra vires claims against the

PUC Commissioners, each instance in which the ECRS Rules or the procedures for

their adoption violated PURA or exceeded the statutory authority of the PUC or

ERCOT constitutes an additional ground for the invalidity of those Rules under

Tex. Gov’t Code § 2001.038. See Sw. Bell Tel. Co. v. PUC, 888 S.W.2d 921, 923 (Tex.

App.—Austin 1994, writ denied).

62

25.503(a)(6), (d). Predictably, and contrary to the directive of PURA

§ 39.157(a), ECRS has caused artificial electricity shortages that

produced massively inflated costs for electricity sold on the Texas

wholesale market. See Appx.288 ¶ 53. The PUC Commissioners acted

beyond or contrary to their statutory authority when they purported to

authorize ERCOT to adopt and implement that market-power abuse

through ECRS, or by failing to exercise the PUC’s “complete authority”

over ERCOT to prevent it from doing so. See Appx.279-80, 290 ¶¶ 30,

59(a).

Second, the PUC Commissioners acted beyond or contrary to their

statutory mandate when they allowed or purported to authorize ERCOT

to adopt, in the first instance, a new “ancillary service” in the form of

ECRS. PURA § 35.004(e) provides that, “‘ancillary services’ means

services necessary to facilitate the transmission of electric energy” and

directs that these are “services … the commission may determine by

rule.” Tex. Util. Code § 35.004(e) (emphasis added). The PUC Parties

concede ECRS is an “ancillary service.” See Appx.420. The ECRS

ancillary service was not “determined” or established by the

Commission, however, as prescribed in § 35.004(e). Instead, ECRS was

63

created by ERCOT. But ERCOT had no authority to create that new

ancillary service. Nor did the PUC have statutory authority to delegate

that power to ERCOT.21 The Commission’s ability to delegate

rulemaking authority to ERCOT is limited by PURA to issues of

reliability and accounting. Tex. Util. Code § 39.151(d) (“The commission

shall adopt and enforce rules relating to the reliability of the regional

electrical network and accounting for the production and delivery of

electricity … or may delegate those responsibilities to an independent

organization.” (emphasis added)). The power of delegation granted to

the PUC by § 39.151(d) does not include delegating the creation of

ancillary services that, by definition, relate to “the transmission of

electric energy,” rather than reliability or accounting concerns. See Tex.

Util. Code § 35.004(e) (emphasis added).22

21 The Legislature did direct the PUC to “require … ERCOT … to develop and

implement an ancillary services program to procure dispatchable reliability reserve

services on a day-ahead and real-time basis.” Tex. Util. Code § 39.159(d). This

express statutory exception, authorizing ERCOT rather than the PUC to develop a

specific ancillary service for dispatchable reliability reserve service, further

demonstrates that ERCOT generally cannot create new ancillary services.

22 PURA § 35.004(h) does provide that “[t]he commission shall require the

independent organization certified under Section 39.151 for the ERCOT power

region to modify the design, procurement, and cost allocation of ancillary services

for the region in a manner consistent with cost-causation principles and on a

nondiscriminatory basis.” (Emphasis added.) But this provision does not authorize

ERCOT to create new ancillary services products in the first instance; that

responsibility remains solely with the Commission per PURA § 35.004(e).

64

By allowing or purporting to authorize ERCOT to create the ECRS

ancillary service, rather than having the PUC do so itself, the PUC

Commissioners acted beyond or contrary to their statutory authority

under PURA.

CONCLUSION & PRAYER FOR RELIEF

As demonstrated above, the trial court does have jurisdiction over

Aspire’s claims challenging the validity of the ECRS Rules and the

conduct of ERCOT and the PUC and its Commissioners in promulgating

them. Aspire therefore respectfully prays that this Court reverse the

trial court’s orders granting the Amended Pleas to the Jurisdiction filed

by ERCOT and the PUC Parties, and remand to the trial court with

instructions that it adjudicate Aspire’s claims on the merits.

65

Respectfully submitted,

/s/ Chrysta L. Castañeda

Chrysta L. Castañeda Monica Latin

Texas Bar No. 15325625 Texas Bar No. 00787881

chrysta@castaneda-firm.com MLatin@ccsb.com

Nicole Michael Brent M. Rubin

Texas Bar No. 24067767 Texas Bar No. 24086834

nicole@castaneda-firm.com BRubin@ccsb.com

THE CASTAÑEDA FIRM Ken Carroll

325 N. St. Paul, Suite 2030 Texas Bar No. 03888500

Dallas, Texas 75201 KCarroll@ccsb.com

Phone: (214) 282-8579 CARRINGTON, COLEMAN,

Fax: (214) 602-9187 SLOMAN & BLUMENTHAL, L.L.P.

901 Main Street, Suite 5500

Dallas, Texas 75202

Phone: (214) 855-3000

Fax: (214) 580-2641

Attorneys for Appellant Aspire Power Ventures, LP

66

CERTIFICATE OF COMPLIANCE

I certify pursuant to Tex. R. App. P. 9.4(i)(3) that this document

complies with the length limitations of Rule 9.4(i) and the typeface

requirements of Rule 9.4(e).

1. Exclusive of the contents identified by Rule 9.4(i)(1) and

inclusive of all textboxes, footnotes, and endnotes, this document

contains 9,787 words as counted by the Word Count function of

Microsoft Word 2010.

2. This document has been prepared in proportionally spaced

typeface using:

Software Name and Version: Microsoft Word 2010

Typeface Name: Century Schoolbook

Font Size: 14-point in text; 12-point in footnotes

/s/ Ken Carroll

Ken Carroll

67

CERTIFICATE OF SERVICE

I hereby certify that on the 18th day of December, 2024, a true

and correct copy of the foregoing Appellee’s Brief has been served via

the authorized electronic filing system on counsel of record for

Appellees:

John R. Hulme Elliot Clark

John.Hulme@oag.texas.gov eclark@winstead.com

Amanda Atkinson Cagle Elin Isenhower

Amanda.Cagle@oag.texas.gov eisenhower@winstead.com

Jordan Pratt WINSTEAD PC

Jordan.Pratt@oag.texas.gov 600 W. 5th Street, Suite 900

Environmental Protection Division Austin, TX 78701

Office of the Attorney General

P.O. Box 12548, MC-066 Counsel for Appellee ERCOT

Austin, TX 78711-2548

Counsel for Appellees the

Public Utilities Commission of

Texas and its Chairman and

Commissioners

/s/ Ken Carroll

Ken Carroll

68

No. 15-24-00118-CV

____________________________________________________________________________________________________________________________________

COURT OF APPEALS FOR THE

FIFTEENTH DISTRICT OF TEXAS

AUSTIN, TEXAS

____________________________________________________________________________________________________________________________________

Aspire Power Ventures, LP,

Appellant,

v.

Public Utility Commission of Texas, Electric Reliability Council

of Texas, Thomas Gleeson, Lori Cobos, Jimmy Glotfelty,

Kathleen Jackson, and Courtney Hjaltman,

Appellees.

_________________________________________________________________

On Appeal from the 345th Judicial District Court

Travis County, Texas

Cause No. D-1-GN-24-003384

Hon. Catherine A. Mauzy, Presiding

____________________________________________________________________________________________________________________________________

TEX. R. APP. P. 38.1(k)

APPENDIX TO APPELLANT’S BRIEF

____________________________________________________________________________________________________________________________________

Tab A: Order Granting PUC Parties’ Amended Plea to the

Jurisdiction, Appx.726

Tab B: Order Granting ERCOT Amended Plea to the Jurisdiction,

Appx.723

Tab C: Tex. Gov’t Code § 2001.003

Tab D: Tex. Gov’t Code § 2001.038

Tab E: Tex. Util. Code § 35.004

Tab F: Tex. Util. Code § 39.151

TAB A

10/21/2024 02:17:35 PM

Velva L. Price

District Clerk

Travis County

D-1-GN-24-003384

Appx. Page 726 of 740

Appx. Page 727 of 740

TAB B

10/21/2024 02:16:04 PM

Velva L. Price

District Clerk

Travis County

D-1-GN-24-003384

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TAB C

GOVERNMENT CODE

TITLE 10. GENERAL GOVERNMENT

SUBTITLE A. ADMINISTRATIVE PROCEDURE AND PRACTICE

CHAPTER 2001. ADMINISTRATIVE PROCEDURE

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 2001.001. PURPOSE. It is the public policy of the state through

this chapter to:

(1) provide minimum standards of uniform practice and procedure

for state agencies;

(2) provide for public participation in the rulemaking process;

and

(3) restate the law of judicial review of state agency action.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1, 1993.

Sec. 2001.002. SHORT TITLE. This chapter may be cited as the

Administrative Procedure Act.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1, 1993.

Sec. 2001.003. DEFINITIONS. In this chapter:

(1) "Contested case" means a proceeding, including a ratemaking

or licensing proceeding, in which the legal rights, duties, or privileges

of a party are to be determined by a state agency after an opportunity for

adjudicative hearing.

(2) "License" includes the whole or a part of a state agency

permit, certificate, approval, registration, or similar form of permission

required by law.

(3) "Licensing" includes a state agency process relating to the

granting, denial, renewal, revocation, suspension, annulment, withdrawal,

or amendment of a license.

(4) "Party" means a person or state agency named or admitted as a

party.

(5) "Person" means an individual, partnership, corporation,

association, governmental subdivision, or public or private organization

that is not a state agency.

(6) "Rule":

(A) means a state agency statement of general applicability

that:

(i) implements, interprets, or prescribes law or policy;

or

(ii) describes the procedure or practice requirements of

a state agency;

(B) includes the amendment or repeal of a prior rule; and

(C) does not include a statement regarding only the internal

management or organization of a state agency and not affecting private

rights or procedures.

(7) "State agency" means a state officer, board, commission, or

department with statewide jurisdiction that makes rules or determines

contested cases. The term includes the State Office of Administrative

Hearings for the purpose of determining contested cases. The term does not

include:

(A) a state agency wholly financed by federal money;

(B) the legislature;

(C) the courts;

(D) the Texas Department of Insurance, as regards proceedings

and activities under Title 5, Labor Code, of the department, the

commissioner of insurance, or the commissioner of workers' compensation; or

(E) an institution of higher education.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1, 1993.

Amended by:

Acts 2005, 79th Leg., Ch. 265 (H.B. 7), Sec. 6.007, eff. September 1,

2005.

TAB D

GOVERNMENT CODE

TITLE 10. GENERAL GOVERNMENT

SUBTITLE A. ADMINISTRATIVE PROCEDURE AND PRACTICE

CHAPTER 2001. ADMINISTRATIVE PROCEDURE

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 2001.038. DECLARATORY JUDGMENT. (a) The validity or

applicability of a rule, including an emergency rule adopted

under Section 2001.034, may be determined in an action for

declaratory judgment if it is alleged that the rule or its

threatened application interferes with or impairs, or threatens

to interfere with or impair, a legal right or privilege of the

plaintiff.

(b) The action may be brought only in a Travis County

district court.

(c) The state agency must be made a party to the action.

(d) A court may render a declaratory judgment without

regard to whether the plaintiff requested the state agency to

rule on the validity or applicability of the rule in question.

(e) An action brought under this section may not be used

to delay or stay a hearing in which a suspension, revocation, or

cancellation of a license by a state agency is at issue before

the agency after notice of the hearing has been given.

(f) A Travis County district court in which an action is

brought under this section, on its own motion or the motion of

any party, may request transfer of the action to the Court of

Appeals for the Fifteenth Court of Appeals District if the

district court finds that the public interest requires a prompt,

authoritative determination of the validity or applicability of

the rule in question and the case would ordinarily be appealed.

After filing of the district court's request with the court of

appeals, transfer of the action may be granted by the court of

appeals if it agrees with the findings of the district court

concerning the application of the statutory standards to the

action. On entry of an order by the court of appeals granting

transfer, the action is transferred to the court of appeals for

decision, and the validity or applicability of the rule in

question is subject to judicial review by the court of appeals.

The administrative record and the district court record shall be

filed by the district clerk with the clerk of the court of

appeals. The court of appeals may direct the district court to

conduct any necessary evidentiary hearings in connection with

the action.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,

1993. Amended by Acts 1999, 76th Leg., ch. 894, Sec. 1, eff.

Sept. 1, 1999.

Amended by: Acts 2023, 88th Leg., R.S., Ch. 459 (S.B. 1045),

Sec. 1.10, eff. September 1, 2023.

TAB E

UTILITIES CODE

TITLE 2. PUBLIC UTILITY REGULATORY ACT

SUBTITLE B. ELECTRIC UTILITIES

CHAPTER 35. ENERGY PROVIDERS

SUBCHAPTER A. COMPETITION AND TRANSMISSION ACCESS IN THE

WHOLESALE MARKET

Sec. 35.004. PROVISION OF TRANSMISSION SERVICE. (a) An

electric utility or transmission and distribution utility that

owns or operates transmission facilities shall provide wholesale

transmission service at rates and terms, including terms of

access, that are comparable to the rates and terms of the

utility's own use of its system.

(b) The commission shall ensure that an electric utility

or transmission and distribution utility provides

nondiscriminatory access to wholesale transmission service for

qualifying facilities, exempt wholesale generators, power

marketers, power generation companies, retail electric

providers, and other electric utilities or transmission and

distribution utilities.

(c) When an electric utility, electric cooperative, or

transmission and distribution utility provides wholesale

transmission service within ERCOT at the request of a third

party, the commission shall ensure that the utility recovers the

utility's reasonable costs in providing wholesale transmission

services necessary for the transaction from the entity for which

the transmission is provided so that the utility's other

customers do not bear the costs of the service.

(d) The commission shall price wholesale transmission

services within ERCOT based on the postage stamp method of

pricing under which a transmission-owning utility's rate is

based on the ERCOT utilities' combined annual costs of

transmission, other than costs described by Subsections (d-2)

and (d-3), divided by the total demand placed on the combined

transmission systems of all such transmission-owning utilities

within a power region. An electric utility subject to the

freeze period imposed by Section 39.052 may treat transmission

costs in excess of transmission revenues during the freeze

period as an expense for purposes of determining annual costs in

the annual report filed under Section 39.257. Notwithstanding

Section 36.201, the commission may approve wholesale rates that

may be periodically adjusted to ensure timely recovery of

transmission investment. Notwithstanding Section 36.054(a), if

the commission determines that conditions warrant the action,

the commission may authorize the inclusion of construction work

in progress in the rate base for transmission investment

required by the commission under Section 39.203(e).

(d-1) The commission by rule shall establish a reasonable

allowance for transmission-owning utility costs incurred to

interconnect generation resources directly with the ERCOT

transmission system at transmission voltage. The allowance must

take into account:

(1) the potential to reduce the costs to consumers of

generation interconnection;

(2) historical generation interconnection costs; and

(3) any other factor that the commission considers

reasonable to accomplish the goal of this subsection.

(d-2) Costs in excess of the transmission-owning utility

allowance provided by Subsection (d-1) incurred to interconnect

generation resources with the ERCOT transmission system must be

directly assigned to and collected from the generation resource

interconnecting through the facilities.

(d-3) Not later than September 1 of every fifth year, the

commission shall review and may adjust the allowance provided by

Subsection (d-1) to account for inflation or supply chain

issues.

(e) In this section, "ancillary services" means services

necessary to facilitate the transmission of electric energy

including load following, standby power, backup power, reactive

power, and any other services as the commission may determine by

rule.

(f) The commission shall ensure that ancillary services

necessary to facilitate the transmission of electric energy are

available at reasonable prices with terms and conditions that

are not unreasonably preferential, prejudicial, discriminatory,

predatory, or anticompetitive. On the introduction of customer

choice in the ERCOT power region, acquisition of generation-

related ancillary services on a nondiscriminatory basis by the

independent organization in ERCOT on behalf of entities selling

electricity at retail shall be deemed to meet the requirements

of this subsection.

(g) The commission shall:

(1) review the type, volume, and cost of ancillary

services to determine whether those services will continue to

meet the needs of the electricity market in the ERCOT power

region; and

(2) evaluate whether additional services are needed

for reliability in the ERCOT power region while providing

adequate incentives for dispatchable generation.

(h) The commission shall require the independent

organization certified under Section 39.151 for the ERCOT power

region to modify the design, procurement, and cost allocation of

ancillary services for the region in a manner consistent with

cost-causation principles and on a nondiscriminatory basis.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Amended by Acts 1999, 76th Leg., ch. 405, Sec. 17, eff. Sept. 1,

1999; Acts 2003, 78th Leg., ch. 295, Sec. 1, eff. June 18,

2003.

Amended by:

Acts 2021, 87th Leg., R.S., Ch. 426 (S.B. 3), Sec. 14, eff.

June 8, 2021.

Acts 2023, 88th Leg., R.S., Ch. 410 (H.B. 1500), Sec. 9,

eff. September 1, 2023.

TAB F

UTILITIES CODE

TITLE 2. PUBLIC UTILITY REGULATORY ACT

SUBTITLE B. ELECTRIC UTILITIES

CHAPTER 39. RESTRUCTURING OF ELECTRIC UTILITY INDUSTRY

SUBCHAPTER D. MARKET STRUCTURE

Sec. 39.151. ESSENTIAL ORGANIZATIONS. (a) A power region

must establish one or more independent organizations to perform

the following functions:

(1) ensure access to the transmission and

distribution systems for all buyers and sellers of electricity

on nondiscriminatory terms;

(2) ensure the reliability and adequacy of the

regional electrical network;

(3) ensure that information relating to a customer's

choice of retail electric provider is conveyed in a timely

manner to the persons who need that information; and

(4) ensure that electricity production and delivery

are accurately accounted for among the generators and wholesale

buyers and sellers in the region.

(b) "Independent organization" means an independent system

operator or other person that is sufficiently independent of any

producer or seller of electricity that its decisions will not be

unduly influenced by any producer or seller.

(c) The commission shall certify an independent

organization or organizations to perform the functions

prescribed by this section. The commission shall apply the

provisions of this section and Sections 39.1511, 39.1512, and

39.1515 so as to avoid conflict with a ruling of a federal

regulatory body.

(d) The commission shall adopt and enforce rules relating

to the reliability of the regional electrical network and

accounting for the production and delivery of electricity among

generators and all other market participants, or may delegate

those responsibilities to an independent organization. An

independent organization certified by the commission is directly

responsible and accountable to the commission. The commission

has complete authority to oversee and investigate the

independent organization's finances, budget, and operations as

necessary to ensure the organization's accountability and to

ensure that the organization adequately performs the

organization's functions and duties. The independent

organization shall fully cooperate with the commission in the

commission's oversight and investigatory functions. The

commission may take appropriate action against an independent

organization that does not adequately perform the organization's

functions or duties or does not comply with this section,

including decertifying the organization or assessing an

administrative penalty against the organization. The commission

by rule shall adopt procedures governing decertification of an

independent organization, selecting and certifying a successor

organization, and transferring assets to the successor

organization to ensure continuity of operations in the region.

The commission may not implement, by order or by rule, a

requirement that is contrary to an applicable federal law or

rule.

(d-1) The commission shall require an independent

organization certified by the commission under this section to

submit to the commission the organization's entire proposed

annual budget. The commission shall review the proposed budgets

either annually or biennially and may approve, disapprove, or

modify any item included in a proposed budget. The commission

by rule shall establish the type of information or documents

needed to effectively evaluate the proposed budget and

reasonable dates for the submission of that information or those

documents. The commission shall establish a procedure to

provide public notice of and public participation in the budget

review process.

(d-2) Except as otherwise agreed to by the commission and

an independent organization certified by the commission under

this section, the organization must submit to the commission for

review and approval proposals for obtaining debt financing or

for refinancing existing debt. The commission may approve,

disapprove, or modify a proposal.

(d-3) An independent organization certified by the

commission under this section shall develop proposed performance

measures to track the organization's operations. The

independent organization must submit the proposed performance

measures to the commission for review and approval. The

commission shall review the organization's performance as part

of the budget review process under Subsection (d-1). The

commission shall prepare a report at the time the commission

approves the organization's budget detailing the organization's

performance and submit the report to the lieutenant governor,

the speaker of the house of representatives, and each house and

senate standing committee that has jurisdiction over electric

utility issues.

(d-4) The commission may:

(1) require an independent organization to provide

reports and information relating to the independent

organization's performance of the functions prescribed by this

section and relating to the organization's revenues, expenses,

and other financial matters;

(2) prescribe a system of accounts for an independent

organization;

(3) conduct audits of an independent organization's

performance of the functions prescribed by this section or

relating to its revenues, expenses, and other financial matters

and may require an independent organization to conduct such an

audit;

(4) inspect an independent organization's facilities,

records, and accounts during reasonable hours and after

reasonable notice to the independent organization;

(5) assess administrative penalties against an

independent organization that violates this title or a rule or

order adopted by the commission and, at the request of the

commission, the attorney general may apply for a court order to

require an independent organization to comply with commission

rules and orders in the manner provided by Chapter 15; and

(6) resolve disputes between an affected person and

an independent organization and adopt procedures for the

efficient resolution of such disputes.

(e) After approving the budget of an independent

organization under Subsection (d-1), the commission shall

authorize the organization to charge to wholesale buyers and

sellers a system administration fee, within a range determined

by the commission, that is reasonable and competitively neutral

to fund the independent organization's approved budget. The

commission shall investigate the organization's cost

efficiencies, salaries and benefits, and use of debt financing

and may require the organization to provide any information

needed to effectively evaluate the reasonableness and neutrality

of the fee or to evaluate the effectiveness or efficiency of the

organization. The commission shall work with the organization

to establish the detail of information, both current and

historical, and the time frames the commission needs to

effectively evaluate the fee. The commission shall require the

organization to closely match actual revenues generated by the

fee and other sources of revenue with revenue necessary to fund

the budget, taking into account the effect of a fee change on

market participants and consumers, to ensure that the budget

year does not end with surplus or insufficient funds. The

commission shall require the organization to submit to the

commission, on a schedule determined by the commission, reports

that compare actual expenditures with budgeted expenditures.

(e-1) The review and approval of a proposed budget under

Subsection (d-1) or a proceeding to authorize and set the range

for the amount of a fee under Subsection (e) is not a contested

case for purposes of Chapter 2001, Government Code.

(f) In implementing this section, the commission may

cooperate with the utility regulatory commission of another

state or the federal government and may hold a joint hearing or

make a joint investigation with that commission.

(g) To maintain certification as an independent

organization for the ERCOT power region under this section, an

organization's governing body must be composed of persons

selected by the ERCOT board selection committee.

(g-1) The bylaws of an independent organization certified

for the ERCOT power region must be approved by and reflect the

input of the commission. The bylaws must require that every

member of the governing body be a resident of this state and

must prohibit a legislator from serving as a member. The

governing body must be composed of:

(1) two members of the commission as ex officio

nonvoting members:

(A) one of whom must be the presiding officer of

the commission; and

(B) one of whom must be designated by the

presiding officer of the commission to serve a one-year term on

the governing body;

(2) the counsellor as an ex officio voting member

representing residential and small commercial consumer

interests;

(3) the chief executive officer of the independent

organization as an ex officio nonvoting member; and

(4) eight members selected by the selection committee

under Section 39.1513 with executive-level experience in any of

the following professions:

(A) finance;

(B) business;

(C) engineering, including electrical

engineering;

(D) trading;

(E) risk management;

(F) law; or

(G) electric market design.

(g-2) Members of the governing body are entitled to

receive a salary for their service.

(g-3) A person does not qualify for selection as a member

of the governing body of an independent organization for the

ERCOT power region if the person has a fiduciary duty or assets

in the electricity market for that region.

(g-4) To maintain certification as an independent

organization under this section, the organization's governing

body may not include more than two members who are employed by

an institution of higher education, as defined by Section

61.003, Education Code, in a professorial role.

(g-5) A former member of the governing body of an

independent organization certified under this section may not,

before the second anniversary of the date the member ceases to

be a member of the governing body, engage in an activity that

requires registration under Chapter 305, Government Code.

(g-6) In this subsection, a reference to a protocol

includes a rule. Protocols adopted by an independent

organization and enforcement actions taken by the organization

under delegated authority from the commission are subject to

commission oversight and review and may not take effect before

receiving commission approval. To maintain certification as an

independent organization under this section, the organization's

governing body must establish and implement a formal process for

adopting new protocols or revisions to existing protocols. The

process must require that new or revised protocols may not take

effect until the commission approves a market impact statement

describing the new or revised protocols. The commission may

approve, reject, or remand with suggested modifications to the

independent organization's governing body protocols adopted by

the organization.

Text of subsection as added by Acts 2023, 88th Leg., R.S., Ch.

464 (S.B. 2013), Sec. 4

(g-7) To maintain certification as an independent

organization under this section, the organization must:

(1) identify all employee positions in the

organization that are critical to the security of the electric

grid; and

(2) before hiring a person for a position described

by Subdivision (1), obtain from the Department of Public Safety

or a private vendor criminal history record information relating

to the prospective employee and any other background information

considered necessary by the independent organization or required

by the commission.

Text of subsection as added by Acts 2023, 88th Leg., R.S., Ch.

410 (H.B. 1500), Sec. 15

(g-7) The presiding officer of the commission shall

designate commissioners to serve terms on the independent

organization's governing body under Subsection (g-1)(1)(B) in

the order in which the commissioners were first appointed to the

commission. A commissioner may not serve an additional term

until each commissioner has served a term.

(h) The ERCOT independent system operator may meet the

criteria relating to the other functions of an independent

organization provided by Subsection (a) by adopting procedures

and acquiring resources needed to carry out those functions,

consistent with any rules or orders of the commission.

(i) The commission may delegate authority to the existing

independent system operator in ERCOT to enforce operating

standards within the ERCOT regional electrical network and to

establish and oversee transaction settlement procedures. The

commission may establish the terms and conditions for the ERCOT

independent system operator's authority to oversee utility

dispatch functions after the introduction of customer choice.

(j) A retail electric provider, municipally owned utility,

electric cooperative, power marketer, transmission and

distribution utility, or power generation company shall observe

all scheduling, operating, planning, reliability, and settlement

policies, rules, guidelines, and procedures established by the

independent system operator in ERCOT. Failure to comply with

this subsection may result in the revocation, suspension, or

amendment of a certificate as provided by Section 39.356 or in

the imposition of an administrative penalty as provided by

Section 39.357.

(j-1) Notwithstanding Subsection (j) of this section,

Section 39.653(c), or any other law, the independent system

operator in the ERCOT power region may not reduce payments to or

uplift short-paid amounts to a municipally owned utility that

becomes subject to the jurisdiction of that independent system

operator on or after May 29, 2021, and before December 30, 2021,

related to a default on a payment obligation by a market

participant that occurred before May 29, 2021.

(k) To the extent the commission has authority over an

independent organization outside of ERCOT, the commission may

delegate authority to the independent organization consistent

with Subsection (i).

(l) No operational criteria, protocols, or other

requirement established by an independent organization,

including the ERCOT independent system operator, may adversely

affect or impede any manufacturing or other internal process

operation associated with an industrial generation facility,

except to the minimum extent necessary to assure reliability of

the transmission network.

(m) A power region outside of ERCOT shall be deemed to

have met the requirement to establish an independent

organization to perform the transmission functions specified in

Subsection (a) if the Federal Energy Regulatory Commission has

approved a regional transmission organization for the region and

found that the regional transmission organization meets the

requirements of Subsection (a).

(n) An independent organization certified by the

commission under this section is subject to review under Chapter

325, Government Code (Texas Sunset Act), but is not abolished

under that chapter. The independent organization shall be

reviewed during the periods in which the Public Utility

Commission of Texas is reviewed.

(o) An independent organization certified by the

commission under this section shall:

(1) conduct internal cybersecurity risk assessment,

vulnerability testing, and employee training to the extent the

independent organization is not otherwise required to do so

under applicable state and federal cybersecurity and information

security laws; and

(2) submit a report annually to the commission on the

independent organization's compliance with applicable

cybersecurity and information security laws.

(p) Information submitted in a report under Subsection (o)

is confidential and not subject to disclosure under Chapter 552,

Government Code.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1,

1999.

Amended by:

Acts 2005, 79th Leg., Ch. 797 (S.B. 408), Sec. 9, eff.

September 1, 2005.

Acts 2011, 82nd Leg., R.S., Ch. 1232 (S.B. 652), Sec.

1.09(a), eff. June 17, 2011.

Acts 2013, 83rd Leg., R.S., Ch. 170 (H.B. 1600), Sec. 1.08,

eff. September 1, 2013.

Acts 2019, 86th Leg., R.S., Ch. 509 (S.B. 64), Sec. 23,

eff. September 1, 2019.

Acts 2021, 87th Leg., R.S., Ch. 425 (S.B. 2), Sec. 3, eff.

June 8, 2021.

Acts 2021, 87th Leg., R.S., Ch. 908 (H.B. 4492), Sec. 3,

eff. June 16, 2021.

Acts 2023, 88th Leg., R.S., Ch. 410 (H.B. 1500), Sec. 15,

eff. September 1, 2023.

Acts 2023, 88th Leg., R.S., Ch. 464 (S.B. 2013), Sec. 4,

eff. June 9, 2023.

Automated Certificate of eService

This automated certificate of service was created by the efiling system.

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Brent Rubin

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Filing Code Description: Brief Requesting Oral Argument

Filing Description: APPELLANTS BRIEF

Status as of 12/18/2024 3:10 PM CST

Associated Case Party: Aspire Power Ventures, LP

Name BarNumber Email TimestampSubmitted Status

Chrysta L.Castaneda chrysta@castaneda-firm.com 12/18/2024 2:53:38 PM SENT

Nicole Michael nicole@castaneda-firm.com 12/18/2024 2:53:38 PM SENT

Monica Latin mlatin@ccsb.com 12/18/2024 2:53:38 PM SENT

Brent M.Rubin brubin@ccsb.com 12/18/2024 2:53:38 PM SENT

Ken Carroll kcarroll@ccsb.com 12/18/2024 2:53:38 PM SENT

Associated Case Party: Public Utility Commission of Texas

Name BarNumber Email TimestampSubmitted Status

John Hulme John.Hulme@oag.texas.gov 12/18/2024 2:53:38 PM SENT

Amanda AtkinsonCagle Amanda.Cagle@oag.texas.gov 12/18/2024 2:53:38 PM SENT

Jordan Pratt Jordan.Pratt@oag.texas.gov 12/18/2024 2:53:38 PM SENT

Associated Case Party: Electric Reliability Council of Texas

Name BarNumber Email TimestampSubmitted Status

Elin Isenhower eisenhower@winstead.com 12/18/2024 2:53:38 PM SENT

Elliot Clark eclark@winstead.com 12/18/2024 2:53:38 PM SENT

Case Contacts

Name BarNumber Email TimestampSubmitted Status

David Laurent david.laurent@oag.texas.gov 12/18/2024 2:53:38 PM SENT