“[T]he regulation of utilities is one of the most important of the functions traditionally associated with the police power of the States.”
How later courts described this case
- “[T]he regulation of utilities is one of the most important of the functions traditionally associated with the police power of the States.”
- “It is only in Hawaii and Alaska and on the ‘Texas Interconnect’—which covers most of that State—that electricity is distributed entirely within a single State.”
- “The Legislature’s description of PURA as ‘comprehensive,’ coupled with the fact that PURA regulates even the particulars of a utility’s operations and accounting, demonstrates the statute’s pervasiveness.”
Written by the judges who cited it.
The opinion
Supreme Court of Texas
══════════
No. 22-0056
══════════
CPS Energy,
Petitioner,
v.
Electric Reliability Council of Texas,
Respondent
═══════════════════════════════════════
On Petition for Review from the
Court of Appeals for the Fourth District of Texas
═══════════════════════════════════════
~and~
══════════
No. 22-0196
══════════
Electric Reliability Council of Texas, Inc.,
Petitioner,
v.
Panda Power Generation Infrastructure Fund, LLC d/b/a Panda
Power Funds; Panda Sherman Power Holdings, LLC; Panda
Sherman Power Intermediate Holdings I, LLC; Panda Sherman
Power Intermediate Holdings II, LLC; Panda Sherman Power,
LLC; Panda Temple Power Holdings, LLC; Panda Temple Power
Intermediate Holdings I, LLC; Panda Temple Power
Intermediate Holdings II, LLC; Panda Temple Power, LLC;
Panda Temple Power II Holdings, LLC; Panda Temple Power II
Intermediate Holdings I, LLC; Panda Temple Power II
Intermediate Holdings II, LLC; and Panda Temple Power II,
LLC,
Respondents
═══════════════════════════════════════
On Petition for Review from the
Court of Appeals for the Fifth District of Texas
═══════════════════════════════════════
Argued January 9, 2023
CHIEF JUSTICE HECHT delivered the opinion of the Court, in which
Justice Blacklock, Justice Bland, Justice Huddle, and Justice Young
joined, and in which Justice Lehrmann, Justice Boyd, Justice Devine,
and Justice Busby joined except as to Part IV.
JUSTICE BOYD and JUSTICE DEVINE filed a dissenting opinion, in
which Justice Lehrmann and Justice Busby joined.
2
These two cases present three questions concerning the Electric
Reliability Council of Texas, Inc.: (1) Is ERCOT a governmental unit as
defined in the Texas Tort Claims Act and thereby entitled to pursue an
interlocutory appeal from the denial of a plea to the jurisdiction?
(2) Does the Public Utility Commission of Texas have exclusive
jurisdiction over the parties’ claims against ERCOT? And (3) is ERCOT
entitled to sovereign immunity? The answer to all three questions is yes.
In No. 22-0056,1 we affirm the court of appeals’ judgment2 dismissing
the claims against ERCOT. In No. 22-0196,3 we reverse the court of
appeals’ judgment4 and render judgment dismissing the claims against
ERCOT.
I
“In its electrical grid, as in so many things, Texas stands alone.”5
Most of the state comprises the U.S. mainland’s only intrastate electrical
grid,6 which covers 75 percent of the state’s acreage, carries about 90
percent of its electrical load, and includes more than 52,700 miles of
transmission lines, 1,100 generation units, and 26 million electricity
1 CPS Energy v. Electric Reliability Council of Tex.
2 648 S.W.3d 520 (Tex. App.—San Antonio 2021).
3 Electric Reliability Council of Tex., Inc. v. Panda Power Generation
Infrastructure Fund, LLC.
4 641 S.W.3d 893 (Tex. App.—Dallas 2022) (en banc).
5 Texas v. EPA, 829 F.3d 405, 431 (5th Cir. 2016).
6 See New York v. FERC, 535 U.S. 1, 7 (2002) (“It is only in Hawaii and
Alaska and on the ‘Texas Interconnect’—which covers most of that State—that
electricity is distributed entirely within a single State.”).
3
customers.7 The Public Utility Regulatory Act (PURA) requires the
Public Utility Commission (PUC) to certify an independent system
operator (ISO) for the Texas power region.8 The PUC certified ERCOT,
a membership-based 501(c)(4) nonprofit corporation.9
ERCOT was formed in 1970 by various Texas electric utilities
that had interconnected their grids for greater reliability and increased
capacity.10 Membership was “available to any electric utility [that]
own[ed], control[led] or operate[d] an electric power system in Texas”.11
In those days, each member utility operated its own control area, and
ERCOT served an administrative role that “promote[d] reliable
operations of power systems in Texas by providing a means to
7 Oncor Elec. Delivery Co. v. Pub. Util. Comm’n, 507 S.W.3d 706, 708
n.1 (Tex. 2017); ERCOT Organization Backgrounder, ERCOT,
https://www.ercot.com/news/mediakit/backgrounder (last visited June 15,
2023); Fact Sheet, ERCOT (June 8, 2023), https://www.ercot.com/files/
docs/2022/02/08/ERCOT_Fact_Sheet.pdf.
8 TEX. UTIL. CODE § 39.151(a), (c). The Texas power region is also known
as ERCOT. See id. § 31.002(5) (defining ERCOT as “the area in Texas served
by electric utilities, municipally owned utilities, and electric cooperatives that
is not synchronously interconnected with electric utilities outside the state”).
To avoid confusion, we refer to the nonprofit corporation that is party to these
cases as ERCOT and the area served by the interconnected grid as the Texas
power region.
916 TEX. ADMIN. CODE § 25.361; ERCOT Organization Backgrounder,
supra note 7.
10See W. Tex. Utils. Co. v. Tex. Elec. Serv. Co., 470 F. Supp. 798, 808-
809 (N.D. Tex. 1979); Jared M. Fleisher, ERCOT’s Jurisdictional Status: A
Legal History and Contemporary Appraisal, 3 TEX. J. OIL GAS & ENERGY L. 4,
10-11 (2008).
11 W. Tex. Utils. Co., 470 F. Supp. at 808.
4
communicate and coordinate the planning and operation of its
members.”12
In 1999, the Legislature restructured the electric utility industry
in Texas.13 It amended PURA to require the “[u]nbundling” of vertically
integrated electric utility monopolies and established a fully competitive
electric power industry.14 The new structure required an ISO to operate
the wholesale electric market and “ensure the reliability and adequacy”
of the Texas power grid.15 Since 2001, ERCOT has served as that
“[e]ssential [o]rganization[]”.16
The two cases before us stem from different facts and different
parties, but they raise overlapping jurisdictional questions.
A
CPS Energy, a municipally owned utility that serves the San
Antonio area, is a market participant in the ERCOT wholesale market.
CPS buys and sells power through ERCOT, so ERCOT both collects
money from CPS and pays money to CPS. The parties settle the amounts
owed by each side and pay each other accordingly in what they call
12 Id.; see Fleisher, supra note 10, at 11.
Act of May 27, 1999, 76th Leg., R.S., ch. 405 § 39, 1999 Tex. Gen.
13
Laws 2543, 2558 (codified at TEX. UTIL. CODE ch. 39).
14TEX. UTIL. CODE § 39.051; see id. § 39.001(a), (b); Oncor Elec. Delivery
Co., 507 S.W.3d at 708-709.
15 TEX. UTIL. CODE § 39.151(a).
16 Id. § 39.151; 16 TEX. ADMIN. CODE § 25.361. On May 28, 2023, the
Legislature amended Section 39.151. The amendments are effective September
1, 2023, and they do not affect the proceeding analysis or our holding. See Act
of May 28, 2023, 88th Leg., R.S., ch. 410, § 15, 2023 Tex. Sess. Law Serv. ___
(H.B. 1500).
5
“settlement” payments. At issue here are payments from ERCOT to
CPS. CPS’ participation in the market is governed by the terms of a
Standard Form Market Participant Agreement, PURA, and the ERCOT
Protocols, which are rules promulgated by ERCOT to manage the
market and the grid.
In February 2021, Texans endured the catastrophic Winter Storm
Uri. On February 15, just as the storm hit, ERCOT declared its highest
state of emergency, Emergency Energy Alert Level 3, and directed
transmission operators to curtail firm load. The PUC then directed
ERCOT to set the per-megawatt-hour price of electricity at the highest
permissible rate of $9,000 to reflect scarcity of supply. ERCOT recalled
its firm load shed instructions on February 17 but kept prices at the cap
rate for an additional 32 hours through the morning of February 19. CPS
alleges that ERCOT should have ended its pricing intervention when it
recalled its firm load shed instructions and that its failure to do so
resulted in $16 billion in overcharges to market participants.
Some market participants defaulted after the storm. Pursuant to
its Protocols, ERCOT then implemented its “short-pay” procedure and
its “Default Uplift process”.17 These processes spread the impact of the
default, allocating the loss among market participants—including
CPS—by reducing the amounts they are owed by ERCOT.18 CPS alleges
that it was short-paid at least $18 million through the short-pay process.
It also alleges that ERCOT intended to apply two downward
17 See ERCOT NODAL PROTOCOLS §§ 9.19(1)(d)-(e), 9.19.1.
18 See id. §§ 9.19(1)(d)-(e), 9.19.1.
6
adjustments to the credit in CPS’ account by over $1 million each
through the default-uplift process.19
CPS sued ERCOT and several of its officers for breach of contract,
negligence, breach of fiduciary duty, and violations of the Texas
Constitution.20 ERCOT filed a plea to the jurisdiction, arguing that CPS’
claims are barred by sovereign immunity and, alternatively, that the
PUC has exclusive jurisdiction over the claim. The trial court denied the
plea.21
ERCOT appealed, asserting that it is a governmental unit
entitled to an interlocutory appeal from the denial of a plea to the
jurisdiction.22 ERCOT also sought review by petition for writ of
mandamus in the event it is not entitled to an interlocutory appeal. After
one court of appeals panel summarily denied mandamus relief,23
ERCOT filed its petition for writ of mandamus in this Court24 to
CPS secured a temporary restraining order from the trial court that
19
prevented ERCOT from applying these downward adjustments. The court of
appeals dissolved its order extending the temporary restraining order when it
dismissed CPS’ claims. 648 S.W.3d at 541.
CPS also alleged that ERCOT’s executives and board acted ultra vires
20
and it sought prospective injunctive relief against downward adjustments for
the storm-related default through the default-uplift process. CPS later
nonsuited all individual defendants except Bill Magness, ERCOT’s former
CEO. The court of appeals determined that Magness was not a party to the
plea to the jurisdiction that is the subject of this appeal. Id. at 532-533.
The trial court also denied ERCOT’s motion to transfer venue to
21
Travis County.
22 See TEX. CIV. PRAC. & REM. CODE § 51.014(a)(8).
23 2021 WL 2814899 (Tex. App.—San Antonio July 7, 2021) (mem. op.).
24 In re Elec. Reliability Council of Tex., Inc., No. 21-0834.
7
continue the alternative path to review. A different court of appeals
panel then held that ERCOT is a governmental unit entitled to take an
interlocutory appeal, that the PUC has exclusive jurisdiction over CPS’
claims, and that CPS’ claims should be dismissed.25 We granted review
and set the case for oral argument on the same day as the case brought
by the Panda Power Companies.26
B
As part of ERCOT’s functions, the PUC requires ERCOT to
annually publish resource adequacy reports that project, for at least the
next five years, the capability of existing electric generation resources to
meet projected demand in the Texas power region.27 ERCOT does so by
publishing “Capacity, Demand, and Reserves” reports (CDRs). ERCOT’s
2011 and 2012 CDRs projected a likelihood of severe energy shortfalls.
Panda, a group of private-equity investors, alleges that it relied on these
reports when it decided to invest billions of dollars to build three new
power plants. After construction on the new plants began, ERCOT
revised its CDRs and forecast a future oversupply of generation
capacity. Panda sued ERCOT for fraud, negligent misrepresentation,
and breach of fiduciary duty. Panda alleges that ERCOT’s misleading
reports caused it substantial financial harm and seeks damages in
excess of $2 billion.
The procedural history of this case is long and complex, and we
recite only what is relevant to the disposition of this appeal. ERCOT
25 648 S.W.3d at 531, 541.
26 ERCOT’s petition for writ of mandamus is dismissed as moot.
27 TEX. UTIL. CODE § 39.155(b); 16 TEX. ADMIN. CODE § 25.505(b).
8
filed two pleas to the jurisdiction arguing that the PUC has exclusive
jurisdiction over Panda’s claims and that ERCOT has sovereign
immunity. The trial court denied both. ERCOT appealed, arguing that
it is a “governmental unit” under the Texas Tort Claims Act entitled to
an interlocutory appeal from the denial of its plea to the jurisdiction.28
ERCOT alternatively sought review by mandamus. The court of appeals
consolidated the appeal and mandamus petition and held that ERCOT
is not a governmental unit entitled to an interlocutory appeal but that
ERCOT has sovereign immunity.29 Accordingly, the court of appeals
dismissed ERCOT’s interlocutory appeal for lack of jurisdiction,
conditionally granted its petition for writ of mandamus, and directed the
trial court to dismiss the case for lack of jurisdiction.30 The trial court
immediately complied, and Panda appealed. The court of appeals, then
sitting en banc, changed course. Relying on three immunity cases
decided by this Court in the interim, and with one justice dissenting, the
court held that ERCOT is not entitled to sovereign immunity and that
the PUC does not have exclusive jurisdiction over Panda’s claims.31 We
granted ERCOT’s petition for review.
28 TEX. CIV. PRAC. & REM. CODE § 51.014(a)(8); id. § 101.001(3).
29 Elec. Reliability Council of Tex., Inc. v. Panda Power Generation
Infrastructure Fund, LLC, 552 S.W.3d 297, 301 (Tex. App.—Dallas 2018), pet.
dism’d as moot, 619 S.W.3d 628, 631 (Tex. 2021).
30 Id. Additional procedural history thereafter is available in this
Court’s prior opinion. Elec. Reliability Council of Tex., Inc. v. Panda Power
Generation Infrastructure Fund, LLC, 619 S.W.3d 628, 632-634 (Tex. 2021).
31 641 S.W.3d at 899.
9
II
The first issue arises from CPS’ petition: whether ERCOT is a
governmental unit under the Texas Tort Claims Act and thus entitled
to take an interlocutory appeal from the denial of a plea to the
jurisdiction.32 “Although private institutions are not commonly
understood to be a part ‘of government,’ we have held that a private
institution can be a governmental unit”, as is the case here.33
“[T]he general rule, with a few mostly statutory exceptions, is that
an appeal may be taken only from a final judgment.”34 However, certain
statutes authorize interlocutory appeals over particular kinds of trial
court orders.35 Section 51.014(a)(8) of the Civil Practice and Remedies
Code authorizes an interlocutory appeal from a trial-court order that
“grants or denies a plea to the jurisdiction by a governmental unit as
that term is defined” in the Tort Claims Act.36 In turn, the Tort Claims
Act defines “[g]overnmental unit” to include not only the state and its
agencies and political subdivisions, but also “any other institution,
agency, or organ of government the status and authority of which are
derived from the Constitution of Texas or from laws passed by the
32 See TEX. CIV. PRAC. & REM. CODE § 51.014(a)(8); id. § 101.001(3).
33 Univ. of the Incarnate Word v. Redus (Redus I), 518 S.W.3d 905, 907
(Tex. 2017).
34 Bonsmara Nat. Beef Co. v. Hart of Tex. Cattle Feeders, LLC, 603
S.W.3d 385, 387 (Tex. 2020) (quoting Lehmann v. Har-Con Corp., 39 S.W.3d
191, 195 (Tex. 2001)).
35 See id. at 390 & n.3.
36 TEX. CIV. PRAC. & REM. CODE § 51.014(a)(8); see id. § 101.001(3).
10
legislature under the constitution.”37 Thus, a private, non-governmental
entity can qualify as a governmental unit under this definition, but only
if (1) it is an institution, agency, or organ of government; and (2) it
derives its status and authority as such from the Texas Constitution or
statutes.38
A
In LTTS Charter School, Inc. v. C2 Construction, Inc., we held
that an open-enrollment charter school qualified as a governmental unit
because it was “indisputably part of the Texas public-education system”
and derived that status and authority from state statutes.39 Our holding
centered on various statutory pronouncements. We concluded that open-
enrollment charter schools derive their status from the Education Code,
which provides that they are “part of” the state’s public-school system.40
Their authority is also derived from the Education Code, which assigns
them responsibilities for implementing the public-education system,
provides them with substantial public funding and resources, grants
them the same powers and privileges of traditional public schools, and
subjects them to the same rules that govern public schools.41 Finally, the
Education Code designates open-enrollment charter schools as
“governmental entit[ies]”, “political subdivision[s]”, and “local
37 Id. § 101.001(3).
38 Id.; Redus I, 518 S.W.3d at 907.
39 342 S.W.3d 73, 76 (Tex. 2011).
40 Id. at 77.
41 Id. at 77-78.
11
government[s]” for various purposes.42
In University of the Incarnate Word v. Redus (Redus I), we
concluded that a private university that operates a state-authorized
police department qualifies as a governmental unit when defending
suits relating to the department’s actions.43 We acknowledged that,
unlike the charter schools at issue in LTTS, private universities do not
receive public funding and are not statutorily labeled as governmental
entities for any particular purpose.44 Nevertheless, we observed that
state statutes grant private universities the “status and authority” to
operate a police department using commissioned peace officers and
subject them to state law-enforcement rules and requirements, just like
a municipal police department.45 And although no statute expressly
designates a private university or its police department as “part of” the
state’s law-enforcement system, we concluded that the university was
an “organ of government” for purposes of its police department because
it “operates as part of a larger governmental system” and performs the
“uniquely governmental” function of law enforcement.46
B
CPS maintains that unlike in LTTS and Redus I, there are no
strong legislative indicators of governmental-unit status in relation to
ERCOT and that in concluding otherwise, the court of appeals applied
42 Id. at 78 (quoting TEX. EDUC. CODE § 12.1053).
43 518 S.W.3d at 906.
44 Id. at 910.
45 Id. at 909; see id. at 910-911.
46 Id. at 909, 910, 911.
12
an impermissibly broad view of “organ of government”. It argues further
that ERCOT does not perform a “uniquely governmental function” and
that ERCOT’s actions during the winter storm event were merely
operational. For its part, ERCOT contends that it is an organ of
government because it is an essential part of a larger governmental
system, namely the PUC’s regulation of electric utilities, as evidenced
by its delegated rulemaking authority and various provisions of PURA.
1
As we recognized in Redus I, an “organ of government” is an entity
that “operates as part of a larger governmental system” and performs a
“uniquely governmental” function.47 Here, ERCOT operates as part of
the state’s broader electricity-regulation system under PURA and
performs the uniquely governmental function of utilities regulation.
PURA was enacted “to establish a comprehensive and adequate
regulatory system for public utilities”, including electric utilities and
telecommunications utilities.48 Under PURA, the PUC—a governmental
entity—was given the “general power” to regulate and supervise public
utilities.49 Within this larger governmental system of utilities regulation
is the express requirement of an independent system operator for the
Texas power region.50 This ISO is tasked with ensuring that (1) all
electricity buyers and sellers have nondiscriminatory access to the
region’s transmission and distribution system, (2) the region’s electrical
47 Id. at 910, 911.
48 TEX. UTIL. CODE § 11.002(a).
49 Id. § 14.001; see also id. § 11.002(c).
50 Id. § 39.151(a).
13
network is reliable and adequate, (3) information regarding a customer’s
choice of retail electric provider is timely available to those who need it,
and (4) electricity production and delivery are accurately accounted
for.51
ERCOT performs these functions under the direct oversight of the
PUC and must do so in compliance with the requirements set forth in
PURA.52 In LTTS, we observed that the open-enrollment charter school
was required to meet “financial, governing, and operational standards”
under the Education Code and that the Commissioner of Education was
empowered to audit the school and revoke its charter for failure to
comply with the Code.53 ERCOT is subject to similar requirements and
more under PURA and by the PUC.
The PUC certifies the ISO, and, as the ISO, ERCOT is “directly
responsible and accountable” to the PUC.54 The PUC has extensive
authority over ERCOT, including “complete authority” over ERCOT’s
“finances, budget, and operations”—including the ability to audit its
financials—to ensure that ERCOT adequately performs its functions
and duties.55 The PUC has authority over ERCOT’s bylaws and
protocols, and the chairman of the PUC sits on ERCOT’s board.56 The
PUC can penalize and even decertify ERCOT if it fails to adequately
51 Id.
52 See id. § 39.151(d).
53 342 S.W.3d at 80.
54 TEX. UTIL. CODE § 39.151(d).
55 Id. § 39.151(d), (d-4)(3); see also id. § 39.151(e).
56 Id. § 39.151(g-1).
14
perform its functions and duties or if it fails to comply with PURA.57
Additionally, the regulation of utilities is “uniquely
governmental”.58 As the certified ISO, ERCOT exercises delegated
authority from the PUC to “adopt and enforce rules relating to the
reliability of the regional electrical network”.59 It is also tasked with
“enforc[ing] operating standards” and establishing and overseeing
payment procedures for transactions by market participants within the
electrical network.60 Market participants are statutorily required to
abide by all rules and procedures established by the ISO, and their
failure to do so could result in a penalty.61
Because ERCOT performs a “uniquely governmental” function as
part of a “larger governmental system”, it is an organ of government.62
2
ERCOT also derives its “status and authority” from statute.63 Its
status derives from statute because PURA requires the PUC to
“establish one or more independent organizations”—that is, an
57 Id. § 39.151(d), (d-4)(5).
58Redus I, 518 S.W.3d at 911; see Ark. Elec. Coop. Corp. v. Ark. Pub.
Serv. Comm’n, 461 U.S. 375, 377 (1983) (“[T]he regulation of utilities is one of
the most important of the functions traditionally associated with the police
power of the States.”).
59 TEX. UTIL. CODE § 39.151(d).
60 Id. § 39.151(i).
61 Id. § 39.151(j).
62 Redus I, 518 S.W.3d at 910, 911.
63 TEX. CIV. PRAC. & REM. CODE § 101.001(3); Redus I, 518 S.W.3d at
907.
15
organization that is “sufficiently independent” of any electricity
producer or seller—to serve as the region’s ISO.64 An independent
organization can serve as the region’s ISO only if the PUC certifies it for
that purpose.65 Its authority also comes from statute because PURA
grants a certified ISO authority to supervise the Texas power region’s
transmission facilities and to coordinate its market transactions,
transmissions planning, and network reliability.66 Thus, although
ERCOT is a private, nonprofit corporation, its “status” as the ISO for
the Texas power region and its “authority” to act in that capacity derive
directly from PURA.
Because ERCOT is an “organ of government the status and
authority of which are derived from” statute, it is a “governmental unit”
entitled to take an interlocutory appeal from the denial of a plea to the
jurisdiction.67
III
The next issue, presented in both cases, is whether the PUC has
exclusive jurisdiction over issues underlying the parties’ claims against
ERCOT. We conclude that it does.
Courts are presumed to have jurisdiction to resolve legal
disputes.68 “To overcome that presumption, the Constitution or another
64 TEX. UTIL. CODE § 39.151(a), (b).
65 Id. § 39.151(c).
66 Id. § 31.002(9); see also id. § 39.151.
67 TEX. CIV. PRAC. & REM. CODE § 101.001(3); id. § 51.014(a)(8).
68Oncor Elec. Delivery Co. v. Chaparral Energy, LLC, 546 S.W.3d 133,
138 (Tex. 2018) (citing In re Entergy Corp., 142 S.W.3d 316, 322 (Tex. 2004));
16
law must grant exclusive jurisdiction to another court or an
administrative agency.”69 A statute may grant an agency exclusive
jurisdiction either expressly or by establishing a “pervasive regulatory
scheme” that impliedly “indicates that the Legislature intended for the
regulatory process to be the exclusive means of remedying the problem
to which the regulation is addressed.”70 Thus, to establish exclusive
jurisdiction over a particular issue, there must be (1) an express or
implied grant of exclusive jurisdiction and (2) the issue must “fall[]
within that jurisdictional scope.”71 If the agency’s exclusive jurisdiction
is established, the claimant must pursue and exhaust all available
administrative remedies before turning to the courts.72 “Until then, the
trial court lacks subject-matter jurisdiction” and must dismiss the
claims with issues that come within the agency’s exclusive jurisdiction.73
A
ERCOT does not claim that the PUC has been expressly granted
exclusive jurisdiction over the issues underlying CPS’ and Panda’s
claims; rather, it argues that Section 39.151 of the Utilities Code
see also TEX. CONST. art. V, § 8.
Chaparral Energy, 546 S.W.3d at 138 (citing In re Sw. Bell Tel. Co.,
69
235 S.W.3d 619, 624-625 (Tex. 2007)).
70 Id. (quoting In re Sw. Bell Tel. Co., 235 S.W.3d at 624-625).
71 Id. at 139; see id. at 138.
72Forest Oil Corp. v. El Rucio Land & Cattle Co., 518 S.W.3d 422, 428
(Tex. 2017).
73Id. (citing Subaru of Am., Inc. v. David McDavid Nissan, Inc., 84
S.W.3d 212, 221 (Tex. 2002)).
17
constitutes a pervasive regulatory scheme that imparts exclusive
jurisdiction. We agree.
Section 39.151 grants the PUC extensive and ultimate authority
over an ISO. As mentioned, the statute provides that the ISO “is directly
responsible and accountable to the [PUC],” and the PUC “has complete
authority to oversee and investigate [ERCOT]’s finances, budget, and
operations” to ensure adequate performance of the ISO’s “functions and
duties.”74 It grants the PUC authority over ERCOT’s board makeup, its
bylaws and protocols, and its ability to charge fees to its members.75
ERCOT is empowered to enact rules over market participants, but they
must be approved by the PUC.76 Moreover, the PUC’s authority over
ERCOT is not solely regulatory; it has adjudicatory power as well. The
PUC may “take appropriate action” against the ISO, including
decertification, for the ISO’s failure to adequately perform its functions
or duties or for its failure to comply with Section 39.151.77
Section 39.151’s grant of extensive authority to the PUC over ERCOT
and its detailed regulation of the particulars of ERCOT’s functions
constitute a pervasive regulatory scheme.78
74 TEX. UTIL. CODE § 39.151(d) (emphasis added).
75 Id. § 39.151(d), (e), (g-1).
76 Id. § 39.151(d); see also id. § 39.151(j).
77 Id. § 39.151(d).
78 Cf. In re Entergy Corp., 142 S.W.3d at 323 (“The Legislature’s
description of PURA as ‘comprehensive,’ coupled with the fact that PURA
regulates even the particulars of a utility’s operations and accounting,
demonstrates the statute’s pervasiveness.”).
18
B
The next inquiry is whether issues underlying the parties’ claims
fall within the regulatory scheme’s jurisdictional scope.79 The question
is whether “the Legislature intended . . . the regulatory process to be the
exclusive means of remedying the problem to which the regulation is
addressed.”80 As to both Panda and CPS, we conclude that the issues
underlying their claims come within the scope of the PUC’s exclusive
jurisdiction.
1
We begin with Panda’s issues. PURA requires that ERCOT
publish CDRs that “identify[] existing and potential transmission and
distribution constraints and system needs” within the Texas power
region, including alternatives and recommendations for meeting those
needs.81 Panda contends that ERCOT failed to properly perform this
requirement by issuing fraudulent CDRs that inaccurately reported the
capability of existing electric generation resources to meet projected
demand in the Texas power region. Because the proper performance of
ERCOT’s operations, functions, and duties comes within the PUC’s
“complete” authority over ERCOT, and because the PUC is statutorily
authorized to hold ERCOT accountable if, as Panda alleges, ERCOT
fails to properly perform, we hold that Panda’s issues come within the
79 See Chaparral Energy, 546 S.W.3d at 139.
80 Id. at 138 (quoting In re Sw. Bell Tel. Co., 235 S.W.3d at 624-625).
81 TEX. UTIL. CODE § 39.155(b); see also 16 TEX. ADMIN. CODE
§ 25.505(c).
19
PUC’s exclusive jurisdiction.82
Panda notes that the PUC “has no authority to determine
whether ERCOT complied with the relevant common-law standards or
to provide a remedy.” While that is true, an agency’s exclusive
jurisdiction does not prevent an aggrieved party from pursuing damages
or other relief in the trial court after the agency has exercised its
exclusive jurisdiction over the relevant issues.83
2
Likewise, CPS’ issues come within the jurisdictional scope of the
PUC’s exclusive jurisdiction. CPS alleges that, inter alia, ERCOT “failed
to implement its protocols in a way to ensure the integrity of its system”,
“failed to take reasonable precautions to meet its load projections
expected as a result of” Winter Storm Uri, “failed to take reasonable
corrective action when it became clear that its own projections showed
insufficient capacity to meet forecast demand”, and failed to correct “an
acknowledged $16 billion error”. Additionally, CPS essentially seeks
exemption from ERCOT’s short-pay and default-uplift procedures for
charges relating to the Winter Storm default because it claims that they
are due to ERCOT’s own error and its subsequent failure to retroactively
reprice the alleged overcharge.
These issues involve “the very activit[ies] the [PUC] regulates.”84
CPS’ issues implicate ERCOT’s operations and billing, which fall under
82 TEX. UTIL. CODE § 39.151(d).
83 See Chaparral Energy, 546 S.W.3d at 141-142.
84 In re Oncor Elec. Delivery Co., 630 S.W.3d 40, 49 (Tex. 2021).
20
the PUC’s “complete authority”.85 And while ERCOT oversees
transaction settlement payment procedures, it does so by delegated
authority from the PUC.86 Additionally, CPS specifically alleged that
ERCOT’s actions (and inactions) violated Section 39.151 of the Utilities
Code because it failed to perform its functions of “ensur[ing] access to
the transmission and distribution systems for all buyers and sellers of
electricity” and “ensur[ing] the reliability and adequacy of the regional
electrical network”.87 By statute, the PUC is responsible for ensuring
that ERCOT “adequately performs [its] functions and duties”, and the
PUC may take action against ERCOT should it fail to do so.88 Thus, CPS’
issues fall within the PUC’s exclusive jurisdiction.
CPS raises a host of arguments to support its claim that the PUC
does not have exclusive jurisdiction or that it is not required to exhaust
administrative remedies. All fall short. CPS contends that the PUC does
not have exclusive jurisdiction because it cannot adjudicate a contract
claim or award damages. However, CPS’ claim for breach of the
Standard Form Market Participant Agreement involves whether
ERCOT properly implemented its protocols, which comes within the
PUC’s exclusive jurisdiction.89 As to damages, as mentioned, an agency’s
85 TEX. UTIL. CODE § 39.151(d).
86 Id. § 39.151(i).
87 Id. § 39.151(a)(1), (2).
88 Id. § 39.151(d).
89 See id. § 39.151(d) (“Rules adopted by an independent
organization . . . under delegated authority from the [PUC] are subject to
[PUC] oversight . . . .”); cf. Chaparral Energy, 546 S.W.3d at 139-140 (holding
21
exclusive jurisdiction does not prevent a party from pursuing damages
or other relief in the trial court after it has exhausted administrative
remedies.90 Moreover, CPS primarily argues that its damages stem from
ERCOT’s alleged overcharge during the storm and its failure to
retroactively reprice that overcharge. The PUC has authority to oversee
transaction settlement procedures and authority over ERCOT’s
finances; therefore, presumably, it could order ERCOT to resettle its
payments to CPS.91
CPS argues that it was not required to exhaust administrative
remedies because it needed immediate injunctive relief.92 But PUC rules
permit the PUC to order ERCOT to suspend complained-of conduct
while a complaint is pending.93 CPS also argues that exhaustion of
administrative remedies is inapplicable where the action concerns
questions of law. But CPS’ issues raise various fact questions including
how much supply was available for the 32 hours after ERCOT recalled
its firm load shed instructions, which is necessary to determine what the
appropriate per-megawatt-hour price was. Thus, this exception to the
that PUC had exclusive jurisdiction because the issue involved a public utility’s
services, even though customer asserted a breach-of-contract claim for money
damages).
90 Chaparral Energy, 546 S.W.3d at 141-142.
91 See TEX. UTIL. CODE § 39.151(d), (i).
See Hous. Fed’n of Tchrs., Loc. 2415 v. Hous. Indep. Sch. Dist., 730
92
S.W.2d 644, 646 (Tex. 1987).
93 See 16 TEX. ADMIN. CODE § 22.251(i).
22
exhaustion requirement does not apply.94
Finally, CPS contends that exhaustion is not required because it
asserts constitutional claims. Specifically, CPS argues that the loss
allocation under the short-pay and default-uplift procedures amounts to
an unconstitutional taking in violation of Article I, Section 17 of the
Texas Constitution and an unconstitutional extension of credit in
violation of Article XI, Section 3. However, “a litigant must avail itself
of statutory remedies that may moot its takings claim, rather than
directly institute a separate proceeding asserting such a claim.”95 Here,
a decision from the PUC on the underlying issues could moot CPS’
constitutional claims. Were the PUC to order adjustment of the alleged
overcharge pricing or resettlement of ERCOT’s payments to CPS, it
would cure the alleged violations and obviate the need to assert the
constitutional claims in court.96 And even if it does not, a party is not
precluded from pursuing its constitutional claims after exhaustion or
from seeking judicial review of any PUC rulings on issues underlying
those claims.97
In sum, the PUC has exclusive jurisdiction over CPS’ claims. As
a result of our holding, we need not address ERCOT’s alternative
argument regarding exclusive jurisdiction in Travis County district
94Clint Indep. Sch. Dist. v. Marquez, 487 S.W.3d 538, 557-558 & n.13
(Tex. 2016).
95 Garcia v. City of Willis, 593 S.W.3d 201, 211 (Tex. 2019) (citing City
of Dallas v. Stewart, 361 S.W.3d 562, 579 (Tex. 2012)).
96 See id. at 211-212.
97 Chaparral Energy, 546 S.W.3d at 141-142.
23
court or the Third Court of Appeals, nor its argument that the PUC is
an indispensable party.
IV
ERCOT’s primary argument is that it is entitled to sovereign
immunity. We agree.
“Sovereign immunity provides that ‘no state can be sued in her
own courts without her consent, and then only in the manner indicated
by that consent.’”98 It is “‘inherent’ in Texas statehood and ‘developed
without any legislative or constitutional enactment.’”99 In determining
whether a legislatively authorized entity is entitled to share in the
state’s immunity, we look to whether “the governing statutory authority
demonstrates legislative intent to grant an entity the ‘nature, purposes,
and powers’ of an ‘arm of the State government’”.100 We also look to
whether extending immunity would “satisfy the political, pecuniary, and
pragmatic policies underlying our immunity doctrines.”101 If these
requirements are met, the “‘entity is a government unit unto itself’ and
is ‘entitled to assert immunity in its own right’ when it performs a
98Univ. of the Incarnate Word v. Redus (Redus II), 602 S.W.3d 398, 403
(Tex. 2020) (quoting Hosner v. DeYoung, 1 Tex. 764, 769 (1847)).
Id. at 403-404 (quoting Wasson Ints., Ltd. v. City of Jacksonville, 489
99
S.W.3d 427, 429, 431 (Tex. 2016)).
100 El Paso Educ. Initiative, Inc. v. Amex Props., LLC, 602 S.W.3d 521,
527 (Tex. 2020) (quoting Ben Bolt-Palito Blanco Consol. Indep. Sch. Dist. v.
Tex. Pol. Subdivs. Prop./Cas. Joint Self-Ins. Fund, 212 S.W.3d 320, 325 (Tex.
2006)).
101Rosenberg Dev. Corp. v. Imperial Performing Arts, Inc., 571 S.W.3d
738, 750 (Tex. 2019).
24
‘governmental function.’”102
A
Three of our recent cases explored the boundaries and contours of
sovereign and governmental immunity and are pertinent to our analysis
here. In Rosenberg Development Corp. v. Imperial Performing Arts, Inc.,
we addressed for the first time whether a private entity could possess
the “nature, purposes, and powers of an arm of the State government”
and thus qualify as an entity protected by sovereign or governmental
immunity.103 Rosenberg involved an economic development corporation
created by a municipality, as authorized by the Texas Development
Corporation Act.104 The economic development corporation was a
private, nonprofit entity, but it was incorporated exclusively for a public
purpose: to promote enterprises to spur economic growth in the city.105
Under the statute, it was authorized to fund projects with tax dollars or
the proceeds of revenue bonds.106 It was also subject to compliance with
the Texas Open Meetings Act and the Texas Public Information Act.107
The municipality had some supervisory control over the corporation, but
ultimately, “all the powers of the corporation [were] vested in the
102 Redus II, 602 S.W.3d at 405 (quoting Ben Bolt, 212 S.W.3d at 325-
326).
103 571 S.W.3d at 749 (internal quotation marks omitted).
104 Id. at 741.
105 Id. at 741, 745.
106 Id. at 744.
107 Id. at 745.
25
corporation’s board of directors.”108 Importantly, the Development
Corporation Act provided that an economic development corporation “is
not a political subdivision or a political corporation for purposes of the
laws of this state”, and it barred municipalities from delegating to the
corporation any “attributes of sovereignty.”109 Ultimately, we concluded
that the Development Corporation Act “evinces clear legislative intent
that an economic development corporation is not an arm of state
government.”110 We also held that granting immunity did not “satisfy
the political, pecuniary, and pragmatic policies underlying our
immunity doctrines” because “[g]overnmental immunity benefits the
public by preventing disruptions of key governmental services,” but
economic development corporations do not perform essential services.111
Next, in University of the Incarnate Word v. Redus (Redus II), we
considered whether sovereign immunity applied to the private
university involved in Redus I, which was sued for the actions of its
statutorily authorized police department.112 We concluded that it was
not immune because the university did not possess the nature, purposes,
and powers of an arm of the state government, nor did applying
sovereign immunity support the doctrine’s nature and purposes.113
Central to our holding was the lack of control the state exercised over
108 Id. (internal alterations and quotation marks omitted).
109 Id.
110 Id. at 750.
111 Id.
112 See Redus II, 602 S.W.3d at 401-402.
113 See id.
26
the university and its police department. We noted that “[t]he State did
not charter” the university, nor did it set the police “department’s
policies, procedures, or protocols.”114 We further observed that the state
did not “hire or fire the [u]niversity’s officers” and that “[t]he
[u]niversity’s administration, and its private governing board, are alone
responsible for its police department’s day-to-day operations and
decision making.”115 Ultimately, because the university’s police
department was “not accountable to the government,” we concluded that
it was not an arm of the state.116 We also held that extending sovereign
immunity to the university did not further the doctrine’s purposes of
protecting the public treasury and preserving the separation of
government power.117 We observed that the university, not the state,
funded the police department, and therefore no tax dollars were at
stake.118 This foreclosed any risk of invading the separation of powers
because there could be no judicial reallocation of public funds.119
Additionally, there were no concerns regarding the diversion of public
funds from government functions in order to pay judgments.120
On the same day we decided Redus II, we also decided El Paso
Education Initiative v. Amex Properties, issuing the first and only
114 Id. at 407; see id. at 407-408.
115 Id. at 407.
116 Id. at 408.
117 Id. at 409.
118 Id.
119 Id.
120 Id. at 409-410.
27
opinion in which we have extended sovereign or governmental immunity
to a private entity under the arm-of-the-state analysis.121 We observed
that the Education Code expressly stated the Legislature’s intent that
open-enrollment charter schools be “immune from liability and suit to
the same extent as a [public] school district”.122 We concluded that,
although charter schools are typically private, non-profit organizations,
they have the nature, purposes, and powers of an arm of the state
because they are regulated by and accountable to the state’s
Commissioner of Education, are largely publicly funded, educate nearly
six percent of the state’s students, “exercise the same powers and
perform government tasks in the same manner as traditional public
schools[,] . . . expressly operate as part of the State’s public education
system, and . . . are generally open to the public.”123 We also concluded
that extending governmental immunity to open-enrollment charter
schools would serve the doctrine’s nature and purposes by protecting
public funds from lawsuits and judgments that would reallocate the
funds from the Legislature’s designated purpose.124 It would also protect
the separation of governmental powers by respecting the Legislature’s
policy choices on how to provide and fund a free, public education, as
well as its express desire that charter schools have the same
governmental immunity from suit and liability as public schools.125
121 602 S.W.3d at 529-530.
122 Id. at 529.
123 Id. at 528-530.
124 Id. at 530.
125 Id.
28
B
ERCOT “do[es] not fall neatly into any camp”.126 It is a unique
entity serving a role that is not clearly analogous to a public entity like
a police department or a public school. Yet, it provides an essential
governmental service. While the Legislature has not expressly stated a
desire that ERCOT be immune from suit, as it did in Amex Properties,
the “the governing statutory authority”—PURA—nevertheless
“demonstrates legislative intent to grant [ERCOT] the ‘nature,
purposes, and powers’ of an ‘arm of the State government’”.127 ERCOT
operates under the direct control and oversight of the PUC, it performs
the governmental function of utilities regulation, and it possesses the
power to adopt and enforce rules pursuant to that role. In addition,
recognizing immunity satisfies the “political, pecuniary, and pragmatic
policies” underlying immunity because it prevents the disruption of key
governmental services, protects public funds, and respects separation of
powers principles.128 Thus, ERCOT is immune from suit.
ERCOT’s governmental nature is demonstrated most
prominently by the level of control and authority the state exercises over
it and its accountability to the state. In this regard, it is much like a
state agency, and it stands in stark contrast to the private university in
Redus II. The PUC certified ERCOT as the ISO, and, as set forth in
Section 39.151 of the Utilities Code, it has “complete authority” over
126 Redus II, 602 S.W.3d at 406.
127 Amex Props., 602 S.W.3d at 527 (quoting Ben Bolt, 212 S.W.3d at
325).
128 Rosenberg, 571 S.W.3d at 750.
29
ERCOT’s operations.129 In other words, the state has complete authority
over everything ERCOT does to perform its statutory functions. The
statute also grants the PUC authority over ERCOT’s governance.
ERCOT’s bylaws and protocols are subject to PUC approval, and they
“must reflect the input of the [PUC].”130 While ERCOT has a board of
directors, the state controls that too. Specifically, under Section 39.151,
ERCOT’s “governing body must be composed of [eight] persons selected
by the ERCOT board selection committee.”131 In turn, the board
selection committee comprises members appointed by the three highest
ranking officials in state government: the Governor, the Lieutenant
Governor, and the Speaker of the House of Representatives.132 In
addition to the members selected by the committee, the board also
includes two state officials, the Chairman of the PUC and the Counsellor
of the Public Utility Counsel.133 The final member of the board is
ERCOT’s CEO, whose selection is subject to PUC review and
approval.134
Section 39.151 also grants the PUC “complete authority” over
129 TEX. UTIL. CODE § 39.151(d).
130 Id. § 39.151(g-1).
131 Id. § 39.151(g), (g-1).
132 Id. § 39.1513.
133Id. § 39.151(g-1). Under the recent amendments to Section 39.151,
the PUC must have two commissioners on the ISO’s board, the presiding officer
of the PUC and one other commissioner who will serve a one-year term. See
Act of May 28, 2023, supra note 16.
134 TEX. UTIL. CODE § 39.151(g-1); 16 TEX. ADMIN. CODE § 25.362(h).
30
ERCOT’s finances and budget.135 ERCOT must submit its proposed
annual budget to the PUC, which can “approve, disapprove, or modify
any item” in it.136 ERCOT is authorized to charge a system
administration fee, but only after the PUC approves its budget and sets
the fee range.137 ERCOT must provide the PUC with reports that
compare its actual expenditures with its budgeted expenditures, and the
PUC is authorized to audit ERCOT’s finances.138
In addition to the control the PUC exercises over ERCOT,
Section 39.151(d) holds that ERCOT is “directly responsible and
accountable to the [PUC]”.139 In Amex Properties, the open-enrollment
charter school was entitled to governmental immunity in part because
it “must adhere to state law and the [Commissioner of Education]’s
regulations . . . or risk revocation of its charter.”140 Here, the PUC is
empowered to “take appropriate action against” ERCOT if it fails to
adequately perform or adhere to the requirements set forth in
Section 39.151, “including decertifying the organization or assessing an
administrative penalty against the organization.”141 And should the
PUC decide to decertify ERCOT, the statute requires that ERCOT
“transfer[] [its] assets to the successor organization to ensure continuity
135 TEX. UTIL. CODE § 39.151(d).
136 Id. § 39.151(d-1).
137 Id. § 39.151(e).
138 Id. § 39.151(d-4)(3), (e).
139 Id. § 39.151(d).
140 602 S.W.3d at 529.
141 TEX. UTIL. CODE § 39.151(d).
31
of operations in the region”, demonstrating the state’s control and
ownership of ERCOT’s property.142
Finally, ERCOT is subject to requirements typically reserved for
state entities. For example, among other things, ERCOT is subject to
review (but not abolishment) under the Texas Sunset Act, and it is
required to open its board meetings to the public.143 While these
requirements are not dispositive—the economic development
corporation in Rosenberg was also subject to open meetings144—when
coupled with the state’s control, they further support ERCOT’s
governmental nature.
The dissent argues that these statutory provisions are
insufficient to show that ERCOT has been vested with the nature of an
arm of the government.145 Specifically, it argues that ERCOT would not
be immune for discretionary and independent actions, and that a factual
showing of actual control by the PUC of the complained-of conduct is
necessary to determine whether ERCOT’s actions were attributable to
the government such that it shares in the state’s immunity.146 The
dissent would wait to resolve the immunity question until after the PUC
exercised its exclusive jurisdiction.147 To come to this conclusion, the
dissent relies heavily on cases involving derivative immunity for
142 Id.
143 Id. §§ 39.151(n), 39.1511.
144 571 S.W.3d at 745.
145 See post at 7 (Boyd & Devine, JJ., dissenting).
146 Id. at 25-27, 34-43.
147 Id. at 26.
32
government contractors.148 However, this reliance is misplaced. ERCOT
is not a government contractor; it is an “[e]ssential [o]rganization[]”
certified by the PUC pursuant to statute, and its argument for immunity
is as an arm of the state, not derivative of the state.149 In Redus II, we
noted that a derivative immunity case, Brown & Gay Engineering, Inc.
v. Olivares,150 was “instructive” in holding that no control by or
accountability to the state precludes arm-of-the-state immunity, but we
have never held that a complete lack of discretion is required for
immunity in an arm-of-the-state analysis for a legislatively authorized
entity.151 “Sovereign immunity is entity-based.”152 Our immunity
inquiry looks to legislative intent, and Section 39.151’s numerous
provisions outlining the PUC’s ultimate authority over ERCOT’s
operations, budget, governance, and property demonstrate the intent to
vest ERCOT with the nature of an arm of the state independently of the
PUC’s actions on a given day.153
Moreover, the PUC had significant control and authority over the
148 Id. at 30-43.
149 TEX. UTIL. CODE § 39.151; id. § 39.151(c).
150 461 S.W.3d 117, 125 (Tex. 2015).
151 Redus II, 602 S.W.3d at 407; see Amex Props., 602 S.W.3d at 529-
530.
152 Redus II, 602 S.W.3d at 407.
153See, e.g., Amex Props., 602 S.W.3d at 527 (noting that we look to the
“governing statutory authority”). The dissent also takes issue with the fact that
PURA does not directly address ERCOT, but instead regulates the ISO. See
post at 22-25 (Boyd & Devine, JJ., dissenting). But ERCOT is the ISO for the
Texas power region and is, therefore, subject to PURA while it serves in that
role.
33
very conduct at issue in these cases. In CPS’ case, the PUC issued the
directive to ERCOT to increase pricing to $9,000 per megawatt-hour
that resulted in CPS’ alleged overcharge. The short-pay procedure and
default-uplift process of which CPS complains are set forth in the
ERCOT Protocols, and the Protocols are subject to PUC approval.154
Finally, ERCOT’s ability to conduct transaction settlements is through
delegated authority from the PUC.155 As to Panda, ERCOT is required
by the PUC to publish CDRs, and those CDRs allegedly caused Panda’s
injury.156 Panda conceded at oral argument that the PUC could have
controlled the CDR data output had it wanted to.
PURA also evinces a legislative intent to vest ERCOT with the
“purposes” and “powers” of an “arm of the State government.”157 PURA
requires the PUC to certify an “[e]ssential [o]rganization[]” to operate a
competitive electric market and to ensure “the reliability and adequacy”
of the grid.158 In this role, ERCOT regulates the electric utility market.
It is statutorily authorized to establish, adopt, and enforce a variety of
policies, rules, guidelines, standards, procedures, protocols, and other
requirements to govern the operations of market participants.159 And
154 TEX. UTIL. CODE § 39.151(d), (g-1).
155 Id. § 39.151(i).
156 Id. § 39.155; 16 TEX. ADMIN. CODE § 25.505.
157 Amex Props., 602 S.W.3d at 527 (quoting Ben Bolt, 212 S.W.3d at
325).
158 TEX. UTIL. CODE § 39.151; id. § 39.151(a).
159 Id. § 39.151(d), (i), (j), (l).
34
market participants are statutorily obligated to abide by these rules.160
This regulatory role over utilities is uniquely governmental.161
The fact that ERCOT is organized as a membership-based
nonprofit corporation does not make it any less an arm of the state.162
An entity’s organizational form is not dispositive.163 While corporations
do not typically enjoy sovereign immunity, ERCOT is not a typical
corporation. Apart from limited liability, one of the hallmarks of a
corporation is management by a board of directors in accordance with
corporate bylaws.164 But here, the state has authority over both
ERCOT’s board and its bylaws.165 Under Texas law, corporations have
the power to, inter alia, own property, dispose of property, spend money,
incur liabilities, and conduct their business.166 However, ERCOT may
not exercise any of those corporate powers independently of the state.
ERCOT’s assets are owned by the state.167 ERCOT may not raise money,
spend money, or obtain debt financing without PUC input and
approval.168 The “business” ERCOT conducts is governmental and for
the public benefit, and it is set forth by statute and subject to PUC
160 Id. § 39.151(j).
161 See Ark. Elec. Coop. Corp., 461 U.S. at 377.
162 ERCOT Organization Backgrounder, supra note 7.
163 See Amex Props., 602 S.W.3d at 528-529.
164 TEX. BUS. ORGS. CODE §§ 22.102, 22.152, 22.201.
165 See TEX. UTIL. CODE § 39.151(g), (g-1); id. § 39.1513.
166 See TEX. BUS. ORGS. CODE § 2.101(3), (4), (6), (7), (12), (22).
167 See TEX. UTIL. CODE § 39.151(d).
168 See id. § 39.151(d), (d-1), (d-2).
35
authority and oversight.169 In short, the fact that the state is utilizing
the corporate form to achieve its objectives for the Texas power region
does not change governmental nature of ERCOT’s actions.170
In sum, “the governing statutory authority demonstrates
legislative intent to grant [ERCOT] the ‘nature, purposes, and powers’
of an ‘arm of the State government’”.171
C
Recognizing ERCOT’s immunity also satisfies the “political,
pecuniary, and pragmatic policies underlying our immunity
doctrines.”172 “Governmental immunity benefits the public by
preventing disruptions of key governmental services,” and there are few
things more fundamental to the state’s ability to function than its
169 See id. § 39.151(a), (c), (d); see also id. § 39.001(a).
170 Relying on a recent Fifth Circuit concurring opinion, see
Springboards to Educ., Inc. v. McAllen Indep. Sch. Dist., 62 F.4th 174, 187-199
(5th Cir. 2023) (Oldham, J., concurring), the dissent contends that “there is no
history or tradition of extending common-law sovereign immunity to private
corporations.” Post at 27 (Boyd & Devine, JJ., dissenting). We need not express
any opinion on the correctness of that proposition today. But even assuming
that it is correct, it does not address circumstances (like here) in which the
state has exercised direct control over the corporation and has harnessed it for
state-related objectives. Indeed, the U.S. Supreme Court has long recognized
that the government cannot, for example, circumvent the state-action
requirement by simply enlisting private entities to do its work. See, e.g.,
Skinner v. Ry. Lab. Execs.’ Ass’n, 489 U.S. 602, 614 (1989). While a corporation
is presumably not “the state”, we reiterate that an entity’s corporate form
cannot in and of itself be dispositive of the immunity question.
171 Amex Props., 602 S.W.3d at 527 (quoting Ben Bolt, 212 S.W.3d at
325).
172 Rosenberg, 571 S.W.3d at 750.
36
electricity grid.173
The protection of public funds and assets justifies recognizing
ERCOT’s immunity. Even though ERCOT is not funded with tax dollars,
any damages payments would nevertheless come from the state and the
public. ERCOT is primarily funded by a system administration fee
charged to wholesale buyers and sellers of electricity.174 The fee is
required to closely match the revenue necessary for its budget without
exceeding it to avoid a surplus of funds.175 In other words, ERCOT
charges only what is necessary for it to function. Were a judgment
rendered against it, ERCOT would be forced to raise the system
administration fee to pay the judgment—assuming the PUC would
authorize that176—resulting in higher costs for electricity for consumers.
Moreover, the Legislature appears to consider ERCOT’s money
and assets to be state assets. The system administration fee is
statutorily authorized, subject to PUC approval, and collected pursuant
to state power.177 As mentioned, the PUC has authority over ERCOT’s
finances, including its ability to raise money and how it spends its
money.178 And were ERCOT to be decertified as the ISO,
Section 39.151(d) requires that ERCOT “transfer[] [its] assets to the
173 Id.
174 TEX. UTIL. CODE § 39.151(e).
175 Id.
176 See id. § 39.151(d), (d-1).
177 Id. § 39.151(e), (j).
178 See id. § 39.151(d), (d-1), (e).
37
successor organization”.179 The state’s ability to divest ERCOT of those
assets and direct their transfer demonstrates the state’s ownership over
them. Thus, were the assets subject to judicial seizure, the judgment
creditor would be the state—not ERCOT.
Finally, recognizing ERCOT’s immunity respects separation of
powers principles. The judicial imposition of a damages award against
ERCOT would run afoul of the Legislature’s determination that the PUC
alone has “complete authority” over ERCOT’s finances.180 This directive
necessarily prevents the courts from enforcing a monetary judgment
against it.
Contrary to the dissent’s claim, this does not leave ERCOT
unaccountable.181 It simply holds that the courts are not the proper
avenue for redress. ERCOT is accountable to the state. Its shortfalls are
being addressed by the Legislature, which is accountable to the people
through the political process.182 For example, in direct response to the
default of certain ERCOT market participants following Uri, the
Legislature passed a bill authorizing the use of $800 million of the Rainy
Day Fund for ERCOT to finance part of the default.183 This helps ensure
179 Id. § 39.151(d).
180 Id.
181 See post at 39-40, 51 (Boyd & Devine, JJ., dissenting).
182 See In re Stetson Renewables Holdings, LLC, 658 S.W.3d 292, 297
(Tex. 2022) (observing various ways in which the Legislature could hold an
agency accountable for the failure to carry out a statutory program and
reasoning that a judicial remedy could “create[] a serious risk that the courts
will intrude into the prerogatives of [the] other branches”).
183 See Act of May 30, 2021, 87th Leg., R.S., ch. 908, §§ 1, 5, 2021 Tex.
38
that short-paid market participants like CPS are repaid faster.184 After
the storm, the Legislature overhauled ERCOT’s board of directors,
making it more independent from electric-market stakeholders and
further increasing governmental oversight.185 It also passed an omnibus
bill that required, among other things, weatherization of generation
companies’ and electric utilities’ assets and gave ERCOT authority to
inspect for compliance.186 And it moved up ERCOT’s Sunset date by two
years, which ensured a comprehensive review of the organization in the
near-term.187
We hold that ERCOT is entitled to sovereign immunity because
PURA “evinces clear legislative intent”188 to vest it with the “‘nature,
Gen. Laws 2218, 2218-2227 (H.B. 4492) (codified at TEX. GOV’T CODE
§ 404.0241, TEX. UTIL. CODE §§ 39.601-39.609); see also SUNSET ADVISORY
COMMISSION, STAFF REPORT WITH COMMISSION DECISIONS: PUBLIC UTILITY
COMMISSION OF TEXAS, ELECTRIC RELIABILITY COUNCIL OF TEXAS, OFFICE OF
PUBLIC UTILITY COUNSEL 106-107 (2023),
https://www.ercot.com/files/docs/2023/01/20/PUC-ERCOT-OPUC-Staff-
Report-with-Commission-Decisions_1-19-23.pdf.
184 See TEX. UTIL. CODE § 39.601(b)(1).
185 Act of May 30, 2021, 87th Leg., R.S., ch. 425, §§ 3, 4, 2021 Tex. Gen.
Laws 830, 830-833 (S.B. 2) (codified at TEX. UTIL. CODE §§ 39.151, 39.1513);
see also SUNSET ADVISORY COMMISSION, supra note 183 at 1 (“In response to
the disaster, the Legislature took swift action, completely overhauling PUC’s
and ERCOT’s governance structures and making numerous changes to the
electric industry and market . . . .”); id. at 106.
186Act of May 30, 2021, 87th Leg., R.S., ch. 426, §§ 13, 16, 2021 Tex.
Gen. Laws 833, 839-840, 841-843 (S.B. 3) (codified at TEX. UTIL. CODE
§§ 35.0021, 38.075); see also 16 TEX. ADMIN. CODE § 25.55(b)(5), (d), (g);
SUNSET ADVISORY COMMISSION, supra note 183, at 106.
187 SUNSET ADVISORY COMMISSION, supra note 183, at A1.
188 Rosenberg, 571 S.W.3d at 750.
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purposes, and powers’ of an ‘arm of the State government’”189 and
because doing so satisfies the “political, pecuniary, and pragmatic
policies underlying our immunity doctrines.”190 There is no evidence
that ERCOT performs any functions outside its role as the ISO, but we
note that ERCOT would not be immune outside that role. We also note
that immunity would not bar CPS’ constitutional claims.191 Because we
conclude that ERCOT enjoys sovereign immunity as an arm of the state,
we need not and do not address ERCOT’s argument that it is entitled to
derivative immunity.
* * * * *
In No. 22-0056, CPS Energy v. Electric Reliability Council of
Texas, we affirm the court of appeals’ judgment. CPS’ motion to stay the
court of appeals’ dissolution of the trial court’s temporary restraining
order is dismissed as moot. In No. 22-0196, Electric Reliability Council
of Texas, Inc. v. Panda Power Generation Infrastructure Fund, LLC, we
reverse the court of appeals’ judgment and dismiss the case for lack of
jurisdiction.
Nathan L. Hecht
Chief Justice
OPINION DELIVERED: June 23, 2023
189 Amex Props., 602 S.W.3d at 527 (quoting Ben Bolt, 212 S.W.3d at
325).
190 Rosenberg, 571 S.W.3d at 750.
191 See City of El Paso v. Heinrich, 284 S.W.3d 366, 372 (Tex. 2009).
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