Three of the justices from the Texas Fifth District Court of Appeals convened in the Ida Green Communications Center at Austin College Monday to hear oral arguments in ERCOT vs. Panda Power, a case out of the 15th state district court in Grayson County.
In February of 2016, Panda Power Generation Infrastructure and its subsidiaries sued the Electric Reliability Council of Texas, Inc. saying the latter offered up flawed information about the scarcity of power in Texas to induce Panda and other companies to build power plants in the state. ERCOT eventually told the power companies that the numbers were off, but — Panda contends — not soon enough to keep Panda and others from making significant investments in the state.
Once the investments were made, Panda contends, the true numbers showed that plans for alternative energy sources like gas and wind would keep the state from seeing the massive energy shortfalls that ERCOT had predicted. That would, Panda said in its complaint, mean that Panda would see less return for its investments in the state.
Panda began operating its state-of-the-art, 758-megawatt combined cycle natural gas power plant on Sherman’s south side in the summer of 2014 and announced an expansion in 2015 that would add an additional 450 to 500 megawatts, adding a third gas-fired turbine and a second steam turbine.
ERCOT denied all of Panda’s claims as the suit made its way to the 15th state District Court in Sherman with Judge Jim Fallon presiding. Briefings in the case show that ERCOT first argued that the case should be dismissed or transferred to Travis County and Fallon denied that motion. Next ERCOT asserted that the Public Utility Commission has exclusive jurisdiction over ERCOT and any claims against it. Fallon denied that motion as well. Then ERCOT filed an amended plea arguing that the state’s sovereign immunity extends to ERCOT and asked that the court reconsider the exclusive jurisdiction plea. Fallon denied that as well and ERCOT appealed both the ruling about the jurisdiction and ERCOT’s assertion of sovereign immunity to the appeals court.
The issues before the three justices Monday were whether or not the legislature clearly indicated its intent for the PUC to have exclusive jurisdiction over ERCOT’s operations and finances and therefore any legal claims against it, such as Panda’s claims of fraud, negligent misrepresentation and breach of fiduciary duty, and if ERCOT enjoys sovereign immunity.
Wallace B. Jefferson argued for ERCOT and Ben L. Mesche handled Panda’ s case. Jefferson went first and had 20 minutes to argue before Mesches got his 20 minutes. Then Jefferson had five minutes of rebuttal.
Jefferson started by giving a little bit of historical background on electricity in Texas. He said that in 1999 Senate Bill 7 un-bundled the utilities in Texas and yet, the legislature knew that there still needed to be some regulation over the power supply grid. ERCOT, he said, was given the task of providing that regulation with oversight by the PUC. He argued that the legislature gave PUC near total authority over ERCOT’s budget, rules and its regulations. He said PUC also has exclusive authority to discipline ERCOT. He said ERCOT does not market its services to any other entity. He said the PUC is the only one that can resolve disputes between ERCOT and any other party. He argued that if Panda were successful in its demand for $2 billion in damages ERCOT would have to raise its fees by 1,000 percent.
Jefferson then argued that Panda shouldn’t be allowed to sue ERCOT at all because the job it performs is so much like a governmental service that it should be considered a governmental entity for the purposes of lawsuits and enjoy immunity.
Mesches said if the legislature had intended for PUC to be the only place where people could address claims against ERCOT, it could have done so. It had no problem, he said, in spelling out how worker’s compensation claims are supposed to be handled. He also said that the PUC allows ERCOT to purchase insurance to cover losses incurred in the performance of its duties. He said because the legislature was silent when it came to granting exclusive jurisdiction for the PUC over ERCOT, the appeals court must see that the legislature wanted the courts to be the place for those complaints. He argued that ERCOT was not acting as an extension of the state when it produced the reports that Panda relied upon to build its power plants and it should not be extended immunity.
The court will issue a ruling at some point in the future.
The litigation of this matter that was ongoing in the 15th state district court is halted pending that ruling.