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

648 S.W.3d 520

ELECTRIC RELIABILITY COUNCIL OF TEXAS, INC. and Bill Magness, Appellants

v.CPS ENERGY, Appellee

No. 04-21-00242-CV

Court of Appeals of Texas, San Antonio.

Delivered and Filed: December 13, 2021

APPELLANT ATTORNEY: Wallace B. Jefferson, Alexander Dubose & Jefferson LLP, Rachel A. Ekery, Nicholas Bacarisse, Alexander Dubose Jefferson & Townsend, 515 Congress Ave., Suite 2350, Austin, TX 78701, Ron H. Moss, David Wilson, Elliot Clark, Winstead PC, 401 Congress Ave., Ste. 2100, Austin, TX 78701.

APPELLEE ATTORNEY: Glenn A. Ballard, Jr., M. Viola So, Mukul Kelkar, Dentons US LLP, 1221 McKinney St., Suite 1900, Houston, TX 77010, Emma Hand, Dentons US LLP, 1900 K Street, NW, Washington, DC 20006, Harriet O'Neill, Law Office of Harriet O'Neill, P.C., 919 Congress Ave., Ste. 1400, Austin, TX 78701-2114, Barry A. Chasnoff, Chasnoff Mungia Valkenaar, Pepping & Stribling, LLP, 1020 NE Loop 410, Ste. 150, San Antonio, TX 78205, Greta McFarling, Adrianna Jimenez, Lauren A. Valkenaar, Blake Stribling, Chasnoff Mungia Valkenaar, Pepping & Stribling, LLP, 1020 N.E. Loop 410, Ste. 150, San Antonio, TX 78209, Adam Kiehne, Chasnoff Mungia Valkenaar, Pepping & Stribling, LLP, 1020 NE Loop 41, Ste. 150, San Antonio, TX 78209-2302.

Sitting: Patricia O. Alvarez, Justice, Beth Watkins, Justice, Lori I. Valenzuela, Justice

Opinion by: Beth Watkins, Justice

Appellants Electric Reliability Council of Texas, Inc. and Bill Magness appeal the trial court's order denying ERCOT's plea to the jurisdiction. Appellee CPS Energy filed a motion to dismiss this interlocutory appeal for want of jurisdiction. We grant CPS's motion to dismiss as to Magness and dismiss Magness's appeal for want of jurisdiction. We deny CPS's motion to dismiss as to ERCOT, reverse the trial court's order denying ERCOT's plea to the jurisdiction, and render judgment dismissing CPS's claims against ERCOT. We also dissolve this court's July 15, 2021 order restraining ERCOT from taking certain actions.

BACKGROUND

The Texas Utilities Code requires the Public Utility Commission of Texas to certify an independent organization to perform certain functions associated with Texas's self-contained electric grid.

TEX. UTIL. CODE ANN. § 39.151(c). Currently, ERCOT is that organization. ERCOT is statutorily charged with, inter alia, "ensur[ing] the reliability and adequacy of the regional electrical network" in the ERCOT region and "ensur[ing] that electricity production and delivery are accurately accounted for among the generators and wholesale buyers and sellers" of electricity. TEX. UTIL. CODE ANN. § 39.151(a)(2), (4). ERCOT operates under the Texas Utilities Code, the Texas Administrative Code, the PUC's oversight, and the ERCOT Protocols. "ERCOT [P]rotocols are rules that provide the framework for the administration of the Texas electricity market." Pub. Util. Comm'n v. Constellation Energy Commodities Grp., Inc. , 351 S.W.3d 588, 595–96 (Tex. App.—Austin 2011, pet. denied).

CPS is a municipally owned utility serving the San Antonio area. Because CPS is both a buyer and seller of electricity, ERCOT collects money from and pays money to CPS. Prior to the dispute at issue in this case, ERCOT and CPS signed a Standard Form Market Participant Agreement establishing their contractual obligations to each other. The parties appear to agree that the issues in this lawsuit are governed by the ERCOT Protocols, the Market Participant Agreement, and Title 2 of the Utilities Code, also known as the Public Utility Regulatory Act (PURA).

This dispute arises out of the catastrophic winter storm that hit Texas in February of 2021. During the storm, the PUC ordered ERCOT to set the per-megawatt hour price of electricity at the highest permissible rate—$9,000 per megawatt hour—to account for a scarcity in electric supply.¹ CPS alleges ERCOT improperly kept prices at this rate after any alleged need for scarcity pricing had ended. CPS alleges this decision resulted in billions of dollars of overcharges to market participants, ERCOT improperly refused to correct these overcharges, and some market participants were driven into insolvency as a result.

The parties appear to agree that CPS does not currently owe any money to ERCOT. However, CPS alleges ERCOT owes CPS money and that ERCOT's plan to use "Default Uplift Invoices" to recoup funds owed to ERCOT by insolvent market participants will improperly reduce the amount ERCOT owes to CPS. It describes these payment reductions as both an unconstitutional taking and an unconstitutional extension of its credit to cover the debt of private entities.

On March 12, 2021, CPS sued ERCOT for breach of contract, negligence, gross negligence, negligence per se, breach of fiduciary duty, and violations of the Texas Constitution, seeking declaratory and injunctive relief and, alternatively, money damages. It also asserted ultra vires claims against ERCOT's former executives and board, including Magness. ERCOT—but not Magness—filed a plea to the jurisdiction arguing the trial court lacked jurisdiction over CPS's claims for various reasons. ERCOT also filed a motion to transfer venue to Travis County. On May 10, 2021, the trial court signed an "Agreed Extended Temporary Restraining Order" that prohibited ERCOT from taking certain actions until "the earlier of (a) June 11, 2021 or (b) the conclusion of a hearing on [CPS's] Application for Temporary Injunction."

On May 24, 2021, CPS nonsuited its claims against all the individual defendants except Magness. On May 26, 2021, the trial court denied ERCOT's plea to the jurisdiction and its motion to transfer venue to Travis County. At that point, Magness had not yet been served or entered an appearance in this lawsuit. Magness appeared for the first time on June 14, 2021, when he filed his own motion to transfer venue.

On June 15, 2021, ERCOT and Magness filed a notice of interlocutory appeal from the trial court's order denying ERCOT's plea to the jurisdiction. CPS then filed a motion to dismiss this appeal for lack of appellate jurisdiction. On July 15, 2021, we granted CPS's motion to extend the trial court's May 10, 2021 temporary restraining order and ordered ERCOT to refrain from taking any actions prohibited by that order.

ANALYSIS

CPS's Motion to Dismiss

CPS's motion to dismiss argues that neither ERCOT nor Magness are governmental units as that term is defined by Section 101.001 of the Texas Civil Practice and Remedies Code and we therefore lack jurisdiction over this interlocutory appeal. See TEX. CIV. PRAC. & REM. CODE ANN. § 51.014(a)(8). CPS also argues Magness lacks standing to appeal because he was not a party to ERCOT's plea to the jurisdiction.

Motion to Dismiss ERCOT's Appeal

Standard of Review and Applicable Law

This court reviews questions of its own jurisdiction de novo. See, e.g., Bonsmara Nat. Beef Co., LLC v. Hart of Tex. Cattle Feeders, LLC , 603 S.W.3d 385, 390 (Tex. 2020). If the record does not affirmatively show we have jurisdiction over a matter, "we have no option but to dismiss the appeal." Gonzales Nursing Operations, LLC v. Smith , No. 04-20-00102-CV, 2020 WL 5646482, at *2 (Tex. App.—San Antonio Sept. 23, 2020, pet. denied) (mem. op.) (citing Nikolouzos v. St. Luke's Episcopal Hosp. , 162 S.W.3d 678, 681 (Tex. App.—Houston [14th Dist.] 2005, no pet.) ).

This court generally lacks jurisdiction to review interlocutory orders. See Bonsmara , 603 S.W.3d at 390 ; Orion Real Estate v. Sarro , 559 S.W.3d 599, 602 (Tex. App.—San Antonio 2018, no pet.). However, the Texas Civil Practice and Remedies Code permits an interlocutory appeal of an order that "grants or denies a plea to the jurisdiction by a governmental unit as that term is defined in Section 101.001." TEX. CIV. PRAC. & REM. CODE § 51.014(a)(8).

Section 101.001 of the Civil Practice and Remedies Code defines "governmental unit" as, inter alia, an "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 legislature under the constitution." TEX. CIV. PRAC. & REM. CODE ANN. § 101.001(3)(D). The Texas Supreme Court has held this definition imposes two conditions: first, the entity "must be an ‘institution, agency, or organ of government,’ and, second, [it] must derive its ‘status and authority ... from the Constitution of Texas or from laws passed by the legislature under the constitution.’ " Univ. of the Incarnate Word v. Redus , 518 S.W.3d 905, 907 (Tex. 2017) (quoting TEX. CIV. PRAC. & REM. CODE ANN. § 101.001(3)(D) ).

The Texas Supreme Court has not yet determined whether ERCOT is a governmental unit under this definition. See Elec. Reliability Council of Tex., Inc. v. Panda Power Generation Infrastructure Fund, LLC , 619 S.W.3d 628, 639–42 (Tex. 2021) (holding mootness doctrine barred review of appeal presenting that question). However, two of our sister courts have held ERCOT does not meet this definition and therefore does not qualify as a governmental unit. See Elec. Reliability Council of Tex., Inc. v. Panda Power Generation Infrastructure Fund, LLC , 552 S.W.3d 297, 309 (Tex. App.—Dallas 2018, pet. dism'd w.o.j.) ; HWY 3 MHP, LLC v. Elec. Reliability Council of Tex. , 462 S.W.3d 204, 212 (Tex. App.—Austin 2015, no pet).

LTTS Charter School

The controlling line of cases begins with the Texas Supreme Court's 2011 conclusion that that an open-enrollment charter school was a "governmental unit" for the purpose of bringing an interlocutory appeal. LTTS Charter Sch., Inc. v. C2 Constr., Inc. , 342 S.W.3d 73, 75 (Tex. 2011). There, the supreme court noted that the Texas Education Code: (1) describes those schools as "part of the public school system of this state"; and (2) gives them "the powers granted to [traditional public] schools." Id. at 76–79 (internal quotation marks omitted). The court also noted that the Education Code and "a host of other laws outside the Education Code" describe such schools as a "governmental body," "local...