Texas generators may escape further litigation for their inability to meet demand during the 2021 winter storm after a state appeals court ruled Dec. 14 that wrongful death, personal injury and property damage cases against the generators have “no basis in law or fact” (01-23-00097-CV, 01-23-00102-CV, 01-23-00103-CV, 01-23-00392-CV and 01-23-00393-CV).
The 1st Court of Appeals in Houston ruled that wholesale power generators in ERCOT’s deregulated market are “statutorily precluded by the Legislature from having any direct relationship with retail customers” and “can have no legal relationship with retail customers as a matter of law.”
“Texas does not currently recognize a legal duty owed by wholesale power generators to retail customers to provide continuous electricity to the electric grid, and ultimately to the retail customers, under the allegations pleaded here by the retail customers,” the court said.
According to Texas Lawbook, the decision will lead to the dismissal of Luminant, NRG, Exelon, Sempra Energy Resources and other generators from the hundreds of lawsuits filed in the wake of Winter Storm Uri.
The storm brought sub-freezing temperatures and precipitation to much of the state that shut down thermal and nonthermal power plants alike. The state says almost 250 people died during the resulting dayslong outages, although it’s thought that number is much higher.
Hundreds of retail customers sued hundreds of entities involved in the ERCOT market for damages sustained due to the outages. They alleged negligence and gross negligence for failing to winterize and maintain their equipment, failing to ensure adequate fuel supplies and failing to properly train workers to ensure against the generator outages that occurred.
The lawsuits were consolidated into multidistrict litigation before Harris County District Judge Sylvia Matthews, who dismissed all the allegations except the negligence claims. The judge then selected five bellwether cases as representative of the cases filed.
The generators filed a petition with the appeals court, arguing that Matthews had abused her discretion in not dismissing the negligence charges. The court agreed, saying the charges should have been dismissed because the retail customers’ arguments alleged actions “have no basis in law or fact.”
The opinion applies to the five bellwether cases. The plaintiffs’ legal counsel has said they plan to appeal.
The Texas Supreme Court ruled in June that ERCOT, which operates 90% of the state’s grid, enjoys sovereign immunity and cannot be sued over the blackout. (See ERCOT Sovereign Immunity Affirmed by Texas Supreme Court.)
The state high court will hear arguments next year from Luminant (23-0231) and RWE Renewables (23-0555) over the Public Utility Commission’s emergency pricing order following the winter storm. The PUC directed prices be maintained at the $9,000/MWh cap to incent more generation to come online and end load shed.
