Panda Power Generation Infrastructure Fund, LLC v. Elec. Reliability Council of Tex., Inc.

• Decision Date: 23 February 2022
• Docket Number: 05-18-00611-CV
• Citation: 641 S.W.3d 893
• Parties: 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 ; Panda Temple Power II, LLC, Appellants v. ELECTRIC RELIABILITY COUNCIL OF TEXAS, INC., Appellee
• Court: Texas Court of Appeals

641 S.W.3d 893

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 ; Panda Temple Power II, LLC, Appellants

v.ELECTRIC RELIABILITY COUNCIL OF TEXAS, INC., Appellee

No. 05-18-00611-CV

Court of Appeals of Texas, Dallas.

Opinion Filed February 23, 2022

Leslie Conant Thorne, Christopher R. Knight, Andrew Guthrie, Werner A. Powers, Dallas, Ben L. Mesches, Roger D. Sanders, Sherman, for Appellants.

Erika Kane, J. Hampton Skelton, Austin, Rachel Anne Ekery, Houston, Wallace B. Jefferson, Austin, Nathan M. Bigbee, Brandon Duane Gleason, Austin, Nicholas Bacarisse, Chad V. Seely, for Appellee.

Before the Court sitting En Banc

OPINION

Opinion by Justice Nowell

Before us is an appeal from the trial court's April 24, 2018 order granting ERCOT's plea to the jurisdiction based on sovereign immunity and dismissing the cause for lack of jurisdiction. The trial court entered the dismissal order pursuant to this Court's original opinion in this case. See Elec. Reliability Council of Tex., Inc. v. Panda Power Generation Infrastructure Fund, LLC (Panda I) , 552 S.W.3d 297 (Tex. App.—Dallas 2018, pet. dism'd w.o.j.). Panda¹ appeals the trial court's order and presents two arguments: (1) ERCOT is not entitled to sovereign immunity, and (2) the Texas Legislature did not grant exclusive jurisdiction over Panda's common law claims to the Public Utility Commission of Texas (PUC). We decide both issues in favor of Panda; we conclude ERCOT is not entitled to sovereign immunity and the Legislature did not grant exclusive jurisdiction over Panda's claims to the PUC. To the extent we previously held otherwise, that holding is in error. We reverse the trial court's April 24, 2018 order granting ERCOT's plea to the jurisdiction and remand this case to the trial court for further proceedings.

BACKGROUND

A. Regulatory Scheme

The wholesale electric power industry consists of the generation of electrical power, the transmission of electricity over power lines, and the distribution of power to customers. Tex. Mun. Power Agency v. Pub. Util. Comm'n of Tex. , 253 S.W.3d 184, 186 (Tex. 2007) (citing Pub. Util. Comm'n v. City Pub. Serv. Bd. , 53 S.W.3d 310, 312 (Tex. 2001) ). Historically, the entire industry was a natural monopoly. See TXU Generation Co., L.P. v. Pub. Util. Comm'n of Tex. , 165 S.W.3d 821, 827 (Tex. App.—Austin 2005, pet. denied).

In the 1990s, the Texas Legislature found that "the public interest in competitive electric markets requires that ... electric services and their prices should be determined by customer choices and the normal forces of competition." TEX. UTIL. CODE ANN. § 39.001(a) ; see also TXU Generation Co., L.P. , 165 S.W.3d at 827 (citing TEX. UTIL. CODE ANN. § 39.001(a) ) ("[I]n recognition that the power generation and power distribution components of the electricity industry are not monopolies warranting strict regulation, the legislature has opened the wholesale electricity markets and retail electricity market to competition and market forces."). To achieve that goal, the Legislature enacted Chapter 39 of the Texas Utilities Code, also known as the Texas Public Utility Regulatory Act (PURA), which restructured the electric utility industry in Texas. See TEX. UTIL. CODE ANN. §§ 39.001 –.918.

Section 39.151 requires the PUC to certify 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.

TEX. UTIL. CODE ANN. § 39.151(a). PURA defines an "independent organization" as "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." Id. § 39.151(b). In 2001, the PUC certified ERCOT, an organization that was founded in 1970 to coordinate utilities in Texas, as the independent system operator (ISO) to perform the functions described in section 39.151(a). ERCOT has acted as the ISO since it was certified in 2001.

ERCOT describes itself as an independent, membership-based 501(c)(4) nonprofit corporation. ERCOT's bylaws define which types of entities can become ERCOT members. Each member has voting rights and pays annual dues to ERCOT. ERCOT is operated by a chief executive officer and a board of directors.

ERCOT's bylaws and protocols must be approved by the PUC and reflect the PUC's input. See TEX. UTIL. CODE ANN. § 39.151(g-1). The current bylaws require that every board member be a resident of Texas and prohibit any legislator from serving as a member. Id. § 39.151(g-1). To maintain certification as the ISO, ERCOT's governing body must be composed of persons selected by the ERCOT board selection committee. See id. § 39.151(g). The board is composed of eleven members, including the PUC chairman who is an ex officio nonvoting board member. See id. § 39.151(g-1). The utilities code sets forth other qualifications for the board's composition. See id. § 39.151(g-1) – (g-6). ERCOT's bylaws state the board hires the CEO who, under the board's supervision and direction, carries out ERCOT's general affairs. With limited exceptions, meetings of ERCOT's governing body or a subcommittee that includes a member of the governing body must be open to the public. See id. § 39.1511.

PURA section 39.151(d) requires the PUC to "adopt and enforce rules relating to the reliability of the regional electrical network and account[ ] for the production and delivery of electricity among generators and all other market participants." Id. § 39.151(d). However, the PUC may delegate these responsibilities to an ISO; the ISO's rules and enforcement actions remain subject to the PUC's oversight. See id. Section 39.151(d) continues:

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 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 organization shall fully cooperate with the commission in the commission's oversight and investigatory functions. The commission may take appropriate action against an 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.

Id.

As the ISO, ERCOT must submit its entire proposed annual budget for approval, disapproval, or modification to the PUC. See id. § 39.151(d-1). "The commission shall establish a procedure to provide public notice of and public participation in the budget review process." Id. After approving the budget, the PUC authorizes ERCOT to charge 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." Id. § 39.151(e). ERCOT is required "to closely match actual revenues generated by the fee and other sources of revenue with revenue necessary to fund the budget." Id. The PUC requires ERCOT to submit reports comparing actual expenditures with budgeted expenditures. See id.

Additionally, ERCOT "is subject to review under Chapter 325, Government Code (Texas Sunset Act), but is not abolished under that chapter." Id. § 39.151(n). The PUC is required to "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." Id. § 39.151(d).

B. Pending Lawsuit

The PUC requires ERCOT to publish "resource adequacy reports" at least annually that provide a five-year forecast of the Texas power region's ability to generate and transmit sufficient electricity to meet projected demands. 16 TEX. ADMIN. CODE § 25.505(c) ; see also Elec. Reliability Council of Tex., Inc. v. Panda Power Generation Infrastructure Fund, LLC (Panda I Appeal) , 619 S.W.3d 628, 631–32 (Tex. 2021). To fulfill this duty, ERCOT publishes a "Report on Capacity, Demand, and Reserves" twice a year, in May and December. Panda I Appeal , 619 S.W.3d at 632. These "CDR Reports" provide predictions on future electricity demands within the Texas power region and the region's ability to supply sufficient electricity to meet those demands. Id. Participants in the electric industry rely on ERCOT's CDR Reports when deciding, for example, whether to invest in new generation plants or transmission facilities. Id.

Panda alleges that in 2011 and 2012, ERCOT used its CDR Reports, press releases, presentations, and ERCOT-sponsored press interviews to broadcast false market information throughout Texas. According to Panda, the information ERCOT provided projected a "serious and long-term scarcity of power supply." However, Panda asserts ERCOT knew there was no long-term scarcity projected;...